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Are you working yourself to the bone? Do you have time to step back and enjoy life? Are you being effective with your time, or are you in an endless pursuit of productivity?
In this episode of The New Music Industry Podcast, I talk to James Schramko of SuperFastBusiness and tease out some amazing insights into building a business and life you love.
- 00:14 – Introductions
- 00:45 – What is Effective Hourly Rate (or EHR)?
- 09:31 – Overcoming mental blocks around building a team
- 18:03 – What holds business owners back from creating an offer that converts?
- 27:26 – How do you transition from hourly pricing to value pricing?
- 28:48 – Profit Formula Template
- 29:33 – Customer Lifetime Value
- 32:24 – How to generate referrals
- 35:29 – Ascension model vs. Chocolate wheel
- 44:11 – The recurring subscription business model
- 48:27 – What do you feel has contributed to the success of your book?
- 53:13 – How do you stay up to date in your industry?
- 54:05 – Closing remarks
David Andrew Wiebe: Today I’m chatting with the founder of SuperFastBusiness and author of Work Less, Make More: The Counter-Intuitive Approach to Building a Profitable Business, and a Life You Actually Love, James Schramko. How are you today James?
James Schramko: I’m doing spectacularly well. Thank you, David.
David: Thank you so much for joining me on my podcast. I’m really excited to talk to you.
James: Well, I’m just very excited to be here. It’s the morning here so you’ve got my maximum energy.
David: Oh, fantastic. So, you’re all fresh.
David: Well, I’m going to start right in with what I think is going to be a pretty straightforward question, but still an important one and something our audience may not really know about is what is effective hourly rate and why is it so important for business owners to understand?
James: Effective hourly rate is a benchmark or a measuring system that I like to use to help people to start to get an understanding as to how they spend their time. If you want to calculate your effective hourly rate you would take your revenue for a certain period, let’s say in this case we’re talking about a year.Effective hourly rate is a benchmark you can use to get an understanding of how you spend your time. Click To Tweet
You take your revenue for a year. You subtract all of your costs, which are generally made up of fixed and variable costs. That leaves you your profit. This is like a profit before tax. Now, you divide your profit by the number of hours that you worked to get that profit and that is your effective hourly rate.
So, if you had a job, let’s say you worked in a music store and you had a salary, then that’s pretty much your profit, because you don’t have any real costs as an employee. Unfortunately, not that many deductible ones unless you work outside maybe you can deduct sun cream but that’s about it.
You divide that by the number of hours you work. That’s what we all know as your hourly wage. Whatever is on your pay slip is probably your effective hourly rate if you have a job.
But for entrepreneurs, most people have never actually sat down to work this out.
Where it becomes a very effective tool is when you start breaking it down by different product lines. Let’s say you are a session guitarist and you are getting paid to do studio time, then you could work out how long do you spend in the studio and how much you get paid.
Then you might think, “Well, I might start a music business. I’ll start a label.” And then you might sink a lot of time into that trying to find artists and set up the label.
Then at the end of the year it might make a small profit, but you might have spent hundreds and hundreds and hundreds of hours to build that up, so your effective hourly rate would be quite low.
In this case, you’d want to be doing a fair bit of session time to bring up your income while you’re building that label on the side. So, it’s a good way to know where to spend your time.
Now, it’s not the end all measurement because it doesn’t take into account things like building an asset or the sale value of what you’re creating.
However, it does help you work out simple stuff like should I be answering support tickets, should I be building my website, should I be mowing my lawn?
Because if you can hire somebody for a lower amount than your effective hourly rate, then it’s usually a good deal to do that.
David: Right. And I think in the example of the session musician, what’s interesting about that is I think that many wouldn’t really think of this as being part of the calculation, is the amount of time they spend practicing and preparing to go into the studio or going on stage to perform.
Then your effective hourly rate kind of instantly goes down, because it’s not just the time that you’re on stage and it’s not just the time that you’re in the studio.
James: That’s right. It’s like in my industry if someone’s an expert speaker or they do keynote speeches they might say “Oh, I got $10,000 for a keynote speech for 60 minutes in front of an audience of 3,000.”
And then you think okay, but you had to travel there. You had expenses relating to that gig. You spent probably a week in advance preparing a keynote presentation and rehearsing it in front of a video camera. All of that time should be considered for that activity.
Now, there are subtleties here that could be by products maybe practicing for a session guitar also helps if you’re in a band or also helps you if you’re doing a how-to-play-guitar info product. You might be able to split that time up between those multiple activities.
That’s a case in my business when we had a coaching business, an SEO business, and a website development business among others.
When I go to a conference, I would actually split the travel costs for that conference between the three different divisions. Then it was a fair sort of situation because I was representing all of them.
David: I ended up buying two copies of your book and then I gave one to my friend and she started reading it and then she calculated her EHR at $5 an hour and I just thought “Wow! That is intense.”
James: Are you still friends?
David: Yeah, still friends.
James: Thank you for buying the book.
David: I introduced her to your book, as well as Ezra Firestone on the eCommerce side, and she’s loving that. She’s actually getting a lot of value from it.
