I was waiting for my train to go back home, when I bumped into the CEO of the office supply company I’ve just been hired by as a sales rep.
“Hey, David, what were you up to in today’s training?”
“Marketing,” I said, not really understanding the complexity of selling office supplies.
“What you’re learning is probably very interesting, but here’s how it really works. I’ve been the CEO in a couple of industries, so let me sum up all you need to know, for everything related to revenue-generating activities.”
“Thank you, but my train is in three minutes …”
“Great, after I’m done, you’ll still have time to grab a coffee if you wish. Let me get straight to my point: if you sell DESIRE, you talk to people’s EMOTIONS. You can make your products or services scarce and expensive. On the other hand, if you sell NECESSITY, you talk to people’s LOGIC. You have to make your products or services available fast, and affordable. And that’s the business we’re in.”
“I’ll be sure to remember it. But what did you mean by revenue-generating activities?”
“Of all a business’s operations, there are only two revenue-generating activities: marketing and sales.”
While this last statement is not precisely correct per se, I remembered his words, and I’ve learned shortly after what a privilege it was to converse with our CEO, a sought-after leader and real gentleman, a straight-to-the-point kind of guy. Good insights always age well. It was in 1999, and his words have never lost their authority. The point I’m trying to make here is: among your low-value activities, marketing and sales deserve special attention.
I can hear your thoughts from here: “What? Marketing is not a low-value task; it’s the most important thing in the world.” Slow down. What I’m talking about in this section is spending your time implementing it. Marketing is an important role of yours … as part of your strategy. But spending your time managing Google ads or Facebook ads is indeed a low-value activity. (Don’t forget that you’re reading a book about time management for business owners.)
Marketing is vital for your business. That’s the reason why you have to delegate it to an expert—unless you’re a marketing genius, which is not the case for over 95% of us.
Before coming back to this, let me zoom out a bit so you get the whole picture. Have you noticed the different types of business owners, when considering the size of their companies?
Let me emphasize a critical distinction between the falcons (6-figure business) and the hawks (7-figure business): the essential difference is that hawks delegate most of their operations. That’s the only way to turn a falcon into a hawk. Without massive delegation of the operations, falcons are condemned to their station in life forever. Period.
That’s the reason why so many business owners, especially among those who provide services, get stuck forever around $100k to $200k a year in revenue. Only so many tasks can be carried out by ONE person. Therefore, you need to devote the least amount of your personal time to low-value tasks, including sales and marketing (unless either is your core expertise), to overcome this step and reach the 7-figure stage.
Now let me tell you the most important difference between a 6-figure business and a 7-figure business, and the most important difference between a 7-figure business and an 8-figure business, from a marketing and sales standpoint. This is critical.
6-figure to 7-figure: the Rule of One
To grow a 7-figure company, that is, to become a hawk, you must apply the Rule of One from the beginning of your business’s life. Have ONE business. Have ONE target market. Have ONE product. Have ONE conversion tool. Have ONE traffic source. Have ONE offer.
If you want to reach $1 million in revenue fast, that’s what you need. If you have two companies, five target markets, fifteen traffic sources, twenty-five products, and you change it all every month, how do you possibly expect to succeed? That’s the exact opposite of focusing. The fastest way to reach the 7-figure ceiling is apply the Rule of One to yours. Apply it at the earliest possible opportunity, even as early as launching your business. That’s the best way to avoid wasting your time.
The formula has worked time and time again in every niche I’ve entered or helped my clients with. Ask any million-dollar business owner, and they’ll agree, at least in principle. Maybe one would add a couple of products if they’re in e-commerce. Maybe one would add a second offer to his first core offer. But you get the point: don’t spread your attention, money, and time too thin. Focus is the name of the game. Put all your eggs in one basket.
By the way, if you’re really determined to give your work the necessary attention to grow an 8-figure business fast, you need to check out this free training. You’ll find the most useful insights on focus you’ve ever come across—that’s exactly how I’ve been setting productivity records for 10 years:
There’s an old saying that goes something like this: “We have to bring more life to the minutes, not more minutes to life.” In order to bring more life to the minutes, we must do one thing at a time.
When you concentrate every fiber of your being on ONE thing, you become present and learn to live in the moment.
Why do you think people go to Six Flags or do bungee jumping? Because they want to live in the moment, and be reminded of what it feels like to be alive! It’s only possible to experience that when you thrust yourself into ONE thing. When they jump from the bridge, they don’t think of their groceries list or their bills or their kids’ problems. They’re 100% present on this very activity. There are no other distractions. And growing a 7- or an 8-figure business is much more enthralling than any amusement park in the world. I give you my word on this.
The best way to sabotage what you’re doing is to do a second thing at the same time. If you want to know the ugly truth about multitasking, you can watch a video I’ve made right here:
7-figure to 8-figure: Horizontal Growth
From a marketing and sales standpoint, there are two ways to grow your business: either you get more customers or you make them worth more (by maximizing the value or frequency of their purchases).
