If you don’t prioritize, everything seems urgent and important. If you define the single most important task for each day, almost nothing seems urgent or important. Oftentimes, it’s just a matter of letting little bad things happen (return a phone call late and apologize, pay a small late fee, lose an unreasonable customer, etc.) to get the big important things done. The answer to overwhelmingness is not spinning more plates—or doing more—it’s defining the few things that can really fundamentally change your business and life.
8. Do not carry a cell phone or Crackberry 24/7.
Take at least one day off of digital leashes per week. Turn them off or, better still, leave them in the garage or in the car. I do this on at least Saturday, and I recommend you leave the phone at home if you go out for dinner. So what if you return a phone call an hour later or the next morning? As one reader put it to a miffed co-worker who worked 24/7 and expected the same: “I’m not the president of the U.S. No one should need me at 8 P.M. at night. OK, you didn’t get a hold of me. But what bad happened?” The answer? Nothing.
9. Do not expect work to fill a void that non-work relationships and activities should.
Work is not all of life. Your co-workers shouldn’t be your only friends. Schedule life and defend it just as you would an important business meeting. Never tell yourself “I’ll just get it done this weekend.” Review Parkinson’s Law and force yourself to cram within tight hours so your per-hour productivity doesn’t fall through the floor. Focus, get the critical few done, and get out. E-mailing all weekend is no way to spend the little time you have on this planet.
It’s hip to focus on getting things done, but it’s only possible once we remove the constant static and distraction. If you have trouble deciding what to do, just focus on not doing. Different means, same end. —AUGUST 16, 2007
The Margin Manifesto: 11 Tenets for Reaching (or Doubling) Profitability in 3 Months
Profitability often requires better rules and speed, not more time. The financial goal of a start-up should be simple: profit in the least time with the least effort. Not more customers, not more revenue, not more offices or more employees. More profit.
Based on my interviews with high-performing (using profit-per-employee metrics) CEOs in more than a dozen countries, here are the 11 basic tenets of the “Margin Manifesto” … a return-to-basics call that gives permission to do the uncommon to achieve the uncommon: consistent profitability, or doubling of it, in three months or less.
I review the following principles whenever facing operational overwhelmingness or declining/stagnating profits. Hope you find them useful.
1. Niche Is the New Big—The Lavish Dwarf Entertainment Rule
Several years ago, an investment banker was jailed for trade violations. He was caught partly due to his lavish parties on yachts, often featuring hired dwarves. The owner of the dwarf rental company, Danny Black, was quoted in the Wall Street Journal as saying “Some people are just into lavish dwarf entertainment.” Niche is the new big. But here’s the secret: It’s possible to niche market and mass sell. iPod commercials don’t feature dancing 50-year-olds, they feature hip and fit 20- and 30-somethings, but everyone and his grandmother wants to feel youthful and hip, so they strap on Nanos and call themselves Apple converts. Who you portray in your marketing isn’t necessarily the only demographic who buys your product—it’s often the demographic that most people want to identify with or belong to. The target isn’t the market. No one aspires to be the bland average, so don’t water down messaging to appeal to everyone—it will end up appealing to no one.
2. Revisit Drucker—What Gets Measured Gets Managed
Measure compulsively, for as Peter Drucker stated, What gets measured gets managed. Useful metrics to track, besides the usual operational stats, include CPO (“Cost-Per-Order,” which includes advertising, fulfillment and expected returns, charge-backs, and bad debt), ad allowable (the maximum you can spend on an advertisement and expect to break even), MER (media efficiency ratio), and projected lifetime value (LV) given return rates and reorder percent. Consider applying direct response advertising metrics to your business.