But I think now she’s thinking in terms of effectiveness and not just productivity. All the time that we spend, not just the time she spends in the technical aspects of things but also the time spent at home marketing or sending out emails or entering data into you know things that you wouldn’t necessarily want or should necessarily be doing as a business owner. So, I think it’s been enlightening for her.
James: I think that the thing that makes it powerful is it’s something you can actually measure because there’s plenty of things you can’t measure that are having an impact on your business.
Like it’s hard for you to measure what your customers are saying about you right now behind your back. That’s what we might call marketing. It can be hard to measure that.
But it can be easy to measure time. You could literally write down what you’re doing. There are tools that did this if you are using a computer for your work. It can tell you where you spent your time. Having an awareness of it is a big step towards being more effective. I use that word over productive.
The other aspect to it is that you can take advantage of Parkinson’s Law, and this one is fantastic. This is that last night of homework phenomenon, where activity will expand to fill the time available.Activity will expand to fill the time available. Click To Tweet
If you give someone five hours to do a job, like a retail clerk. If you say, “Can you stock the shelves?” They might take all day to do that.
If you said, “Look, the boss from the regional office is coming. We need those shelves stocked within the next 20 minutes or we’re all going to get fired.” Then amazingly, you could do the same job in 20 minutes.
So, as soon as you start measuring this, it gives you a powerful tool to increase your effective hourly rate. And, now every time that you sit down to do work or stand up in the case of a musician probably, then you are going to get paid more per hour.
That’s how I sort of arrived at this idea that you don’t need to work more hours. You just need to get paid a little bit more for every hour that you work and then you can choose how many hours you want. You could actually still have a life.You don't need to work more hours. You just need to get paid a little bit more for every hour that you work. Click To Tweet
David: Yeah. Because one of the ways you said you could instantly increase it is by working less which is counterintuitive just like the book title says but very true.
James: If you can do the same job in less hours then you will actually make more money. Or the same money working less. You could work the same hours and have a higher effective hourly rate then you can make more by working the same.If you can do the same job in less hours then you will actually make more money. Click To Tweet
But you can also dial the mix whichever way you want. You could work more and make a lot more, or you could actually work less and still make more if you get that mix right.
David: And you mentioned software. I recently installed RescueTime on my computer. I’ve used it before, but I just haven’t been using it in a while so I’m looking forward to calculating my EHR which, I hope is not $5 an hour.
James: To me I used it in the beginning to get a sense of how long I actually spend on the computer in a week. When I do this for clients, it’s actually quite eye opening. Some of them have racked up 40, 50, 60 hours in a week on their computer, and I’d have to question how effective can you be if you’re just getting blunt sitting there staring at a screen.
I like to try and keep my work week to around 20 to 25 hours. Knowing where the time is spent is a big part of that.
David: In your book you talk about the importance of building a team. I know a few business owners like me that have mental blocks around hiring. Is there a way or thinking we can adopt to overcome this mental block?
James: I’d say so. Otherwise people like Richard Branson wouldn’t be so effective in business.
It’s really a necessary step if you want to go past a certain level in your business because as a solo operator, unless you write a hit song, in your case there might be some very odd exceptions, like if you wrote a hit song and you’re lucky enough that it got picked up by some big network you might get a fat royalty check forever.
But that’s probably unlikely. More likely is that you’re balancing out in a few sorts of paid jobs with actual customers and different employers.
In that case, yes, you will have to take on some people to help you grow so that you can scale, and that you’re not having to do all the work.
The reason for this is that you only have a certain number of hours per week that you can put towards making money.You only have a certain number of hours per week that you can put towards making money. Click To Tweet
So, unless you have a very leveraged business model like writing hit song or creating some ingenious software that takes off, or you just happen to be extremely lucky crypto investor or something, you really need to get help. That effective hourly rate is a great benchmark to know which jobs to get help with.
Generally, you look for the ones that are a low effective hourly rate. In my case it was answering support tickets. And then it was writing content. See, I’m a two-finger typist. I can’t type very well. I never went well at school or in English, so I’m not the person to be writing in the blog reviews on things. I like to talk. So, I might talk stuff out.
In fact, that book that you purchased, it was talked for the most part to my good friend Kelly Exeter. She fixed it all up. She tightened it up and put it into the right structure and put the chapters in order and then sent it to me to just go over each chapter for a couple of hours and just clean it up to make it absolutely my words and the way that it should flow. But I couldn’t have done it by myself and that’s the point.
If you’re looking for something to remove the block, I would just take solace in the fact that (A) logically there is a certain limit to how much you can physically do with your time, and (B) there’s plenty of proof around you that others have made it work, and (C) you’ve got the tools to do it now.
The effective hourly rate and with the referral network that you have access to, it’s not that hard to find good help in the things that you don’t want to do, can’t do, or shouldn’t do.
David: Yeah. I like how you identified a few things on kind of on the low value side.
One thing that I decided as I got my podcast up and running was to stop doing transcriptions. I did hire a transcriptionist and she does good work. I can rely on her to get things done relatively quickly and affordably which is really important too just based on my current cashflow in my business.
