IN THIS ISSUE
- What six types of leverage will take you wherever you want to go
- The Russian Doll leverage journey
- What you need to do before any leverage can happen
- When should you use OPM in your leverage strategy
Today I wanted to talk about leverage.
Some of you have very little leverage because you either don’t understand it or don’t know what’s possible.
Maybe I can help fix some of that.
Like a Russian Doll
If I can achieve a more final form, you would see a progression like this:
Uses time to earn cash for low-skilled labor (teenager).
Uses cash to learn higher-value skills (college student).
Uses time to trade higher-value skills for more cash (employee).
Uses excess cash and remaining time to bootstrap digital assets (hobbyist solopreneur).
Uses excess cash from digital assets to buy tools and products and fund experiments (learning solopreneur).
Uses more excess cash, learnings, tools, and products to build marketing systems (leveraged solopreneur).
Uses leverage solopreneur assets to build more digital assets to be managed by people I hire who do all the work (entrepreneur).
Uses excess cash to buy “hard” assets like real estate.
And so on.
There’s a sort of Russian Doll thing going on where each phase gives birth to the possibility of a next generation.
But you could also look at it like a snowball of knowledge, experience, and value; gradually growing larger as it rolls downhill.
None of this is possible without creating and exploiting various types of leverage, so I thought it would be useful to talk about a few of them.
I list financial leverage first, but early on, it’s the least likely leverage that you can bring to bear.
Normally financial leverage involves using other people’s money (OPM) which most people do not have access to for this purpose.
Using your own cash is a form of leverage, but it is not financial leverage.
Before I steer away from this topic, it should be understood that financial leverage would be useful if you’ve built a cash machine whereby you can invest $1 and get $2 back. At that point, you pump as much money from anywhere into your machine.
Time is finite.
What should you spend your time on?
For some people, it’s watching TV—feel free to read my cautionary tale, The Price of Netflix.
I talked about your temporary labor business in Starting You, Inc. and the idea that time and health are finite, so it’s very important to use all of your time wisely.
In that newsletter, I wrote:
You must optimize for:
- Relentlessly obtaining specific skills (and not plateauing)
- Continuously upgrading your compensation in exchange for these skills.
Assuming you can make your time more valuable, it becomes necessary to always be doing the most valuable activities.
Therein lies the opportunity to delegate low-skill tasks to others so you’re always locked into your highest use.
This is one form of time leverage, but another powerful way to acquire time leverage is through automation and systems which eliminate humans altogether; and their inconsistencies (it had to be said).
The highest use of your time is to turn the activities required to run your business into standardized processes that can operate without you.
The upfront investment in time pays huge dividends down the road.
Since I mentioned the idea of outsourcing tasks to people, you could imagine systems for Onboarding and Training. These respective systems would assure your business ran consistently despite the eventual change in people.
As referenced in the time leverage section, some of your systems will eventually be automated, so systems leverage improves your time leverage.
Communications and Marketing Leverage
The kind of communications leverage I’m talking about is something I commonly refer to as a distribution network.
The ability to communicate your message wide and far or inspire sales at will is very powerful.
Think: blogs, social media, videos, reviews, etc.
And the messages you distribute and the system around that is your marketing leverage. You build this over time through experience with your customers, tuning your marketing messages, and systematizing all of this.
As I wrote in Invisible Selling Machine, this can all happen while you sleep.
Network and Relationship Leverage
If you haven’t heard the phrase, read it now, “Your net worth is in your network.”
You’re looking to build strategic connections where you can barter for or exchange value.
I wrote about partnership marketing in The Back End Marketing Agency, but there are professional relationships where you swap professional services or even expertise.
Knowing the right people is also a form of network leverage. Over the years, I’ve figured out who are the go-to real estate investors to listen to and also the internet marketing experts too. I now get nearly 100% signal.
And lastly, the most important relationship network of them all is your customer network. It should be obvious why that is.
Knowledge and Experience Leverage
I wrote about specific knowledge recently as a key aspiration in life overall. You can see that knowledge acquisition comes into play early in life to enhance time leverage.
When building digital assets, knowledge and experience and intellectual assets can be leveraged over and over.
Learning how to learn and acquire this specific knowledge is also valuable leverage. Do it once in one industry and you can do it again elsewhere. As I write this, I’m following Frankie Fihn’s 90-day agency creation journal for a completely new problem space for him.
As I’ve pointed out a couple of times, these different leverages can work together to create or enhance each other.
But before you can create this virtuous leveraging leverage situation, you have to get started somewhere.
Now that you’re aware of the different types of leverages, consider where your natural strengths lie and what strategy can help you bring those to bear.
For me, I have the financial leverage of excess cash which enables me to afford tools and money to iterate on advertising. I can profit from asymmetric investing.
And, of course, as a software guy, systems leverage is guaranteed; I just have to be careful to not hold on too tightly as my time leverage situation suggests I should outsource it.
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