Leadership, Leverage and Scale
“I think a fit epitaph for me would be, ‘Here lies a man who knew how to get around men much cleverer than himself.’” -Andrew Carnegie
The first time I earned $100k in a month, it blew my mind. I remember completely freaking out!
For someone who came from way below middle class, with a goal of earning 6-figures as the “destination” of making it — to make that much money in just a month felt surreal. Zero employees. Zero overheads. No membership site. No website.
No tech! It was just me and my business partner. The thing we did have, was focus. It's crucial to understand the only thing preventing you from earning money as a consultant are these basics:
1) having an offer and
2) making offers to people…
Inside our consultancy now, Traffic and Funnels, we talk about “the Skype call,” a now infamous conversation that Chris and I had in the early days… I was at the lake with my wife’s family in Minnesota.
Chris was in his house that he couldn’t wait to get out of. They now live in a (literal) mansion in Charlotte NC, how times have changed. But back then, we just wanted to make $20k/mo.
That’s the reality of the financial situation we came from.
On this Skype call we talked about the possibility of hitting our dream of $20k/month… and a few months after that we pulled down a monster 6-figure month. If I could go back and do it over again, I’d change … everything!
While it is true that we did 6 figures with no employees, it wasn’t without its problems and stressful moments… knowing what I know now, we would have grown so much faster had we known what I’m about to teach you about leadership, scale, and leverage.
I believe the most powerful ingredient to building a business to great heights quickly, is leverage. So let’s expand your thinking and follow up with a few practical ways to apply this to your new business.
WHAT IS LEADERSHIP?
Leadership is leverage. Leverage allows you to:
* Earn more while working less
* Achieve more while doing less
The only way to truly impact the whole world is through leadership and leverage. It’s amazing to me that people work so hard and accomplish only a fraction of what they’re capable of — because they’re doing it all by themselves!
Now, the beauty of consulting as a business model is, technically you can do this yourself. You can earn 7-figures on your own — but you will miss out on the benefits of a well-balanced, well-oiled LIFE doing everything on your own this way.
Most people fail at leading others because they struggle to lead themselves well.
If you can lock in the lessons I cover throughout this blog, you can make good money and do well for yourself. If you can lock in the lessons in this article and some of the future ones I publish, you can make a fortune and do well not only for you, but your family and your future generations.
I am grateful for my early years as an entrepreneur. They were exciting, fast paced, long, sometimes difficult, but nonetheless FULL of energy and optimism.
I am now grateful that I made it through those years, and have since transitioned into playing in the pro league. What do I mean by this? Simply that – now versus then:
* I make way more money
* I have way more fun
* I impact way more people
* I am much more diversified
* I have far more assets
And the list could go on for pages, but the short moral of the story is this: learning leadership, leverage, and scale is WORTH IT. So let’s get into the process of defining what playing at the “next level” looks like. Here are some guidelines that you will need to master…
Leading well means you need a vision for YOURSELF.
You have to know what you want and where you want to be – in crystal clear detail – and you must know why you want that. If what you want is just because “someone else has it,” the why will not be strong enough to carry you through the challenges you will face as you begin to lead a team.
Leading well means you need to control your emotions.
People are going to fail you — that is a guarantee. Great leaders offer patience and guidance to help turn these failures into lessons. Poor leaders take offense, react emotionally, and create cultures that make people afraid to take risks ever again.
Leading well means you must let go of your own mistakes and failures.
There is nothing worse than an insecure leader. Insecure leaders throttle people, micromanage people, and create problems out of thin air — just so they can ride in on a shining horse and fix them! Simply put: nobody wants to work for an insecure leader… you will not keep great team members if you cannot let them be the heroes.
Leading well means you must always be evolving.
Stagnation comes from laziness. The best leaders I know are always learning, always reading, always asking their teams for feedback. How you operated 8 years ago is not good enough for right now, so you must be constantly updating your “operating system” if you want to keep up.
A question that comes up frequently is, “Who do you hire first?” Perhaps you know you want to build a team, you’d love to create leverage in your business – but you aren’t sure who to start with or where to begin.