But that was a really good step for me to take.
James: It’s a huge step. I mean I’ve got… Gosh, even on my prime website at SuperFastBusiness.com, I’m up to episode 580 for my podcast.
Now, I didn’t used to like recording the thing for 45 minutes. And then having to listen to my own voice, and edit out uhms and ahs, and add in an intro and an outro, and run it through a sound quality filter, and then ID tag it with outwork, and push it up to the cloud, and then embed it into my post, and then come up with a title and a description and the words and the bullets and the tweetables and the image, now my team does all of that.
Now, you mentioned a critical thing there and that is what your budget can afford.
So, that’s why I focused on getting an offer that converts. If you can sell something that people really need, they want, and they will happily give you money for, then you now have some funds that you can reinvest in building your business up.
So, even when I had a job, I was trying to do everything myself by myself after hours and it was very slow going. It was only later when I started selling stuff that I had some money to put back into hiring my support person and my article writer.
It was all done on the basis that if I could spend a dollar or two here that I could make three or four dollars back there and I get to keep that time for myself.
David: I was just going to say like I’m very familiar with all the steps you just described. I actually have the checklist right in front of me of how to go about my you know, getting my podcast up.
And I still do all this myself besides as a transcription and it’s a lot of work but yeah, outline, record, edit, show notes, image, MP3, meta, Amazon S3.
James: I did it for quite a few years. In the end I just said “You know what? ? I do make sales from my podcast. It’s my primary marketing method. I can certainly afford to pay someone to do this, so I should sit down with them and teach them exactly what I’m doing.”
And we sat down. Actually, I went over to the Philippines. That’s where my team is. I sat down with one of the nice ladies in my team and I said “Look, I want to show you what I’m doing so please watch me, take some notes.”
I went through the whole process from start to finish and she took notes. Then I said, “Now, you do it and I’ll watch. I’ll just let you know if you’re making any moves that I wouldn’t do.”
She tries a few things and we make a few adjustments. Then I said, “I think you’ve got this now. Now, you try it.”
And then the first few times there are a couple of changes. Then for the next three or four hundred episodes after that I haven’t touched it. That’s the power of hiring someone in the team.
Now, for reference, because I’m sure the question is on the mind of a listener. How much would it cost you to have a full time person working in your business? Maybe not as much as you think.
If you were to spend around about $500 US per month, now I’m conscious that we have artists in our listenership here and maybe $500 is enough to eat and live and travel in some countries but certainly not in Australia and not some US or North American countries or London.
But $500 a month, if you can come up with a business model that generates you even $1,000 a month, then you could reinvest some of that into a full-time team member who’s going to take all those jobs off your plate that you can train them for.
And I do emphasize that. It’s really worth training them and not try to hire people who can already do it, because unlike playing a solo guitar riff in a concert, it’s not something you need to train for 10, 15, 20 years to master.
I was able to train my podcast editor in one sit down session. That’s a very fast training curve. It’s worth doing that if you possibly can.
Over time, these people in your business will help you to take that stuff off your plate, so that you can focus on the very best work that you can do, the highest value stuff that they can’t do.
I can’t send someone in my team along to talk to you about my book. That’s best for me to do. But while I’m doing that, someone in my team is looking after my website, and sending out my emails, and collating the weekly news, and doing those tasks that I used to do that I no longer wish to do.
David: Yeah. I think you just broke down a lot of mental blocks for people by explaining that. That’s awesome.
You mentioned it earlier, but I often hear you talking about the fact, especially recently, that if you don’t have an offer that converts you don’t have a business.
I don’t think most people go into business hoping that it will take a long time to generate revenue, so what are some common things you see business owners doing that get in the way of them arriving at an offer that converts faster?
James: They get caught up in the whole idea of having a business. It’s very intoxicating to be sitting down with your mates at the pub or a family picnic and talking about your business. Usually, when you dig a bit deeper you find out it’s really just an idea or a concept or a romantic attachment to this notion of freedom.
When you dig deeper they don’t actually have anything they’re selling or certainly not at any profitable level. They might be spending hundreds and hundreds of hours and making a few dollars. So, they get tied up with the ego of it. You see people go and get an office or hire a team or get logos or websites or signage or t-shirts for their business but there’s no offer that converts supporting that. It’s really just spending savings until it runs out. So, it’s very important to put all of your attention into your offer that converts. That is actually all that matters in the beginning. Until you have that, you don’t have a business. You’ve just got to dream.
David: Huge! And you often talk about like making low res versions or minimum viable, however you want to say it, starting with that. Seeing if it converts or it’s something that people want and going from there.
James: Yeah. I’ll give you an example of how this plays out.
