How to Work Less and Make More, with James Schramko | The Growth Booth #36

Welcome to episode number 36 of The Growth Booth, where today I'm joined by someone who has served as a sounding board for some of my hair-brained ideas, a council of wisdom, and someone who I personally catch up with at least every couple of weeks to share business ideas and just how things are going in general.  I've invited him along to the show today and I'll introduce you to him in just a moment. Some of you may know him. His name is James Schramko. He's done pretty much everything online, including having done around 1000 podcast episodes, over 4 million podcast downloads, and very successful businesses, and as I said, he's really done pretty much everything you could imagine online. But what I really wanted to talk to James about and the time that we've got today is how we can earn more and work less.

AIDAN

James, you've got a book called I think it's called Work Less, Make More.  Is it Work Less?

JAMES

That's correct.

AIDAN

Work Less, Make More. Great deal. You can pick that up at Amazon or I guess you get it over at James's website, which is jamesschramko.com, one of my favorite books. So definitely go and check that out. So, where do we start if we want to work less and earn more?

JAMES

Essentially learning the idea of leverage. If we have an online business, we have a lot of leverage available to us. The key element is not doing everything yourself. A team becomes a big part of it, and that can apply to the household as well, I mean, literally having someone mow your lawns or cook food for you. If you've ever been to a restaurant, you already know that sometimes it's good to have someone else do all the manual labor and grow the food, and you just turn up and do your bit, which is eating you can do the same in business, which is great.

Other things to help you make more would be to identify all the tasks you have to do. Some of them are not equal. Some of them are more valuable than other things. If you can spend some time thinking about which of the tasks you're doing are going to have a greater outcome and you focus more on those, you can leverage up the income that you're bringing in. And there are other aspects, too, such as which business model you pursue. Some business models are easier or more suited to your style and also can get paid more than other business models. For example, if you had a shoe shine store and you're doing all the shoe shining, you sort of cap out at the number of people you could see in a day, and you cap out at what the market will be happy to bear for someone who wants to pay you to shine their shoes. But if you have a digital product now, you could start to use things like advertising, and you're essentially fulfilling with electrons, there’s no actual cap on how many eBooks you could sell.

For example, if you have a services business and you're hiring team members to deliver the service, you can actually scale that up much better. Some business models are better than others. The ones I like generally are at higher price points than low-ticket items. And I particularly like subscription model businesses where there's a recurring subscription that could be if you're a service, you can put people on a retainer. If you're a deal maker, you might do deals where you get paid on a percentage of performance. When you can increase someone's business, you might get paid a percentage of revenue. You might also have a membership or information product business or a software business where people pay per month. And pretty much everyone who's watching this or listening to this podcast would be paying a subscription of some kind, whether it's to Netflix, Amazon Prime, or a phone company. We're used to subscriptions, and I really look for subscription elements because the leverage on that is fantastic.

AIDAN

Yeah, one of the places where we've got a subscription, which is often overlooked, is actually in physical products, because one of our brands has a number of consumable products and people can buy them and just get them delivered over and over again. You make that one time and you get to reap the rewards and the profits from it over and over and over again. I totally agree with you there.

One of the things you mentioned a few moments ago, which I thought we could dive into a little bit more, is the fact that not all tasks in your business are created equal. And in your book, one of the things you talk about is the 64/4 rule, which is an expansion of the 80/20 rule. I guess it's applying the 80/20 rule to itself.  I think that's a really interesting concept. How does someone go about identifying which are their most important tasks?

JAMES

Well, the first step is to be aware of all the tasks you're actually doing. I would suggest some kind of task order. Literally, write down everything you do for a while until you capture all the tasks and identify how long you're spending on each task and see if you can pin the outcome to that. Like, is there a dollar outcome that comes from that task? And then that will start to help you organize tasks into which ones have a bigger payoff.

Other things to look at might be: which tasks do you not enjoy or which tasks you're not particularly good at. For example, I was doing my own bookkeeping for a number of years, and even though I studied some accounting, I don't enjoy bookkeeping and I'm actually not that good at it. It's one of the first things to go. The other sorts of things really bogged down business customer support. As you scale your business, you're going to get more customers and they're going to have questions. Even simple stuff like “How do I log in?” or “What's the name of my billing statement?” or “How do I change my credit card because I've lost my wallet?” These little things seem inconsequential, but they could really suck up time. That time could be better served on high-level activities such as for a business coach, it might be spending time with an actual customer. If you're in a sales or marketing type area, you could make significant revenue gain by making better sales by getting on the phone to more customers or Skype or Zoom these days, I suppose they call it.

