To improve, businesses tend to focus on those things most legibile.
Numbers which are easy to measure succeed to the detriment of fuzzy yet equally important concepts.
Or, as Taylor Pearson might riff:
´What gets made legible gets measured’
And then, as a consequence, focusing on one number for an extended length of time tends to create a lopsided organisation.
However, making the illegible legible can be transformational for many companies.
After spending a lot of time hanging out with online entrepreneurs, it has clicked with me that dollar-based productivity is largely illegible in most small companies. This is a concept that can significantly add to profits.
Dollar-Based Productivity — The Basis of Leverage Hacking
The goal of hiring is to achieve leverage — instead of working for 40 hours a week to complete a certain task, I can work for 2 hours a week to manage a person performing that task.
Entrepreneurs have different tasks to work on, with varying levels of value to the organization. My goal as the owner is to work on high value tasks and minimise, automate, systemize, delegate or outsource lower value tasks.
When we hire, we are looking to team members to occupy either lower value tasks or to complete high value tasks with better results than we are able to. In both cases, we look for them to create more value in dollar terms than what they receive. Our ultimate goal should be to achieve the best result per dollar spent. That is, productivity.
This enables me to focus on $500/hr tasks and leave the $5/hr tasks to someone else.
So far, so good.
However, close to zero entrepreneurs that I hang out with apply the SAME mindset to their team!
A-Players vs SOPs
Two typical scripts exist within the Dynamite Circle, my online community of choice.
Script one: Hire A Players and future A Players. They reject the idea of outsourcing because of lower quality output.
These entrepreneurs incorrectly conflate the productivity per hour employed compared to productivity per dollar employed. Just because someone is more dollar productive with their 40 hours, doesn’t mean that 20 of those hours aren’t able to be replaced. We can also delegate most work successfully, even if it is to be of lower quality, if we also have processes to catch mistakes.
Script two: Hire Serbians or Filipinos.
The entrepreneurs here make the opposite mistake: they can save a bunch of money measured in terms of each hour worked but the overall productive value is capped as the company is wholly limited to the expertise of their $5/hr team.
Both scripts make for useful tools but just like in chess, replacing the either-or choice with a combination of the two can be something MUCH more powerful. I now call it Leverage Hacking.
Leverage Hacking: What Is It?
Leverage Hacking is the process of extracting the most value per dollar spent on your team —through any method. Geo-arbitrage, outsourcing, software, training, SOPs — you name it.
Take the A-Player script and let’s say you run a popular Adwords agency. Your ability to scale is completely limited to your ability to find and hire Adwords experts.
To summarize the leverage involved:
YOU< —> ADWORDS EXPERT ($25/hr)
Let’s say you have 3 Adwords guys.
$5500 REVENUE <—> $4000 WEEK COST. (3 Adwords experts at $25/hr + $500 in software + $500 in admin and customer acquisition costs)
Profit is $1500 on $5500 in revenue.
To increase the effectiveness of each employee, most agencies will tend to use software such as the famed Optmyzr to leverage each additional minute.
However, think about the insanity of this. If it’s worth hiring people to take away your less productive hours, why aren’t you hiring people to take your team’s less productive hours?
Your highly paid team of A Players is almost definitely wasting a whole shit-ton of time on low productivity tasks. The incredible popularity of Optmyzer is more than enough confirmation of how much latent opportunity existed. Who knows how much is left?
Let’s go back to your superstar Adwords team at $3000/wk. They are currently working 120 hours a week between them. 40 hours are highly productive (again, in dollar terms), 40 are mediocre and 40 are low value admin tasks.
I can cut your team down to two Adwords players and add two workers at $5 an hour.
$5500 REVENUE <— > $3480 WEEK COST. (2 Adwords experts at $25/hr + 2 Assistants at $6/hr+ $500 in software + $500 in admin and customer acquisition costs)
Each Adwords manager now has an experienced assistant based in Serbia.
I’ve just increased the profit of your team while also paradoxically increasing the amount of hours worked.
Profit is now $2020 on $5000 in revenues. Profits have grown over 30%. Yeh:
The Combination is the Magic
Think about how far this can be pushed!
What is stopping you from hiring those 2 assistants at 30 hours a week and a third for $3 an hour, also at 30 hours? Once again — total hours worked have increased, total cost has dropped.
This is something we have been implenting at TourismTiger.
Right now, we have two Eastern European workers happily making a $3.5/hr wage (not much to you, but great pay for them). They are augmenting someone on $6/hr. She, in turn, is coached by someone on $10/hr. I now spend maybe 3 hours a week on trickier scenarios (I’m still the A Player here) and the other 37 or so hours are spent working elsewhere in the company.
Leverage Can be Achieved Many Ways
- Hiring future A players
- Hiring local expats away from their English teaching jobs. (I’m falling more and more in love with this.)
- Paying programmers to create scripts to automate repetitive tasks in your company. (We generate 100 email signups a week from a tactic that used to take around 15 hours each week to implement. We created a script for literally $45 that has reduced this task to 20 minutes.) Creating scripts is one of my favourite Leverage Hacks and yet I know very few people that do this.
- Hiring assistants to your assistants’ assistants.
- Having your assistants meet together to find tasks that can be replaced with scripts.
The best thing is I’m just scratching the service.
Welcome to the Leverage Hacker’s Factory
None of the above is revolutionary in the world of physical products — Leverage Hacking is why Apple’s headquarters are in the USA and its manufacturing is in China. Every last unproductive cent is chopped out of the process. At the same time, the best minds are still paid their millions of dollars. *
If big businesses can do it... why can’t we?
*Apologies for using Apple as an example to make a point. I hate it, too.