James: I coach people in my community. Sometimes someone will say “Oh, I’ve got an idea for a product or service. I’ve spoken to my customers. They said they’re really into it so I’m now going to go and build it.” And they disappear for months. They go and get a domain name. They get stuck on the sales letter. They hire someone to help them build out a membership and then the software to integrate that to their email list and then a shopping cart. They disappear for months. They don’t get a domain name. They start getting a website built. They buy membership software that they get a designer to write ads for their affiliates. They put up all sorts of software and graphic design and challenges. Then they come back. I’m like… I say “Hey, how’s it going? What are you up to?” And they say “Well, yeah. I’ve built this whole thing. Now, no one’s buying.”
That’s why I talk about low resolution or a minimum viable offer. I think it’s far better if a customer says, “Oh yeah, I’m interested in that.” That’s the time to say “Great. Here’s my PayPal address. It’s $100. If you flick that over, then I’ll send you over the lessons that you’re purchasing.” Or “I will send you the first module of the course.” And then you go and create the first module after you’ve been paid. And this is totally fine. People say “Oh, my goodness. You can’t sell something and then make it.” It’s not like a bespoke guitar. If you’re selling a course, you could make a course in an evening. I’ve done this before. I’ve made courses in an hour.
James: It’s simply a case of using a framework and then doing the work. But, you are much more motivated to do the work once you’ve been paid. At the minimum, have people pay a deposit with a promise to deliver the course in a week from now. And then you’ve got an entire week to deliver it. So, people often put every possible excuse in between them and collecting the customer’s money. Often it ends up in tears because they didn’t validate the market by asking people to buy. Don’t ask them what they want. Ask them to buy. If they buy, then they’re voting with their wallet. That’s the best kind of vote. You can start off small. Some of our products are still in the minimum viable version even years later. We’re never actually got around to making the final product, but I was just so excited about the take up.
In fact, my membership has now been going for nine years and I still get a list of things in my mind that I would like to do. I slowly get to them here and there. We add in app. We re-do the style of the site. I mean I went for seven years without even getting custom design. Eventually I got custom design to make it look and feel more like the homepage of my site but that’s the sort of thing people spend a lot of time with in the beginning before they sell a single thing.
David: I think you’re so right. it does take a little bit of guts to say, “Please pay me for this before I send it to you.” Or just “If you’re interested, please pay me for this.” But if you start there then you know you have something that people want and then you can build off of that.
James: Have you ever bought a ticket to a rock concert?
James: Well, that’s exactly what they’re doing. They’re getting paid and then they put on the show. Sometimes it cancels, and they refund it or whatever. That’s just life. But other times you pay your money, you wait, and wait, and wait. And then notice comes to town and then you turn up and you have a great night. That’s what they do with live events. You can sell tickets to a live event and then run the event. So, most people listen to this even if they didn’t think so before today could actually put up a page or even without having to go online. Even if you just wrote it on a piece of paper and you said to people you’re speaking to.
Let’s say you’re a music teacher and you have like six students coming around each week learning how to play guitar. You could say to them “Hey, I’m running a special workshop in three weeks from now on a Saturday. I’m going to be teaching deep blues guitarist or whatever.” I don’t know the technical terms. You can tell I don’t play the guitar but let’s just say. And it’s going to be $100 and it’s going to go for three hours. You can offer that to your next six students who walk through the door. If one or two of them buy it, you got two or three or four hundred or five hundred dollars for two or three-hour session on a Saturday.
A few weeks from now that could be your very first workshop. Then before the workshop comes you sit down and you do your session plan. What are you going to teach them? You document it. Now later, you could set up a video recorder and you could actually deliver that workshop to the video camera instead of a student. Then you could put that up for sale online as music lessons. Now you could get paid $50 or $60 every time someone buys that. Now you can start going on podcasts and doing a website and driving traffic from Facebook and doing all the crazy stuff.
You can get paid for that music lesson even if you didn’t show up which is the beauty of the industry that I’m in where you can really leverage that activity. But it started off on you writing it on a piece of paper and asking if a student who’s sitting in front of you face to face, there’s no demand, there’s no website, there’s no logo, no office, no staff. That’s just the minimum viable offer or the low-resolution version.
David: I think it’s so powerful to think of it that way. When we have sort of started applying that I do have an offer that converts decently, not as much as I would like, but it’s my book. What I’ve started doing is I’ve started creating low-res versions of future books and started putting them out there as pre-orders. I’m seeing some results with that. So, I know I could take–.
James: That’s the way to go. When we just took a chapter from my book and put it as a PDF on my website, and then we went to Facebook, and I wrote a little post with the picture talking about… I think in this case it was the offer that converts. “If you don’t have this you don’t have a business.” That’s what the post says. Then we can now buy traffic to that post. People who don’t have my book can go and get the PDF for free without even opting in. If they like the PDF, it has a call to action to buy the book. The book’s not very expensive relative to online courses. Like the amount you can learn in that one book in two hours for the price is ridiculously good. That’s a nice foot in the door for me to have people become aware of my brand. And it’s just by giving something away that’s related exactly to what I’d like to sell. And the book relates exactly to the way that I coach businesses so it’s all relevant, but you just start.