CONSULT YOURSELF FIRST
Remember how you built your offer? You answered the question, “What are people bothered by the most?” You designed a program that tackles the most painful issues that you are qualified to solve!
It is no different when hiring your first employee. Ask the question, “Where am I hurting the most?” For 75% of our clientele, the answer is usually to start with hiring sales people. By the time you’re ready to dive into true leverage, you are likely earning $30k per month at a minimum, and you’re spending most of your time on consults and sales calls.
The most leverage-able person to bring in is the person who can keep your revenue growing while protecting you from doing more work. Of course, it’s impossible for me to tell you who to hire first from an article like this – we’d need to integrate into your business (which we do with our private clients) and look at where the breaking points are. Maybe it’s not a sales person – maybe you need a marketer or a financial admin…
Ultimately, the way for you to get clarity on this is to “consult yourself.” If you were consulting someone in the same position as you – what questions would you ask? Jot them down and then answer those questions!
OUTSOURCE YOUR WEAK AREAS
Then go from there. My advice is simply this: outsource FIRST the activities you cannot see yourself doing for many years… if you’re not energized by it, you will likely not put in the effort to make that area truly great. Therefore, it is wise to first bring someone in who will give it their all and bring up the quality of the area.
For us, inside of Traffic and Funnels, the first position we hired was a media buyer / advertising person. The reason for that was simple: Chris is absolutely gifted at advertising and media buying but, his true passion is strategy, the ‘set of the sail’ for the whole company — so we brought someone in to free him to do that.
AFTER you bring people in to carry the areas you are not as fueled up by, you must then bring in people who are as competent as you at the things you LOVE – and eventually work yourself out of them. On the sales side, we did that shortly after we brought in media buyers — I love sales, but to be a true owner and partner with people I needed to be free to lead, not just sell on the front lines all the time.
WARNINGS & CAUTIONARY TALES
Chris and I always joke about the things we thought we knew when we started hiring our team… the most damaging things are going to be the things you think you have covered but, in hindsight, realize you didn’t have a clue! That’s kind of how we operated with our people.
As the CEO of your business, your #1 concern first and foremost needs to be controlling your cash flow. I’ve seen businesses sink themselves because they go out and hire an expensive team, taking their eyes off the prize (which is profitability and control over expenses), and eventually burn themselves out trying to fix it. This is your first warning as it pertains to your team: honor your numbers and control your cash flow.
You might find it interesting that, in a section all about “people,” we are talking about cash flow — but there is a reason for that: you can’t pay people without cash flow! The only way to hire great talent and compensate them well enough to motivate them to stay is by having healthy cash flow. It is a simple issue of economics. Our formula for this came from a lot of study pre-2017, and has been validated by great returns from 2017 to present…
In short, we want each employee of ours to be worth approximately $400,000 in annual revenues for us. This is NOT ‘linear,’ because you are going to have team members who do not “produce revenue.” I’m not saying each employee needs to produce $400,000 in revenues, I am saying that if you take your annual revenues and divide them by the number of employees you have you want that figure to be $400,000.
- $1,200,000 per year revenues
- 3 employees = $400k per employee
- Even if one employee is an operations manager and doesn’t “produce” revenue
- $750,000 per year revenues
- 2 employees = $375k per employee
- In this case, you are almost properly staffed based on cash flows
In fact, currently for Traffic and Funnels I believe we are at about $375,000 per employee per year — so we are just slightly “overstaffed,” as we need an additional $25k per employee per year to hit our constraints. In this case, that is an additional $1,000,000 in revenues which is quite easy to do, so not a big problem!
When you nail your cash flow targets, you are poised to win. Cash does three important things for your business:
Cash gives you confidence.
It’s difficult to make great decisions if you are worried about failure. And what’s worse, the more risky the failure, the harder it is to make a great decision. In fact, there’s nothing worse than needing to do something, but being so close to the line that you’re robbed of confidence.
Cash accelerates your growth.
When you are able to properly invest into your business, it will take on a life of its own. People will begin growing things for you, and you’ll find yourself in a position where, believe it or not, you might be uncomfortable with how quickly you are growing! It sounds crazy, but this scenario has replicated itself for Chris and I time and time again.
