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Make 55 Percent More Money – Part 2

Written on February 12, 2009 by George Krueger & Mary-Lynn Foster in Balance, Money, Time Management

watch_time Last time, we discussed using the way a venture capitalist invests as a model for how we invest our time. We talked about a 4-step process to create a portfolio of activities that generates the greatest return.

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The example

Now we want to look at an example. Let’s say that you make $100,000 a year. You invest 2,500 hours a year – 50 hours a week for 50 weeks – to earn that money. We immediately see that you’re making $40 an hour.

We’ll simplify the 4-step process we discussed last time. Let’s say that you found that 20 percent of your activities generate 80 percent of your income. The old 80/20 rule. We’ll call these your highest-value activities.

So while you earn $40 an hour from your entire portfolio of activities, you’re actually making $160 an hour from your highest-value activities.

Also assume that further analysis showed that you aren’t making any money from 20 percent of your tasks. These are your lowest-value activities, which are really weighing down the overall return on your invested time.

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A bigg jump in income

Looking at the lowest-value activities, ask yourself if you can eliminate any of them. Let’s say you determine that all those activities are a complete waste of your time. Further assume that you could spend all of that time on your highest value activities. It’s unlikely that this would be the case, but it illustrates our point simply so let’s go with it.

Under our assumptions here, your income would increase 80 percent. You would make $180,000 instead of $100,000. Instead of making $40 an hour, you’re making $72 an hour. Sounds pretty good, huh?

But it’s really just making sure you’re allocating your time – your most precious resource – most effectively.

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Make 55 percent more

The problem is it’s not realistic to think that 20 percent of your time is completely wasted. In fact, we bet you waste very little. A more realistic assumption is that you would have to pay someone to do some portion of these lowest-value activities. But you can afford it now!

In fact, we found that you could pay up to $160 an hour for those activities and still break-even. But we want to do better than break-even.

So we assumed you would pay $50 an hour on average for those activities. In that case, you would make 55% more even after paying someone!

Synergy

Now think about it, you’re paying someone $50 an hour and before you were only making $40 an hour. This is consistent with things we’ve seen in our own businesses as we focus on higher-value activities.

But here’s something else we’ve found – your highest value activities may our lowest value activities. This is where synergy comes in. By partnering with people and organizations around core strengths – we work together, with you doing what you do best while we do what we do best – everyone makes more money without investing more time.

The importance of testing

But what if you just don’t have the money to hire someone to do these things for you? It’s important to test. Just try investing a little more time on your highest value activity.

You may have to give up something – even a little downtime – while you’re doing this. See if you make more money. If you do, keep feeding that task. To do that, find ways to delegate those lower-value activities for you, even if it costs a little money.

Just like a venture capitalist, if you keep funding those activities that generate the highest return and you move away from things that don’t, you’ll make that bigg money you know you’re worth!

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Thank you so much for reading our post today. Until next time, here’s to your bigg success!

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(Image in today's post by bluegum)

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Make 55 Percent More Money – Part 1

Written on February 11, 2009 by George Krueger & Mary-Lynn Foster in Money, Time Management

watch_time We recently did a couple of posts about project selection – how to choose the projects that are best for you. First, we talked about knowing if you should invest your money in a project. Then we integrated the value of our time into the project selection methods.

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Hear George & Mary-Lynn discuss today's topic on The Bigg Success Show! Click the purple player: Play Now | Play in Popup | Download

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Now we want to extend that concept. We hear a lot about the right mix of assets when it comes to investing in our retirement portfolios. But we don’t often think of the activities we perform – how we invest our time – as a mix of assets.

Investing time like a venture capitalist allocates money

We should because the things we do should add value to our lives or we shouldn’t do them. So we want to approach our investment of time like it’s a portfolio … specifically, a venture capitalist’s portfolio.

A venture capitalist invests in a bunch of companies. Then they see how they perform and make decisions. If a company is hitting its marks, they keep funding it. If not, they don’t. They are constantly allocating money to the companies that look like they will generate the greatest return.

We can use this as a model for how we invest our time.

Find your highest value mix of activities

We’ve come up with a four-step process to determine those activities which deserve more of our investment of time and those tasks that should get less. So we can make more money without investing more time.

Step 1: List all the activities you perform.

Step 2: Place a dollar value on each of those activities.
It’s relatively easy to figure out the value of activities that make you money, but what do you do with those tasks that don’t? You want to look at two scenarios:

How much would it cost to pay someone to do it for you?
How much could you make in that time?

For example, spring is about here. It will be time to get out the lawn mower. For the sake of simplification, we’ll ignore the cost of owning and maintaining a mower. Say you could find someone to mow your yard for $50. In that time, you could earn $75 after-taxes. Under these assumptions, mowing your own yard costs you $25.

Step 3: Rank your activities from high to low.

Step 4: Create a portfolio of activities that generate the highest return.
Just like a venture capitalist, you want to invest more time in those activities at the top of your list. You want to “fund” the winners (i.e. invest more time in them).

To find the time for those activities, look at the bottom of your list and find ways to eliminate or delegate those tasks. One by one, you’ll find more time to invest in your higher value activities.

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Limitations

Admittedly, there are limitations to this process. Some activities cannot be measured with money. Going back to our example about mowing the yard, you may really enjoy that task.

It also doesn’t account for the fact that you need some down time to recharge. This is definitely a quantitative, not a qualitative, process.

This was the set-up. Next time we’ll discuss an example so you see how powerful this process can be. You’ll see how to make 55 percent more money without investing any more time.

Thanks so much for stopping by our site today. Until next time, here’s to your bigg success!