And here’s the thing. I didn’t do the book till like 10 years into the business. It doesn’t have to be a “Right Now” thing. There’s so much you could do. It’s just a matter of finding that one thing. But if you know that people buy the book and like the book, then focus more of your efforts around that goal. Actually, if it’s on Kindle you can look at the popular highlights and you could make a podcast episode on every single one of those popular highlights to really bring that book into the presence of more people.
David: Wow! Those are some really great tips. I love it. In chapter six you talk about the fact that charging hourly means you probably have a job and not a business, but it can be challenging to move away from that kind of model. Is there an easy way to transition from hourly pricing to value pricing?
James: I think so. It’s just not accepting hourly work. You can’t buy me for an hour anymore. A lot of people actually say “I want to consult with you. Could I hire you for a few hours?” My answer is you could join SuperFastBusiness membership and I’ll privately coach you there or you could join a Silver Circle and I’ll coach you there. I don’t sell my time by the hour.” So, you don’t have to accept. You don’t have to sell yourself for an hour. That’s what employees do and that’s fine. I mean with employee side of things it’s great for other reasons. You don’t have any responsibility outside the hour. Like you clock on, you clock off. But I really think of that more like being a taxi driver. They can really only get paid if they’re driving someone somewhere. And the rest of the time they sit in the car smoking cigarette or whatever. I love taxi drivers, but they always are a reminder to me of an unleveraged job. It’s better to own the fleet of taxis and be leasing your car out to the drivers and get paid while they are driving customers around. That’s a more leverage business model.
David: This isn’t a question so much as a comment, but I love the profit formula template you added to the same chapter. I think a lot of business owners would see a lot of progress in their business if that was the only thing they applied.
James: If that was the only thing they applied, and it is an extension of a version that I learned from J. Abraham many years ago, it works on any business and there are always easy wins. It doesn’t matter which business I sit down with. If you go through the profit formula and if you know some of the moves and I do put them in a chart so that it’s easy if you don’t even know the moves are. You can just pick a few of the ones that have already laid out. You will find money just sitting there. At least enough to pay for the book.
David: You often say it’s much cheaper and more profitable to serve your existing customers than to attract new ones. Talk about the importance of customer lifetime value.
James: So, 95% of my business is just dealing with people who have already bought from me and I’m just continuing to serve them. I like that kind of relationship because the longer you get to know someone and the more you work with them, the easier it is to help them. You have context. It’s less energy burn. You don’t have to start from scratch every time.
Could you imagine? Like I don’t know if you have any long-term relationship or even just thinking about you parents. Let’s say your parents had Alzheimer, and every time you met them you have to reintroduce yourself and explain everything over again. That would get really draining. Versus when you just see your mom and dad again and it’s like “Hi mom! Hi dad!” Like you continue where you left off. So, I like that kind of business relationship where you can develop that over time. It’s much more profitable and it’s easy because the sale has already been made. Now it’s just focusing on the good stuff which is solving their problem and giving them great results.
So be like if you are musician and a promoter hired you to do a world tour and they really liked what you did the first year so they invite you back to do it the next year or every year after that and you just love working with them, you love touring all the different countries. Now you don’t have to go through that negotiation process all the time and redo everything. You just pick up where you left off. So, I like that.
David: Yeah. I have gigs like that. And because I work with other bands and band leaders, I rarely book my own gigs anymore. But you know when I’m playing solo shows usually they come to me instead of the other way around just because I’ve built a positive reputation with them. And that’s huge. I don’t have to go out and earn that $300 every time. I can just show up and play.
James: And I imagine in your world there’s no end to people who wants you to do it for free to see how things go. And then if it works out then they might consider hiring you. Is that what would come up sometimes?
David: That comes up all the time. I don’t play those gigs myself but.
James: You can avoid that if you have this existing relationship. They value you. They know what you can bring to the party. They will keep getting you back over and over again with that relationship. It’s fantastic.
David: Exactly. Sometimes you can get referrals through that which is something I’m working on.
James: Yes. And you can even engineer referrals as my friend Dean Jackson talks about. You can help people know how to refer people to you and what you’d like them to say at the right point of the conversation when it should be mentioned.
David: Can you go a little bit deeper into that? How would we generate more referrals?
James: So, I’ll use an example of my past career. At one point I was selling Mercedes Benz vehicles. I was actually the top sales person in the whole of Australia at one point. I knew that after I’d hand over the card to someone, they would be very excited, and they would generally go and show it off to their friends. Usually, when people take a brand-new car home they’ll take the family out to dinner or they go and visit their mate and show them their car. But certainly, if they’re in a stockbroking firm or a law firm or they have a hobby like golf which is pretty easy to tell because often they would say “I would need to check the trunk too.” I said trunk instead of boot to make it user friendly for North America. “To see if my golf clubs fit.” Now that was a big clue for me.
