This is a guest post by Ramit Sethi of iwillteachyoutoberich.com. His book, "I Will Teach You To Be Rich," comes out next week on March 23rd.
One of the problems with starting a new business is that you have an infinite number of choices for ways to start earning money. For the last few weeks, I've been working with someone named "Nicole," a freelance writer who offered to help me interview some of my readers and collect money stories for my blog. She offered to work for me in exchange for advice on building her freelance business. Last week, we had our first "advice" call, and it was fascinating. She asked:
- How come I'm not earning enough money?
- How do I get paying clients that stick with me?
- Time management: "I'm not very focused or targeted in my self-promotion...what should I do?"
Our conversation was a great example of the troubles that many entrepreneurs face when starting their businesses, so I thought I'd share some simple techniques that Nicole and I came up with to focus her on earning more money.
First, the back story: Nicole had emailed me a few weeks earlier, offering to do research and freelance writing for me in exchange for advice and possibly paid work. I skeptically checked out her site (because most people who say they're writers actually write like 3 year-olds), but I was immediately impressed: She'd published articles in multiple magazines, and on her blog, she wrote about looking for more freelance work.
She has done a great job doing research for me, but for her own business, she hasn't made much progress. On our call, I asked her a few questions:
- What's your goal? Her first answers were wishy-washy: "I want to have a consistent client base" and "I want to write interesting articles," which are totally pointless and non-measurable goals. After I pressed her, she got specific: "I want at least two clients paying me $500 each month by June." Perfect.
- What are you doing to hit that goal -- where do you spend your time? This is where it got really interesting. She was doing the following: Updating her blog, adding content to her web site, attending networking events, working with me (and a couple other people), and reading blogs to learn about the business.
Stop wasting time!
Immediately I could tell that at least 60% of her time was being completely wasted. "In my experience," I told her, "freelancers try to do 50 things, and they end up doing a 5% job on each of them." She paused. "That's exactly what I've been doing." It's much better to pick the 1-2 most important tactics and focus on them. Let's examine each of these in turn:
Updating her blog: Why? What's the point? How does this help her get to her goals when her blog has less than 1,000 readers/month? Has she ever gotten a client from her blog? No? Skip it.
Adding content to her web site: Nobody cares. Her website is already great: When I got her email, I clicked over, read 2 articles for 30 seconds, and decided she was a great writer. Adding more content is overkill. Once it's good enough, move on.
Attending networking events: These make me want to kill myself. "Networking events" are popular with entrepreneurs (especially non-tech entrepreneurs who aren't afraid of meeting people in person), but you have to think about the odds: You spend 5 hours (travel time, scheduling, attendance, etc) to meet -- what? -- 15 people? You give them your business card, you'll get in touch with maybe 2, and probably neither of them will end up being a paid client. Tough to hear, but true, and Nicole agreed that her last few "networking" events had not gone well. Imagine how many well-targeted emails you could send in 5 hours.
Working with me and other people who can either (1) pay her directly or (2) introduce her to people who will pay her: Nicole said this was her best channel for reaching paying clients. I agree. Find the best clients, impress them, and get them to pay. Then get referrals. That's a business.
Reading blogs: Sure, maybe for fun, but how does this directly contribute to getting two paying clients?
It sounds ruthless, but in the first few months of a venture -- especially freelancing where you have to work to eat -- it's critically important to figure out a way to earn a sustainable amount of money. That's why reading blogs is a "nice to have," but it doesn't help her achieve her goal.
She needed to do an 80/20 analysis to understand that 80% of her results came from 20% of her time, so by eliminating the unnecessary work, she could actually do a much better job.
I advised her to find a few bloggers in verticals she knows about, like personal finance and fitness, and reach out to them. The popular ones are swamped but have huge needs that she can solve using her writing skills. By offering them free help for a set amount of time, she could prove that she's good and discuss a paid engagement -- all at no risk to the bloggers.
Her one goal would be to open the funnel to get as many paying clients in the front door as possible, then knock their socks off with her skills. That's it.
People don't like to hear this
This isn't a popular position. Many of my friends have started small businesses and they spend their first few months buying business cards, getting an office, and doing things that are designed to contribute to their business but are really just huge wastes of time. This post on the 37 Signals blog describes it perfectly:
“But I was told I need to have a ____ to start a business.” Fill in the blank with a board of advisors, business plan, or some other obstruction between you and the thing you want to build. Have you noticed how all these commonly held notions about things you “have” to do are just excuses in disguise? They’re a reason for not doing something. […]
Next time you hear that “you need this” or “you need that” to get your business off the ground, question it. Ask yourself: “Is this really necessary or can I get by without it for now?”
And then, in my favorite quote of the post, a commenter named Jacob replies:
"It’s surprising how many of these people, once their excuses are removed, are suddenly no longer interested in starting a business."
Exactly. The point of Nicole's business isn't to attend events, or read blog posts. In her own words, it's to have two sustainable, consistent clients paying her $500 per month, each.
To get there, she picked a crisp goal. She eliminated all the possible things she could do -- "Should I get business cards? An office? Read blogs? Attend events? Update my blog and website?" -- and just decided to focus on the tactics that would take her directly to her goal. That's the importance of reducing choices and focusing on the things that matter.
How this relates to personal finance
Nicole's paralysis is very similar to how we manage our personal finances. We get overwhelmed by the number of choices -- "Should I invest? What's my asset allocation? 401(k) match or pay off debt? How do I save money on eating out?" -- that we just do nothing. It's much better to build an automatic personal-finance infrastructure that takes each dollar you make and automatically routes it to the right place.
That way, you only have to focus on one thing: Earning more money to funnel it into the front end of your system. I describe this in my book, especially chapter 5 on automating your finances.
The importance of reducing choices, doing an 80/20 analysis, and focusing on the things that matter applies to all of us -- whether we're managing our own finances or running a new business.