Sent by Jonathan Stark on April 13th, 2018
If you’re charging your clients based on the business outcomes that you provide to them (i.e., value pricing), instead of the labor intensity of providing those benefits (i.e., hourly billing), then your business is set up to benefit from creating leverage.
Leverage allows you to deliver bigger benefits to your clients with less effort on your part.
Work less, make more.
Work smarter not harder.
Sounds great, right?
Yes, but... there is a nuance that I want to call out.
Every year, my wife and I host Thanksgiving for both of our extended families at our home. We usually expect between 26-32 guests, which is more people than our house is set up to accommodate normally. So every year we rent tables and chairs, pull out the fancy china, and rearrange our furniture.
This process involves temporarily relocating at least one of our couches to an upstairs bedroom.
Have you ever tried to move a couch up a flight of stairs by yourself?
I don’t care how buff you are, it’s not possible to do this alone without risking severe damage to your couch, your stairs, and your abdominal wall.
Okay so here’s the question:
Since I have to do this every year, why don’t I have a freight elevator installed?
A freight elevator is like a lever in the sense that it would amplify my effort (okay, it’s actually more of a pulley, but bear with me). I would be able to move our couch from the living room to the upstairs by pressing a button instead of by brute forcing it, step by step.
The answer, of course, is that elevators are crazy expensive.
Since I only do this maneuver once a year, an elevator wouldn’t be worth the investment. I wouldn’t use it often enough. The benefit wouldn’t offset the cost.
The same is true in your business. It takes time and money to create levers like code libraries and workflow automation and swipe files and process documents and so on.
Therefore, you want to be mindful about balancing the cost of creating the lever against the value you expect the lever to create.
Levers aren’t free. Don’t build one just for the sake of it. Build one when the ROI of building one is glaringly obvious.