When I hand over the car, I could give him some custom golf balls with Mercedes Benz logo on it or something really special for them. I know when they pull those golf balls out at the golf course to show off to their friends that they’ve just bought a new Mercedes Benz that’s the perfect time for them to say “I’ve got a guy. You should speak to him. He can help get you out of that pile of junk and into something decent.” And you know this is the alpha male ego type of company director who I was dealing with. I would actually program them with that sort of idea. So, I’d give him the golf balls with their brand on it and I’d say “Listen. When you go and play golf next you should pull one of these balls out and tell him that you know a guy who could help them out of their pile of junk and have a laugh about it.” And they would do it. I would often see their golfing buddies a week or two later saying “I believe you saw it out Freddie with his new car. Can you have a look at mine and tell me if there’s something we could work out?” And this was a great referral system. I’ve never shared that example. Anyway, this is the world premiere.
David: Oh, wow! Right here on the New Music industry podcast. That’s great.
James: Well, you could do it with pics or something like that.
David: Oh, yeah. That’s absolutely true. There’s a lot you–.
James: You can get put your brand… put your band name on a pick and you know leave it around at the booking manager’s office or something or whatever. Or give it to your other artists and say “Hey, when you’re out there, can you also mention us.” Just say hey there’s someone we really like to open for us or something to that effect. Whatever the industry lingo is. I don’t pretend to know it but I’m sure there is a way you could have other people put a foot in the door for you.
David: Oh, yeah. I think you could leave them at coffee shops or throw them out to your fans or leave them at music fan of yours and things like that. I think the family…
James: Yeah. You could tell your fans “Hey listen, when you’re at your next gig, make sure you tell them that you want to hear us play.”
David: Exactly. Yeah, that could work really well. For this next question, I think it deserves a little bit of an explanation, so I’ll do my best, but you talk about the ascension model and that’s usually where you get a free report, you are prompted to buy a low-cost product then a higher cost product and a product that’s even higher than that. You argue that the chocolate wheel is better or it’s an alternative to that strategy. So, how does the chocolate wheel differ from the ascension model and why is it a better way of serving your customers?
James: So, we all know the chocolate wheel is that big wheel that spins around and you land on a prize. Let’s say you had a chocolate wheel and it had one prize was a frozen chicken and the other prize is a car. Where would you like it to land?
David: Probably on the most expensive item.
James: Right. You think about this with your business. There are some people who have big problems right now and they need it solved. You could go straight to that. Let’s say, I know you’re a guitar player. You could be publishing an eBook for $5. You could be doing sessions in the studio for hundreds of dollars. You could be playing on a worldwide platform for thousands of dollars or tens of thousands. Or you could be writing a hit song and getting hundreds of thousands, let’s say if it really took off.
There’s different activities. Basically, you want your customer to be able to find the right one for them right now and not force them through all of the other products. I’m speaking to a client of mine who’s in the highest-level group the other day. He said, “Why wouldn’t I have people come through the low-priced products and then the next product and then through to this product?” I said “Well, how did you come to this product? Did you go through my free report? Did you listen to all my podcasts? Did you join SuperFastBusiness?” He said no. I said why not? He goes “I knew that your high-end solution was exactly what I need right now. Like I need high level of access. I’ve got to a big opportunity in front of me. I’m making plenty of money and I want to make a lot more.” I said “Well, they you go. You’ve found the right product at the right time.”
So, the only thing we have to think about is how can we help a customer find the right product right now. That means if you’re playing guitar and you would like to perform on worldwide stages then design something that would help people get to that product right now. It could be having a page, a new artist’s site – wherever they get stored, that says I’m available for global tours. Ready and willing to travel. Have played with AC DC and The Eagles. I’m good to go. Let people know that you have this product available and how they can action it, what they should do next.
David: I love that. I think some people might be scared to even put something like that up there because it might be in the thousands of dollars or tens of thousands of dollars. I think that’s just mostly a mindset thing that they’d have to overcome to realize that they are worth that and they should charge that amount if that’s what’s required of them to travel and tour and learn all these songs and stuff like that but.
James: That’s how I started in coaching. I actually just put a page on my blog. I put a PayPal button on it for $700 recurring. I just said something along the lines of if you would like to learn about driving traffic or selling more stuff online then click on the button and let’s get started. This guy researched me and then clicked the button and get started. That was my first paid recurring coaching gig. Since then I put my prices up and I’ve managed to get some scale to it. But I can tell you if you don’t have the offer up there it’s not going to happen.
David: And one thing I always say… I think it was probably Evan Pagan that I heard this example from but there’s the world’s most expensive wine. Do they have customers? Yes. Absolutely. And they’re known as the world’s most expensive wine and that’s how they market themselves. You can have products that are higher priced and totally find customers for them.
James: What’s the budget Ferrari?
David: Good question. I don’t know.
James: I don’t think there is one. They really just start at a high level and go up from there. Like to the highest level they have this program where they keep your car and they take it to the racetrack and they service it in between races. They change the brakes and tires and the clutch and rebuild the engine. It’s your car but they keep it. It’s like an FXX or something like that. Maybe a car not but it’s the most sort of bespoke program they have and there’s very few of them. It’s super exclusive. There’s always a higher level.