Of all the things you're doing, some of them just have bigger payoffs. Some of them are things that only you can do so that will put them into their own category. One of the ways that I'll do this with someone is actually having a big stack of post-it notes and we write down everything they do on post-it notes.  We might use an Eisenhower matrix which is a scale of importance and urgency, and we might start identifying which things are actually really important and really urgent. Which things are really important but not that urgent, things not urgent or important? Those things should just be cut.

The profound thing about the 64/4 is that it's pretty much saying that 4% of the things you do end up getting you about two-thirds of the results you get. That just means there's an incredible amount of wasted activity and a lot of noise happening in most people's day to day. And if you look at studies like adults, they typically can't produce more than about 3 hours of effective output in a day. A lot of people are drowning busy with eight or ten or twelve-hour days banging their chest about how hard they work, but almost all of it is useless. They only worked two or 3 hours. They could actually get the same number of results if they stopped doing wasted activities.

AIDAN

That was one of the big takeaways I had from a book by Cal Newport called Deep Work which is you really can't work for more than a few hours a day at that incredibly high level of output or flow or being in the zone. It always amazes me when I think back to that 64/4 rule. Imagine, for example, that you make $100,000 in a year and that involves working a full-time work week. You could make two-thirds of that or $64,000 by just working 4% of that work week which would just be a couple of hours a week, something like that. It's amazing when you really start breaking it down like that because I think it allows you to start asking the question, “What would I rather do? Earn $64,000 and work a couple of hours a week or $100,000 and work 40 or 50 hours a week?” That's kind of a basic sort of dumb-down example, but that's kind of the gist of what we're doing here.

I wanted to mention one thing about the task order that you mentioned, and then I want to take us in a little bit of a different direction here. For the task audit, one way that I've done it in the past is with a spreadsheet and simply creating a few different columns. In one column, put down the task that you're doing, in the second column, how long you spent on it, and then in the third column, if it's only something that you can do, or if it's something that someone else can do. I guess the fourth column would be the Eisenhower hierarchy or matrix that you mentioned there. And if it's one of those things that's just not important or urgent, then delete it. It also reminded me of when you were talking about the old “do-it, delete it, or delegate” approach to dealing with a lot of tasks.  I really love that.

What about teams now? I think from what we've spoken about in the past, you've run a pretty lean operation, which seems to work really, really well for you. In our business, we just did an organizational structure and I was blown away to see that we've got 100 people on the payroll. It's more than I would probably like to have, but it works for our business.  I'd love to get your thought about teams and how you sort of approach that.

JAMES

Well, one way to think about the team is they are a resource. You can buy that they will agree to an amount on an ongoing basis and they have installment plans, which are basically wages, right? As business owners, we can get this resource. We can basically buy people's time to spend doing things that we would like them to do, and they will generally do the things that we can't get to ourselves. We have limited capacity, right? Even if I wanted to, I could probably only work a couple of hundred hours a month because I'll run out of capacity. If I hire ten people now, I have 2000 hours that I can use. I built a service business off the back. At one point, I had 65 people in my virtual team, and in real life, I had 100 people working for actual business, a motor dealership, a Mercedes Benz dealership, and a smash repairer. That was quite a complicated thing. I didn't think I wanted to have a team after that. But these days you can actually have a small team if you want a small business. And to give you a perspective, for a business that's doing $1 million or $2 million a year, you can have a small team of five or six people and they can be all virtual. They can just be at their own home and their own country, doing their own things in their own time, and then you do your things. We're a collaboration.

