Case study: How to work less and make more
Is it really possible to work less hours and make more money? James Schramko shares a compelling case study that shows the answer is a resounding ‘YES’.
According to the Pareto principle (aka the 80/20 rule), 20% of the invested input is responsible for 80% of the results obtained.
If you take it one step further and apply the rule to itself, 4% of what you do generates 64% of your results.
How wild is that?
Isn’t it liberating to know you can coast by doing very few things as long as they’re the right things and you’re doing them well?
"I like EHR as a metric because it’s a fast way to cut through vanity metrics "
Most of my clients are working more than 60 hours a week when they first come to me. We usually discover they can immediately reduce that to 30 hours a week and still make the same income. They’re always so relieved when I help them identify what they can do less of, rather than what they should do more of.
That was certainly the case with Jarrod.
A 64:4 case study
I met Jarrod Robinson in 2015 and was immediately impressed. He’s a very switched on guy. He was highly motivated and very hard working—much like the kind of person I’d expect to be reading this article.
I’ll never forget sitting with Jarrod as he told me everything he was doing.
He was a full-time Physical Education (PE) teacher and had a website/blog called The PE Geek. He started monetising the site by selling an e-book. Then he made this connection:
If one product = good
Then many products = better
So he went from one e-book to eight. He got each one translated into three languages, giving him 24 e-books all up.
Then he started building iPhone apps. One app quickly became 60. He turned 20 of them into Android apps. While some did well, most didn’t. But Jarrod didn’t care because:
Many products = better
You’d think that 24 e-books and 80 apps would be enough. But not for Jarrod. He built four software-as-a-service (SaaS) products, each requiring a minimum investment of $30,000.
He also had a live workshop product that was popular around the world. He’d fly overseas on weekends to deliver his workshop, and then fly home in time for school to start on Monday.
Are you tired yet? Because Jarrod wasn’t.
He produced ten video courses.
He launched a podcast and quickly built it up to 40 episodes.
He created a t-shirt range because … well, why not? Teachers need t-shirts, right?
He created a comic book.
Finally, he created his pièce de résistance—a music album. For teachers.
And he did it all while working full-time as a PE teacher—a job that involved a four-hour daily commute.
When he finished telling me all this, he looked at me expectantly. I guess he was waiting for the same response he always got: ‘Whoa man, that’s incredible’.
What I actually said was, ‘Jarrod, you need help’.
And I didn’t mean, ‘You need to hire some staff’. No, I meant he needed someone to help him identify which of the million things he was doing were actually worth the time he was spending on them.
Fortunately for Jarrod, this was my specialty.
A highly effective filter
The first thing I did was calculate his EHR.
EHR stands for Effective Hourly Rate and the formula is this:
Profit (income less expenses)
Hours worked to achieve that profit
I like EHR as a metric because it’s a fast way to cut through vanity metrics and figure out if the time spent on something is actually worthwhile.
Jarrod’s PE Geek ‘side-hustle’ was generating a profit of $250,000 a year. Not bad money, right? The thing was, he was working 5,000 hours a year to make it.
Five. Thousand. Hours.
That’s an EHR of $50/hour, which seems reasonable until you realise:
- He was working literally every waking hour (because remember, he was also working full-time as a teacher).
- All the things he was working on were not equally profitable.
It was time to reduce the number of hours Jarrod was working while maintaining profits where they were. It was time to focus on the 4% activities in his business and life – the ones that would generate 64% of results.
Here’s what I got Jarrod to do:
1. Challenge assumptions
Jarrod felt he needed to keep working as a PE teacher because it gave him credibility with the people he was servicing. I asked him to consider whether he’d have a more positive impact on those people’s lives if he got out of the classroom. Getting rid of his teaching job immediately freed up 60 extra hours a week. (Yes, it also brought about a reduction in income, but we’ll take care of that in a second.)