3. Pricing Before Product—Plan Distribution First
Is your pricing scalable? Many companies will sell direct-to-consumer by necessity in early stages, only to realize that their margins can’t accommodate resellers and distributors when they come knocking. If you have a 40% profit margin and a distributor needs a 70% discount to sell into wholesale accounts, you’re forever limited to direct-to-consumer … unless you increase your pricing and margins. It’s best to do this beforehand if possible—otherwise, you’ll need to launch new or “premium” products—so plan distribution before setting pricing. Test assumptions and find hidden costs by interviewing those who have done it: Will you need to pay for co-op advertising, offer rebates for bulk purchases, or pay for shelf space or featured placement? I know one former CEO of a national brand who had to sell his company to one of the world’s largest soft drink manufacturers before he could access front-of-store shelving in top retailers. Test your assumptions and do your homework before setting pricing.
4. Less Is More—Limiting Distribution to Increase Profit
Is more distribution automatically better? No. Uncontrolled distribution leads to all manner of headache and profit-bleeding, most often related to rogue discounters. Reseller A lowers pricing to compete with online discounter B, and the price cutting continues until neither is making sufficient profit on the product and both stop reordering. This requires you to launch a new product, as price erosion is almost always irreversible. Avoid this scenario and consider partnering with one or two key distributors instead, using that exclusivity to negotiate better terms: less discounting, prepayment, preferred placement and marketing support, etc. From iPods to Rolex and Estée Lauder, sustainable high-profit brands usually begin with controlled distribution. Remember, more customers isn’t the goal; more profit is.
5. Net-Zero—Create Demand vs. Offering Terms
Focus on creating end-user demand so you can dictate terms. Often one trade publication advertisment, bought at discount remnant rates, will be enough to provide this leverage. Outside of science and law, most “rules” are just common practice. Just because everyone in your industry offers terms doesn’t mean you have to, and offering terms is the most consistent ingredient in start-up failure. Cite start-up economics and the ever-so-useful “company policy” as reasons for prepayment and apologize, but don’t make exceptions. Net-30 becomes net-60, which becomes net-120. Time is the most expensive asset a start-up has, and chasing delinquent accounts will prevent you from generating more sales. If customers are asking for your product, resellers and distributors will need to buy it. It’s that simple. Put funds and time into strategic marketing and PR to tip the scales in your favor.
6. Repetition Is Usually Redundant—Good Advertising Works the First Time
Use direct response advertising (call-to-action to a phone number or website) that is uniquely trackable—fully accountable advertising—instead of image advertising, unless others are pre-purchasing to offset the cost (e.g., “If you prepurchase 288 units, we’ll feature your store/URL/phone exclusively in a full-page ad in…”). Don’t listen to advertising salespeople who tell you that 3, 7, or 27 exposures are needed before someone will act on an advertisement. Well-designed and well-targeted advertising works the first time. If something works partially well (e.g., high response with low percentage conversion to sales, low response with high conversion, etc.), indicating that a strong ROI might be possible with small changes, tweak one controlled variable and microtest once more. Cancel anything that cannot be justified with a trackable ROI.
7. Limit Downside to Ensure Upside—Sacrifice Margin for Safety
Don’t manufacture product in large quantities to increase margin unless your product and marketing are tested and ready for rollout without changes. If a limited number of prototypes cost $10 per piece to manufacture and sell
for $11 each, that’s fine for the initial testing period, and essential for limiting downside. Sacrifice margin temporarily for the testing phase, if need be, and avoid potentially fatal upfront overcommitments.
8. Negotiate Late—Make Others Negotiate Against Themselves
Never make a first offer when purchasing. Flinch after the first offer (“$3,000!” followed by pure silence, which uncomfortable salespeople fill by dropping the price once), let people negotiate against themselves (“Is that really the best you can offer?” elicits at least one additional drop in price), then “bracket.” If they end up at $2,000 and you want to pay $1,500, offer $1,250. They’ll counter with approximately $1,750, to which you respond: “I’ll tell you what—let’s just split the difference. I’ll overnight FedEx you a check, and we can call it a day.” The end result? Exactly what you wanted: $1,500.