The only good thing about it, and a nice way to think about it, in your case, if you have 100 people you're employing, that's 100 people you're responsible for, which can be a burden. And it's obviously for someone who has values, it's something you take great stock in. I remember there was a recent LinkedIn post that went viral where the CEO was crying because he had to let two or three people go. It was probably a little bit of a piss take, I suppose. Like, it is a huge responsibility, but also people choose to work or to have their own business. Not everyone can have their own business. It's probably not suitable for everyone. But if you do take on that responsibility, you're actually helping 100 people, like, you're providing an opportunity for them and you're able to create value in their lives. They're also paying taxes and providing for the ecosystem, schools and roads and police forces and things like that. It's a really nice thing to do if you're a responsible employer, but the best thing is, if you get the team part right, you only do the things you want to do or that you're good at, and then you don't have to do anything else. In my business, my team comes along and does all the stuff I don't want to do, which is websites, emails, editing, and bookkeeping support, and I just do the bits I want, which is to talk to my students and to do the occasional podcast, as you mentioned before.

AIDAN

Yeah, I think it varies a lot as well depending on the type of business that you have. In our physical product business, our products are in over 25,000 stores in the United States. Now, we do millions of dollars online, millions of dollars offline, and that's all done with a core team of probably six or seven people. Now, we also outsource some things like product inspection. We've gone off on our own in China and different bits and pieces there, but it's a remarkably lean operation for the size of business that it is.

But then there are other businesses that we've got which could hire 20 or 30 people in one business. A couple of examples is in the software start-up that we've got 15 different developers doing different things and then also a good number of support staff as well.  I think, at least in my mind, it's all relative and business-dependent, but it's good to think strategically when you are hiring people because it's amazing the kind of difference that you can get when you hire the right kind of people. If I have to think about the best hires that I've made over the past couple of years, one would certainly be my personal assistant because he is absolutely amazing and takes a huge, enormous weight off my shoulders. We've recently done some restructuring and we've now got what you could probably call a chief outsourcing officer, and his responsibility is really managing a lot of our development team. That's been absolutely transformational for us. Putting a formal CMO, Chief Marketing Officer, in place that can sort of life across different businesses that we've got has been a huge step forward. And also recently, within the past few months, something that we've done is we've created a new role called a Chief Customer Officer. All of these roles have got impressive names, but ultimately what the chief customer officer does is look after customers across all different businesses and different products that we've got and it's also streamlined through one system, whereas previously each product had its own support team, we still have a lot of the same resources, but it's just streamlined now through one system and it makes us more efficient and much more effective.

Continuing down that idea of key hires, one of the questions I had for you was as if you were just starting out again and understanding that it would be different depending on which business you would do, but what would you look at hiring or outsourcing first?

JAMES

Well, again, I'd have a look at what I'm doing. When I started my business, I did everything. And yeah, what am I not good at? What do I hate? What's easy to find? There are some roles that are much easier to find. It's very easy to find a general virtual assistant who you can train. It's really easy to get people to fulfill support and content-type activities. Editing, publishing, website activities, all of these things are pretty easy. The harder ones are where you might start crossing over between internal to going to an external supplier. You might get a professional service company that specializes in a particular thing, like talking top-end design, top-end copywriting, and top-end search engine optimization.

Some of these things become more specialized, they're going to be harder for you to hire an actual individual. You might get a service company or there's this whole rise of fractional roles, and fractional just means part-time. I've got a few partners, for example, who provide fractional services. One is doing fractional director of operations rather than having to hire a whole person to run your people in your systems, which is what a lot of visionary creators are not good at and don't want to do, you could just hire this guy to come in part-time to do meetings and to see what systems you've got and to organize your people, and you're paying a fraction of what you have to pay full time. These hybrid roles are popping up and there's the same fractional marketers, fractional operators, and fractional accounting.

AIDAN

Yeah, accounting. We hired a CFO a few years ago and when we were looking for that person, one of the fractional. It's actually a really interesting idea, especially for startups. It's just amazing.

JAMES

Exactly. I mean, you don't have a huge budget. It's a chicken and an egg, right? Business is going really well and you've got a lot of money to pay for all these great roles. The big objection you get is, but “I can't afford this.” What I really encourage people to do is disassociate themselves from the time equals money equation. We have to get away from that. If you can focus on your offer that converts, and I really push this in my book Work Less, Make More, the offer that converts is the secret that opens up the door. As soon as you can find an offer that people want to pay you for, then I would quickly assemble the team that is involved in fulfilling it. That fulfillment is really the big secret. If you can build the capacity to deliver, then I think marketing is generally the easier part of the equation to solve. That's why I built people to help me deliver service in terms of customer support. Help me get that website going, help me get my content on the internet, organize it, structure it, publish it, and email people about it. That's turning on the marketing. And if you can do this, I'm really fortunate in a way that I've found a good recurring front-end routine that matches a great recurring back-end payment system. Those two things paired together have created a beautiful business for me that's an ongoing podcast front end and my team.