Next, I asked Jarrod why he needed to limit the class sizes of his live workshops to 20 people. Those live workshops were his most lucrative product. By capping the class sizes at 20 he’d put a ceiling on the income he could make from them. To fix this, Jarrod opened up 20 more spots in each workshop. And he sold them all. So now he was making twice as much from his workshops.
Finally, I asked Jarrod why he thought he was the only one who could deliver this live training. Yes, there was a certain amount of expertise only he could bring to the table. But when he hired other experts to deliver his training he realised they had levels of expertise he didn’t have. They could give workshop attendees the same positive impact but in a different way.
2. Hit the delete button
We drilled deeper into Jarrod’s various offerings and worked out the EHR of each one. Some of them had a negative EHR and were actually costing him money! Getting rid of those products and services was an easy decision to make.
In the end, we got rid of everything except the stuff that was providing the most value—both to Jarrod and to his audience.
3. Amplify the things that worked
Jarrod’s live workshops were his best leveraged and best EHR product. How could he amplify their effect?
I’ve already mentioned one way—delivering them to 40 people at a time rather than 20.
Next, he identified his most highly engaged followers around the world and emailed them to see if they’d be interested in him running a workshop at their school. The result? An all-expenses-paid world tour where he delivered workshops in more than ten countries over six months.
4. Stop selling one-time products
It’s always hard to leverage the selling of one-time products. Why? Because you’re selling to a new person every time. I suggested Jarrod combine all his one-time products in place and make them available via a monthly membership.
Why would someone who only wants one or two of those products join up? For the same reason you have a Netflix subscription but watch only a tiny percentage of the shows on offer.
When Jarrod combined all his products into a membership where people paid a monthly or yearly subscription, everything changed. It allows him to focus on providing excellent value to his current (and best) customers instead of constantly chasing after new ones.
5. Let go of things he did well
Jarrod was very good at delivering his live workshops. Was he the only one who could deliver his workshops at his level? Yes. Did attendees need someone who could deliver at that level? No.
One thing a lot of business owners struggle with is letting others do the jobs they do well—especially when they enjoy doing them.
But doing those jobs yourself rather than outsourcing them to others stops you from:
- doing your highest-level work (i.e. the work literally no-one else can do)
- being able to do things like go on holiday and have a life.
Hiring other people to deliver his workshops didn’t mean Jarrod couldn’t deliver them himself. It just meant he didn’t have to, which gave him freedom to explore other opportunities for his business (and his life).
6. Used EHR as a filter for future projects and opportunities
The craziest thing Jarrod told me was that he was knocking back the chance to deliver live workshops because he didn’t have the time.
Those live workshops had an EHR of around $1,500. And yet he was turning them down in favour of work that had an EHR of $50 or less.
Jarrod now uses EHR as a highly effective filter. He measures any new opportunity that comes his way against a benchmark of $300/hour. If it doesn’t stack up, he doesn’t take it on.
Summarising the power of focus and 64:4
Today, Jarrod makes more than half a million dollars a year and works around 25 hours a week. His current EHR is $380. He has a lot more leisure time at his disposal and can actually enjoy the money he’s making.
Even better, he and his partner have just had a baby and he gets to be highly present in the early months of his first child’s life.
That’s a privilege most new fathers only dream of.
Over to you …
How can you apply the power of 64:4 to your business? Just follow these steps:
- Calculate your overall EHR (if you haven’t already done so).
- Calculate the EHR of each of your business activities/products/services.
- Identify your 4% activities/products/services.
- Identify the activities/products/services you need to delete.
- Identify activities you like doing but could realistically be done by someone else.
- Identify the EHR you’ll use to filter all future opportunities and ideas.
- Apply that filter to all future opportunities and ideas.
Which activities in your business are lowering your overall EHR? If you share them in the comments below I suspect we’ll start to see a pattern emerge!
The above is an edited extract from James Schramko’s book Work Less, Make More: The counter-intuitive approach to building a profitable business, and a life you actually love. It is re-published here with full permission of the author.