Increasing customers is vertical growth. Making each of them more valuable is horizontal growth.
Up to around one million in sales, your first goal is to get more customers. Once you reach the 7-figure threshold, you start switching your marketing and sales strategies to increasing the value of your customers: how to make them buy more; how to make them buy more frequently; how to increase customer lifetime value (CLV).
To sell you their magic beans, marketers often say things like, “If you put $1 in your marketing system and you get $2 out, how much would you put in there?” Given the hypothetical promise of doubling your money, the obvious answer is often something like, “As much as I have available.” That’s theory. It doesn’t really work this way in the real world.
If you keep pumping your money into acquiring new customers using a previously proven strategy, over time your ads will become less profitable, the cost of acquiring a customer will get higher, and your margins and returns will diminish: this is the law of diminishing returns. Whereas, in increasing the value of your customers, you’ll substantially increase your margins and bring in new business from referrals. From seven figures, your goal is to strengthen your steady base of satisfied customers that generate stable and predictable revenue.
Developing a recurring revenue stream is the Holy Grail, especially if you plan to sell your business. This is the golden gate to freedom because buyers go crazy for this kind of company. But it’s important not to get carried away with our emotions. This is your marketing STRATEGY. You’re the owner, founder, investor of your company, and maybe also the CEO. It’s NOT your job to implement this.
THEORY
If you’re not an expert in marketing or sales—scratch that … let me start again. If you haven’t had TREMENDOUS results, to the point where people ask you for advice, that’s an activity you shouldn’t be doing personally. Especially if you want to reach the 7-figure threshold.
If you keep working on your marketing and doing the sales by yourself while you’re not good at it, you’re slowing down the growth of your business.
You read that right. Instead of delegating it, if you personally take over one of those important activities (your marketing strategy for example), while it’s NOT your specialty, you transform it into a low-value task. A high-value activity can yield low-value results because of your close involvement. You become a liability in your own business. Why is that? Because when you take into account the impact this will have on your business, in proportion to the time it actually takes you, the chances are you’re not going to generate much value.
After all, what is marketing? It’s sales done via a SYSTEM. Not sales done by the owner. Keep marketing at a strategic level. Indefinitely. As for marketing operations, as soon as you can delegate it, leave it to someone else, for once and for all (generally when your business exceeds $100k in revenue).
That’s it for the theory.
REAL LIFE
In real life, to be able to apply this theory, you need some financial resources. Now, even if you’re just starting your business, it’s unlikely that you’re a pro at marketing and sales, and it’s likely you’re short of money. But these activities still need to be done. At this stage, if you can’t delegate your business’s sales and marketing function, you’ll have to do it by yourself, even if you’re not an expert at it. You’ll need to scour information online, or in print, or harvest knowledge directly from the people you have around you. Then try, test, and get the job done. That’s not the best solution, that’s just the best outcome for this situation.
That’s what most entrepreneurs do. I’ve done it. Most of us have earned some money this way … and consequently wasted a lot of time in doing so. More often than not, the process is slow and fastidious. But at least it’s moving forward.
Do it for a while—that’s okay. It’ll enable you to grow your business to six figures. Then if you want to go higher and free up more of your time, delegate up as soon as possible. Again, that’s where most people get stuck in the growth of their companies. That’s what 95% of entrepreneurs miss: they might have had some kind of early success, so they spend their hard-earned money on an immediate reward.
They probably think their businesses are going to trade forever. This mindset is the beginning of the end for many. At best, their businesses will peak at this growth stage and decline thereafter. On the other hand, in postponing your reward, you give yourself a better chance of securing a reward of greater value at a later stage. Your time will come.
Apart from the 8- and 9-figure business owners I’ve worked with personally, I’ve been a long time Kiyosaki disciple, and so, as a rule of thumb, my personal spending policy is as follows:
Call me frugal. Your goal at this stage is to save money to be able to hire the best people for your revenue-generating activities: marketing and sales. That’s the key. The difference between handling marketing or sales by yourself and delegating it to the right people, when it’s not your area of expertise, is tremendous. As long as you do it by yourself, your business is taking baby-steps (unless you’ve discovered a latent talent along the way that you never knew you had); whereas when you give the work to the right people, you’d better be ready to take off.
Delegation is the most critical step in your business’s life. And it’s the ONLY road to real wealth.
While ever you can afford it, be sure to find the best people to accomplish a given task, especially when it’s an important one. Delegate as soon as you can, even if it’s at the cost of your short-term profit. I know it hurts. They’re called GROWING PAINS.
Now, if marketing or sales IS your expertise, that is, if you’ve already had great results by doing it, then great! Continue taking care of that part of the business—or at least stay involved to some degree until you hit a certain growth stage.