Of the six people I have in my business, most of them are involved in just getting that front-end marketing machine organized, and then they serve the back end, all the admin and tech stuff. Just freeze me up to just create content and fulfill the coaching, those are the two main jobs in my business, but we get to choose what we do. The other thing that's essential is to ring-fence or partition off, or time box or whatever you want to call it, slices of your week where that's where you do your work. And then other parts of the week are where you never do work. You have that time off to think and do whatever you want to do. Meditate, spend time with your family, and do a hobby. This will sound foreign to most workaholics, but I can assure you almost all the workaholics that I've worked with who have big impressive revenues are usually making less per hour than a lean, well-structured business where the owner is working maybe a quarter of the time.

AIDAN

Yeah, I think it's a trap that so many people fall into. And coming back to that 64/4 rule that we were talking about that you also dive into a lot in your book there, most businesses that I see will earn 64% of their profits from 4% of the products.

JAMES

Exactly. As well, especially e-commerce stores. It's one of the first activities I do to go beyond the effective hourly rate. Effective hourly rate is a great metric. That's what we're talking about. That is the amount that you make per hour. I sort of referenced it earlier. Most employees know what their wage is. Their hourly wage is their effective value rate.  That's their profit for a business owner. Most of them don't know what their effective value rate is, but its revenue minus cost equals profit divided by the number of hours they work is their effective value rate. Some of them are shocked when they do this, but it's really worth doing it by product line or service division. If you have a three-tiered product line, you'll find one is really profitable and one sucks and one is probably average, then you can make decisions.

I like to get the data, make decisions, and then do that. My sort of 3D approach. Get your data. When you get the data, you find out, “Okay, I'm going to make some decisions here. I'm going to stop fulfilling this product. I don't want this product anymore, or I've got to fix this product to make it better.” Often, it's better just to stop a product. But if you have an e-commerce store and you have all these line items, we call them SKUs, some of them are just going to be sucking up your budget to buy and procure and store, but they never sell. They're a waste of time. If you didn't have them, you'd automatically be more profitable. That is mind-blowing, isn't it? If you just delete the bottom 20% performance of your stock, your product line, and your team members, then you will actually instantly become more profitable with no change in the amount of energy or effort that you're putting in. Negative rates, only positive change.

AIDAN

Yeah. And that's without even taking into consideration the fact that you will now all of a sudden be so much more focused and able to free up better energy into the resources that really are making you money.

JAMES

It'd be like if you were carrying a backpack and there were things in the backpack that you never use. Let's say you're traveling around the world and in your backpack, you took a barbell, right? And you never used it once. If you just took the barbell out of your backpack and left your undies and your laptop in there, you got a lighter backpack. It's easy to carry around. It's no net difference in terms of whether you use the barbell or not, but the outcome is so much better just by removing and deleting it.

AIDAN

Yeah, I love that, and I think it's a good way to wrap up this episode here. Thank you so much for being on here, James. I definitely want to do maybe a second and even a third iteration of an episode with you because I think there's so much more that we could dive into. But I think for right now, it would be great if people want to grab a copy of your book, which they can find on Amazon, or like I say, by heading over to jamesschramko.com, you'll be able to find a lot more about some of the topics that we've spoken about here today in this book.

If you're watching the video version, you'll be able to see what the book looks like on the screen right now. You see that there.  James, thank you for taking some time out of your day here. Always great to jump on these calls with you and look forward to and hope that we can do it again soon.

JAMES

I'd love to do that and thank you so much. So, a quick summary. Make sure you start outsourcing your task to the team. Choose a good business model that is going to help you get the most leverage possible, and carve out time for yourself so that you have time to think about your next moves and recognize that not everything should be treated equally. Some things are just far more valuable than others.

AIDAN

And ditch that barbell from your backpack. Get rid of the barbell. There's no point carrying that around the world with a dumbbell or whatever it is that you've gotten there.

All right, guys, thanks for listening here. We will see you on the next episode of The Growth Booth.