9. Hyperactivity vs. Productivity—80/20 and Pareto’s Law
Being busy is not the same as being productive. Forget about the start-up overwork ethic that people wear as a badge of honor—get analytical. The 80/20 principle, also known as Pareto’s Law, dictates that 80% of your desired outcomes are the result of 20% of your activities or inputs. Once per week, stop putting out fires for an afternoon and run the numbers to ensure you’re placing effort in high-yield areas: What 20% of customers/products/ regions are producing 80% of the profit? What are the factors that could account for this? Invest in duplicating your few strong areas instead of fixing all of your weaknesses.
10. The Customer Is Not Always Right—“Fire” High-Maintenance Customers
Not all customers are created equal. Apply the 80/20 principle to time consumption: What 20% of people are consuming 80% of your time? Put high-maintenance, low-profit customers on autopilot—process orders but don’t pursue them or check up on them—and “fire” high-maintenance, high-profit customers by sending a memo detailing how a change in business model requires a few new policies: how often and how to communicate, standardized pricing and order process, etc. Indicate that, for those clients whose needs are incompatible with these new policies, you are happy to introduce other providers. “But what if my largest customer consumes all of my time?” Recognize that (1) without time, you cannot scale your company (and, oftentimes, life) beyond that customer, and (2) people, even good people, will unknowingly abuse your time to the extent that you let them. Set good rules for all involved to minimize back-and-forth and meaningless communication.
11. Deadlines Over Details—Test Reliability Before Capability
Skills are overrated. Perfect products delivered past deadline kill companies faster than decent products delivered on time. Test someone’s ability to deliver on a specific and tight deadline before hiring them based on a dazzling portfolio. Products can be fixed as long as you have cash flow, and bugs are forgiven, but missing deadlines is often fatal. Calvin Coolidge once said that nothing is more common than unsuccessful men with talent; I would add that the second most common is smart people who think their IQ or resume justifies delivering late. —JUNE 24, 2008
The Holy Grail: How to Outsource the Inbox and Never Check E-mail Again
What if you never had to check e-mail again? If you could hire someone else to spend countless hours in your inbox instead of you?
This isn’t pure fantasy. For the last 12 months, I’ve experimented with removing myself from the inbox entirely by training other people to behave like me. Not to imitate me, but to think like me.
Here’s the upshot: I get more than 1,000 e-mails a day from various accounts.89 Rather than spending 6–8 hours per day checking e-mail, which I used to do, I can skip reading e-mail altogether for days or even weeks at a time … all within 4–10 minutes a night.
Let me explain the basics, followed by tips and exact templates for outsourcing your own inbox.
1. I have multiple e-mail addresses for specific types of e-mail (blog readers vs. media vs. friends/family, etc.). tim@ … is the default I give to new acquaintances, which goes to my assistant.
2. 99% of e-mail falls into predetermined categories of inquiries with set questions or responses (my “rules” document is at the bottom of this post—feel free to steal, adapt, and use). My assistant(s) checks and clears the inbox at 11 A.M. and 3 P.M. pst.
3. For the 1% of e-mail that might require my input for next actions, I have a once-daily phone call of 4–10 minutes at 4 P.M. pst with my assistant.
4. If I’m busy or traveling abroad, my assistant leaves the action items in numerical order on my voicemail, which I can respond to in a bullet-point e-mail. These days, I actually prefer the voice-mail option and find that it forces my assistant to be more prepared and more concise.
Each night (or early the next morning), I’ll listen to my assistant’s voicemail via Skype and simultaneously write out the next actions (1. Bob: Tell him that … 2. Jose in Peru: Ask him for … 3. Speaking in NC: Confirm …, etc.) in a Skype chat or quick e-mail. How long does the new system take? 4–10 minutes instead of 6–8 hours of filtering and repetitive responses.