To grow a 6-figure business, you need to get rid of the no-value activities, focus on ONE thing at a time, and save as much money as you can to be able to hire the right people. Then, to grow a 7-figure business, keep focusing on only ONE thing at a time and delegate your business’s operations, including your sales and marketing. To grow an 8-figure business, delegate all of your sales and marketing if you haven’t done so already. Even if you’re great at it, you need to invest your time on more valuable activities.
If you’re a marketing genius, maybe you’ll realize you’re doing a much better job as a marketer than as a CEO. Are you doomed to become an employee for the rest of your life? No, you can be the founder of your company and realize that you need a better CEO than you are, in which case, you’ll be more useful to the company as a CMO, for example. You just have to hire or partner with the right guys, the ones who have skills that you lack. I myself wasn’t the CEO in half of the successful ventures that I had.
Never forget the main question that should drive your decisions: WHAT needs to be done? Once you have the answer, the second question is: WHO is the best person to get this done? If it’s not you, you’ll have to hire that person (unless you’re ready to become that person).
80/20 MARKETING 101
I’ve worked closely with private equity groups for years and have seen up close how they improve and turnaround the companies they take over. This ought to be a whole new topic for another book, but let me briefly tell you the very first thing they do. As mentioned in the earlier sections of this book, most of your profit comes from very few of your products or services. For any company, there are products that are more profitable than others. More often than not, approximately 20% of products make 80% of profit, grossly stated. Maybe it’s 5%–60%, maybe it’s 25%–90%.
The fact is—and I know from personal experience—that business owners don’t know where their profitability is coming from after allocating all costs. Business owners don’t really bother looking at the financials under a microscope, as long as their company is doing well. They ought to devote their marketing efforts to directing clients’ attention towards these most profitable products. Why would you want your clients to buy products that are less profitable to your business?
The same thing applies to your clients. In most industries, small clients pay high prices, but sometimes they have a high cost to serve, whereas big customers take on large volumes and may be easier to deal with … but they screw you down on price. Therefore, business owners never know who their most profitable clients are, after allocating all costs—which really pisses me off. At times, I feel like I care more about their companies than they do; but at least it’s easy for me to diagnose their problems and build a roadmap to improve the profitability of their business.
So the first thing to do is to sort the clients out to find the 10–25% most profitable and market to them the most. Second, find a couple of upsells. Make surveys and create new products and services for them.
Remember that finding a new client costs on average 7x more than reaching out to an existing one.
Does this contradict the Rule of One previously stated? No.
As you’ve read it, my advice is to concentrate all your efforts in getting new clients until you hit the milestone of around a million in sales. From there, you have enough to play with to maximize your clients’ profitability with new offers. And from there, you can sort out your offers, keeping the most profitable ones and directing your clients towards them.
Don’t stop there. Drill down further. In the 25% of your clients who bring you the vast majority of your business’s profit, identify the top 10% who are your superstar clients, and market new special products to them. Take care of them. Send them special gifts. Cherish them. There you find your real fans, those who will buy from you each time you offer something new, those who like you, those who are ready to pay more to deepen their relationship with your company.
Study their demographics and find other similar clients, and market to them as well—following the same approach, whether it’s on Facebook, YouTube, or wherever your clients typically hang out, whether digitally or in person.
Business owners who understand this make a real difference in the market and in their lives. I want you to understand that this 80/20 phenomenon has nothing to do with being average. Don’t think average, think leverage. Think in terms of leverage, multiples, and compounding. Business growth is rarely linear. Each level brings with it greater multiples of ten, in a way not dissimilar to the Richter scale when measuring earthquakes. Each gradation represents an outcome with greater magnitude. Top performers aren’t twice as good as average ones, they’re more like 10x or 100x better. When putting together the jigsaw of all your associated costs, your best customer, your best product, your best employee, and your best marketing strategy, you’ll see that it can bring you up to and in excess of 100x more sales than an average system.
That’s a marketing and sales strategy I used myself when I bought businesses, alongside some other low-cost measures which are easy to implement, such as referral programs, testimonial broadcasting, mini eBooks, marketplace reports, or newsletters. But just by identifying and working with the 10–20% most profitable clients and products, you can easily double the value of any company in a few months.
By the way, to grow your company, you can of course grow it organically as we’ve seen, but you can also grow externally. Growing through acquisition is the single quickest way for a company to increase its value overnight. But that’s a whole new topic for another book for another time.
MISUNDERSTANDING
You may or may not have heard the saying: “People buy emotionally, then justify logically.”
For some reason, in recent times, many now tend to interpret it in more extreme terms: “People buy emotionally. Period.” Consequently, the misconception is that customers are fools who don’t rely on logic but only on their emotions.
Of course, nothing could be further from the truth, especially if you sell to sophisticated people. Here’s what the saying actually means: people are attracted to your product and are ready to buy … IF, and only IF, you give them compelling reasons to reinforce their first feeling. People need substance, data, and facts.