I have this idea that there’s a 10% of your audience will probably pay 10 times more for whatever your highest-level solution is right now. There will be an extreme. I saw it on a newspaper article yesterday, an online newspaper article. I don’t read the physical paper, but it was about a local celebrity who went bankrupt because he didn’t pay for his marble staircase of $200,000. This guy has a $200,000-dollar marble staircase. To put that in perspective, he spent more on getting from level one to level two of his house than a lot of people would spend on their entire house in some remote areas of Australia. Like you don’t get a house for $200,000 in Australia anymore unless you go very regional but that just to give you an example. If someone’s in the marble business, there is a customer willing to spend $200,000 on a short staircase. That’s what he wants. It sounds like he just got paid by court order but there is someone who wants to spend more and have a more exclusive experience in most markets.
David: Yeah. And I often encourage musicians to even create bundles because I say there’s probably people who are willing to spend $200-$300 with you. You just don’t have a $200-$300 offer.
James: Of course, there is. Imagine a couple is just getting engaged. Like a surprise engagement. They might be happy to pay an artist $300-$400 to come to a private restaurant courtyard and play a love ballad for them or two you know. If it had some champagne and you wore a black-tie suit or whatever then that’s great. I mean string quartets are probably a good example. Maybe someone who’s good on a guitar could play a violin or something and pick up some classy gigs doing something a little bit unusual but there are definitely people out there who want a custom experience and are willing to pay for it. So, get creative!
David: Oh yeah. I think for something like that you could command a lot more money so good point.
James: Well, I do it. I love surfing. I can’t beleive we’ve gone this far into an interview and haven’t mentioned it.
David: No kidding.
James: But I love it so much that I rent an entire hundred foot cruiser in the Maldives every year, and then I invite some people to come along with me and talk about business while we surf and scuba dive every day for a week. I love it. It’s my absolute passion. For me, being in the perfect waves talking business with a cocktail and little bit of a warm sun glow in a tropical environment, that’s just the ideal scenario. People would pay to come along for that and I’ve managed to end up with a free trip. So, it’s totally possible to combine your passions if you get creative around it.
David: I definitely look forward to the day where I can spend my days surfing. It would be fantastic.
James: Well, I believe that that day is available to everyone right now. If you want, you could move to somewhere next to the water in a climate that’s acceptable and that probably starts it. Some people surf Vancouver Island or somewhere I’ve heard about.
David: Yeah, they might.
James: That would be pretty wild.
James: I think so. I wouldn’t go much further north than Santa Barbara but let’s say if you want to surf every day you can surf every day. The only person stopping you is you.
David: You’re a proponent of the recurring subscription business model. I also believe in [unclear 00:44:15] but I think it can also be challenging for some business owners to think about transitioning from a product or service-based business to a recurring model, if only because of the technical aspects of like setting up a forum and shopping cart or the costs involved. I can imagine this is where you’re going to say first create an offer that converts then build a team and then get your team to do it, but is there anything else people should be aware of when making a change like that?
James: Well, you don’t need a forum. That’s just one way of a subscription offer. Do you use Netflix?
James: Right. So, there’s a subscription offer. You pay them each month. They send you access to streaming content. Some people do this with flower shops. They say look give us 50 bucks a month and we’ll send you out some flowers, some fresh cut flowers. We’ll pick the best from market. Because you have that consistent order in place, then they have the consistent revenue to go out and get better deals on their flowers. And you know, it works. We do it with our phone, in our internet service provider, in our content. But we also do it… In business, you can have an expert on retainer. Someone might hire a musician or retainer to consult about musical things. Maybe it’s a film studio. Maybe it’s a university. Maybe it is a business that does Muzak background themes and they just want to pay a recurring monthly fee for some organ music you know. I don’t know that market but I’m sure that there are opportunities for people with the kind of gifts that would listen to this show that could be deployed on a monthly basis. All of my business is people paying a recurring fee for me to help them in their business. That’s such a simple model.
Now, in my case I’ve chosen to deliver that via a forum and via Skype. That choice was made because I want to be location independent. I don’t have a physical office. We don’t have in person meetings on a regular basis so that allows me a great degree of flexibility. If you were to wave a magic wand and you could think what would be the perfect situation, you could probably end up with something close. Maybe ClubMed or some resort is happy to have someone who could play a banjo for an hour a day in the evening at sunset and then you get the rest of time yourself. I’m seeing this happen.
David: Right. So, you could have something that’s extremely flexible and enjoyable.
James: Yeah. Like I go to luxury resort in Fiji and around the pool at sunset and there’s two guys on a barstool playing ukulele. I don’t know what they do for the rest of the day but they’re at that resort. Either they’re for free or they’re getting paid. I’m paying to be there. So, they’ve got it worked out for them. Same as to surf coach. When I go on the boat or I visit a surf resort, usually there’s a surf coach who’s staying there either free or they get a slight allowance and they get free meals, they get to surf every day and they’re meeting interesting people all year long or seasonally depending on where they are. These things are available. You just have to decide “Hey, you know what? I don’t want to put on a suit and tie and go into a miserable office every day.” At some point like that’s where I reached. I just reached that point. I’m not doing this anymore. I’m not going to defer the rest of my life for one day in the future. I’m going to do something about it. I’m going to build my own business. I’m going to do it on my own terms. I believe the action steps will help others follow that path, if it’s of interest.