If you only have one e-mail account, I recommend using a desktop program like Outlook or Mail instead of a web-based program like Gmail for a simple reason: If you see new items in your inbox, you’ll check them. Like they say in AA: If you don’t want to slip, don’t go where it’s slippery. This is why I have a private personal account that I use for sending e-mail to my assistant and communicating with friends. It’s almost always empty.
E-mail is the last thing people let go of. Fortune 500 CEOs, best-selling authors, celebrities—I know dozens of top performers who delegate everything but e-mail, which they latch onto as something only they can do. “No one can check my e-mail for me” is the unquestioned assumption, or “I answer every e-mail I receive” is the unquestioned bragging right that keeps them in front of a computer for 8–12 hours at a stretch. It’s not fun, and it keeps them from higher-impact or more rewarding activities.
Get over yourself. I had to. Checking e-mail isn’t some amazing skill that you alone possess.
In fact, checking e-mail is like everything else: a process.
How you evaluate and handle (delete vs. archive vs. forward vs. respond) e-mail is just a series of questions you ask yourself, whether consciously or subconsciously. I have a document called “Tim Ferriss Processing Rules,” to which my assistants add rules when I send them a note via e-mail with “ADD TO RULES” in the subject. Over the course of a week or two with a virtual assistant (VA), you will end up with an externalized set of rules that reflect how your brain processes e-mail. It often shows you how haphazard your processing is. I’ve included my “rules” here to save you some time. A few tips:
1. Setting appointments and meetings takes a lot of time. Have your assistant set things up for you in Google Calendar. I input my own items via my Palm Z22 or iCal, then use Spanning Sync and Missing Sync for Palm OS to sync everything. On my überlight Sony VAIO, which I still use for travel, I use CompanionLink for Google Calendar. I suggest batching meetings or calls in one or two set days, with 15 minutes between appointments. Scattering them throughout the week at odd times just interrupts everything else. (Update 2009: The Palm Z22 has been discarded, and I now use a 13-inch MacBook and BusySync to synchronize iCal with Google Calendar.)
2. If you jump in your assistant’s inbox and answer anything, BCC them so they are aware that you handled it.
3. Expect small problems. Life is full of compromises, and it’s necessary to let small bad things happen if you want to get huge good things done. There is no escape. Prevent all problems and get nothing done, or accept an allowable level of small problems and focus on the big things.
Ready to jump in and test the holy grail? Here are the steps.
1. Determine exactly which accounts you will use and how you want them to respond to (or just categorize or purge) e-mail for you.
2. Find a virtual assistant.
3. Test for reliability before skill set. Have the top three candi
dates do something on tight deadline (24 hours) before hiring them and letting them in your inbox.
4. Use a probationary period of 2–4 weeks to test the waters and work out the problems. Again: There will be problems. It will take a good 3–8 weeks to get to real smooth sailing.
5. Design your ideal lifestyle and find something to do other than let your brain fester in the inbox. Fill the void.
TIM FERRISS PROCESSING RULES90
[Note the Q&A format—some of the questions are my standard points for VAs, some have been added by my assistant, who put together this document.]
Passwords
Team Requirements
[I often have exec-level assistants manage 4–5 other “sub VAs” who handle certain repetitive tasks, often at half the exec VA’s hourly rate. The exec VA takes on an office manager or, in some cases, COO-level function.]
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Deadlines are extremely important. Be Aware of them, and Be Punctual!
If Tim says “Call me back,” CALL HIM BACK, do not send an e-mail. This is an important point, as Tim does not always have e-mail access because he is traveling a lot.
Even if it is late in the evening, he is up late, if he does not want to answer his phone, he will not. But PLEASE call him back when he asks you to. He much prefers a phone call to an e-mail.
Purchase and read The Elements of Style regarding proper grammar and punctuation. We are dealing with high-profile clients on Tim’s behalf and the proper writing techniques and message says a lot about his team.
Become as familiar as you can with his book and his website as to answer questions accordingly.
The 4-Hour Workweek: Escape 9–5, Live Anywhere, and Join the New Rich - Expanded and Updated Page 31
