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If I Showed You A Mathematical Formula For Business Growth, Would You Use It?

mathematical formula business growth

“The purpose of business is to create the greatest value exchange in the least amount of time while having the most amount of fun” – Tim Dwyer, Global Partner, Shirlaws

Tim Dwyer (Product mentor in the Key Person of Influence Accelerator) was recently interviewed for the Dent Podcast by my business partner and co-founder Glen Carlson on navigating the precarious and challenging world of business. The feedback we’ve had has been astounding…this episode will blow your mind.

Read on for the cliff notes. There are three key ideas you need to get your head around:

Time

Time is one of the most valuable assets you have. Yet most business owners aren’t effectively measuring how they’re spending their time in their business. Tim talks about breaking down your time into 3 categories. Red, Blue and Black.

  • Red time is admin. It’s stuff that costs you money or allows you to deliver on your capability. Think Infrastructure like accounting, HR, IT, office etc.
  • Blue time is all the time you spend in sales, marketing and delivery activities. Its the time you spend making revenue today and delivering upon your promises.
  • Black time is the time you spend formulating strategy and developing assets that will generate revenue in the future. If you are creating a brochure to sell your product or services, that’s black time. Going out and sweating that asset by running a sales meeting is blue time. Identifying new markets, products and opportunities for growth 12+ months out — that’s black time.

The problem is, if you can’t see how you’re spending your time (in your diary), it’s easy to default to the things that you find easy or safe. Stuff you’re comfortable with. If you really enjoy researching, learning and writing (like I do), then when you don’t know what to focus on, feel overwhelmed or aren’t focused, you’ll spend too much time in that black activity (asset creation) and not enough in the blue (revenue generation today).

Capacity

Capacity is the maximum revenue you can generate given your current resources. It’s a dollar figure. For example you might calculate your average daily revenue you can generate in your accounting firm is $2000. Therefore with 40 working weeks in the year, your potential capacity is 5 (days) x $2000 x 40 (weeks) = $400,000 in revenue. However, you can only ever work to about 70% of your potential capacity — stuff comes up, travel time, rest and re-energising etc. This is true in any business over time and distance. So your maximum available capacity in this example is $400,000 x 0.7 = $280,000.

Think of capacity much like a cup of water. Now you know how large your cup is with your current resources ($280,000 in revenue) you can check the water level for how full your cup is (your current revenue). If you’re only tracking to $180,000 in revenue then you know your number one priority for time is blue activity (sales and marketing) to keep filling up the cup. If you find yourself in too much black time (building a bigger cup — more capacity for future revenue generation) you’re widening the gap between where you are to where you need to be. That’s bad. More capacity equals more overhead equals less profit based on your current revenue. This is where a lot of business owners get distracted by bright shiny objects and implode — they didn’t clearly know their maximum available capacity and measure their time against filling that capacity.

Capability

Capability goes to the heart of progress in business and life. It’s capability that allows us to achieve our goals and get what we desire most. The trick is to become aware of your capability and listen to when you don’t have enough of it.

Entrepreneurs are driven by three parts of the brain. There’s the reptile (brain stem, least evolved, scarcity, fight or flight), the monkey (limbic system, wants familiarity, emotional, highs and lows) and the empire builder (neo-cortex, thinks expansively, resourceful beyond current available resources). When you truly listen to your body and how you’re feeling, you’ll know which part of the brain you’re operating from. When you’re in a state of fear, that’s your reptile telling you its not safe. When you don’t feel capable of doing something, how do you feel? Afraid. To ignore that is foolish (the ego) — you’re biologically wired that way to protect yourself from harm. The trick isn’t to give up — it’s to seek out an environment and the people that can teach or give you the capability you need.