David: That’s something I realized for myself too. In 2016 I started working entirely from home and not from multiple locations and not multiple jobs. That was a huge victory for me. I don’t make a good employee because I would want to spend company time blogging or doing social media or something else.
David: What do you feel has contributed to the success of your book?
James: Well, I don’t mean to sound bad when I say this, but I think it’s a good book.
David: It is.
James: My goal is to make a good book rather than to make a good marketing hype around it. I do see people in my industry making big campaigns around their book. They send out people to buy books from all the different stores to get a best seller status. They manipulate sales by having kickstart as in making people buy 10 or 20 or 50 books so they can have a number one bestseller. I think that kind of stinks. I just wanted to have a good book because I want the book to be a classic where people can still be comfortable recommending it or buying it for a friend in years from now. And because I dedicate it to my children, one of whom is an artist, I wanted something I could be proud of and say “Look. Here’s what your dad’s done. Here’s some sort of instructions for you that might help you save a few yeas of your life or make a few extra dollars. And you know good luck.” Basically, I think the reason the book’s going well is that it’s easy to understand what it’s about, and it’s a short read, and it’s very effective.
David: Yeah. I’ve seen marketers and experts do exactly what you’re talking about with the manipulation of the numbers. I’ve heard other people talk about it on podcasts too so it’s true. I think it starts with a really good book and having good content. I think you create a better brand for yourself and more authority and more credibility when it’s something that adds value to people.
James: I really think you’d be a slow burner. I think this book will actually gather a bit of momentum over time as I have in business. The me that you are speaking to now is after over a decade of chipping away at this. You know like a thousand podcast later, here I am. It’s like that classic overnight success. You know like the Beatles were grinding out in those nightclubs every single night for years and years and years and years before they became mainstream.
David: Yeah, that’s very true. That’s something that a lot of people don’t realize. A lot of it was 10 years in the making you know. Every overnight success took 10 years.
James: It’s like my kid who plays guitar. I said to him from the moment I bought him a guitar. Like just play that thing. If you’re going to play guitar like play. He plays a lot. My friend who got me to buy my kid a guitar, John Carlton, who’s kind of a famous copywriter.
James: He said you’ll know if he likes a guitar because he’ll play so much ’till his fingers bleed. And you know, my kid would be full sleep with the guitar on his chest. Because he is just playing until he can’t even stay awake anymore. He plays and plays and plays and plays gigs and records. He’s just so into it. I love saying that unbridled passion like there’s no filter on it. He just loves it and pours himself into it. I think in a few years from now all of that will pay off. It won’t be by accident. It will be because he’s put the time into it.
David: Yeah. I’ve had periods in my life where I did that too. I would set the goal to do three hours a day for every day for the year and then when I didn’t meet my goal or try again the next year and then eventually I did meet that goal of playing three hours every day. That was a huge part of my growth as a guitar player.
James: That’s where I’m at with my surfing. I’ve surfed every single day, often twice a day, three times a day. I surf more times a year than there are days in the year. I probably rack up 400+ surfs a year. Now, I’m four years into it. I’m starting to get better. It’s a brutally difficult sport. Especially as you are aging. Like time is against me. I generally don’t take up surfing at age 42 but I did and I’m really getting the rewards from it now. But, it’s just been such a steep learning curve. It’s still the most exhilarating thing. I look forward to it every day. I can now surf for four or five hours in a day whereas 15 minutes it was exhausting four years ago. It’s just build up your business muscle now and in a few years time you might have something really cool.
David: I know you’re a big reader, so this is something a little bit curious about. Like especially in something like digital marketing or SEO, it’s changing so fast. There’s not necessarily a way to keep updated with it all or at least it seems kind of overwhelming. How do you keep fresh with all the knowledge that you’re gaining?
James: I’ve got pretty good filters. I’m screening a lot of stuff off. I don’t feel like I need to be bombarding myself with information all the time. I actually spend a lot of time just thinking and processing. I almost feel like I’ve read enough and learned enough now to know that a lot more could just give me overwhelm so I just follow my interest. If something’s intriguing or interesting, I just pull it like a magician’s handkerchief and just follow that line. I don’t feel like I have to know everything or read everything any more. I’ve let it go.
David: Well, I am a member of SuperFastBusiness. I do think it’s awesome. I’m not a great forum participant but I do watch all the videos and I try to get a little bit of coaching from you when I can. It’s been fantastic.
James: Well, you should definitely ask me questions there in the private section because, so I’ll put my energy towards that. That’s how I serve my audience. I want you to have a successful.
David: All right. I’ll definitely send you more questions and I’ll get better at that. This has been a fantastic conversation. Is there anything else I should have asked?
James: No. You had excellent questions. I think you’re serving your audience particularly well, so I just want to say thanks for the opportunity to come and discuss things. It’s been a lot of fun. It was good remembering some things that I’d forgotten about the golf balls in particular. It made me smile.
David: That’s awesome. Well, thank you for your time and generosity, James.
James: Thank you.
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