One of my key learnings was not getting disheartened by the problems of rapid growth. You will learn more about how to manage this throughout our entrepreneurship blog.
We grew so fast we had to hire people. Before we recognized it, we had so many clients, we couldn’t take care of them. If you can’t take care of your clients, you will get refund requests. You need to keep track of your deliverables, and especially when your growth is rapid. Things can shift quickly, and your quality of delivery will slip if you are not ready for the tipping point.
We also got a huge tax bill that had never happened before. This required a mindset adjustment for me as our tax bill for 2018 was more than my combined income from 2010, 2011 and 2012.
It’s not that you have to learn that many new skills, it is more that you have to make shifts in your attitude. Here’s the thing, when people come in and have growth problems, and then complain about them saying, “This doesn't happen to anyone else.” This is stupid, because everyone … and I mean everyone has the same issues as they grow. Most of the issues as you grow, at least from my experience, are attitudinal, not your aptitude.
For example, the belief that the best way to pay less in taxes is to make less money. Well, there's an attitude shift you need to make right there, and all of a sudden you don't mind that you have to pay taxes anymore.
There are good problems and bad problems people. So, when you feel like you're growing too fast, you have to remember that they're good problems. And for every problem, there's a solution. If you're willing to find it.
Growth is so predictable now, that we always take our goals and add a healthy margin into them, because at the end of the day, the last thing we want is to set a goal too low, when for all intents and purposes we could have doubled or tripled it.
Cash protects your downside and grants you a larger “margin of error.”
Chris’ dad was in the Coast Guard and, as such, he grew up in hurricane territory, off the southeast coast. He told this story to our team in Traffic and Funnels one time and it was so impactful, I want to share it here with this third point…
“I remember these old houses, growing up… built on janky stilts that seemed so fragile. Sure enough, when a decent hurricane showed up, these houses would get obliterated. They were up off the water enough to protect the house from flooding, but they offered no structural support so any heavy flooding would ruin them.
Recently, I saw something that reminded me of my childhood and, particularly, these faulty home foundations. I took my wife and a couple of friends to New York City and while there, we visited One World Trade Center and memorial. One World Trade Center stands as the tallest building in the USA… as I was looking up at it, from the memorial, it seemed to touch the clouds. It’s quite amazing, actually, I was blown away by the construction, the design, and the sheer size of it – magnificent.
Why did this remind me of the homes on the coast built on stilts? While at the memorial, I learned that the foundations of One World Trade Center had been driven 110 FEET into the earth! What a contrast. Here is a foundation driven so deep into the ground, it would take a sizable act of God to remove it from its foundations…
I’m a very visual person, so I started thinking of business – and the structural nature of businesses as they grow. The majority of businesses that become clients, when they first come in, they’re built on stilts. Their foundations are weak, and their risk of being obliterated at any point is high. When you implement our material, you slowly begin driving the foundations deep into the ground… it won’t happen all at once, but slowly, and surely, you become resilient, you become safe!
Taking the time to build your foundations allows you to do three things that you cannot do with a business built on stilts:
- You can grow taller.
- You can handle more turbulence.
- You can last longer.
All good things when it comes to business!
If any part of the business relies SOLELY on you: stilts.
If you do NOT have at least 3-6 months of operating costs: stilts.
If you do NOT have a predictable, REPEATABLE way to produce cash: stilts.
If you do NOT have great coaches and mentors: stilts.
If you NEED to grind away, working 60-70 hours a week for months: stilts.
If you do NOT have SOPs and processes in your business: stilts.
If you do NOT know more than one way to get new business: stilts.
Most people run their business like a game of Jenga… just one piece away from it all crashing down. That’s the reason WHY I wrote this article. To build a skyscraper, you need foundations – depth and strength of structure.
If you have predictable client acquisition processes: skyscraper
If you can go on vacation for a month and the business grows: skyscraper
If you can build new levels of growth (revenue) without working harder: skyscraper
If you’re reading this and it seems a bit, “ethereal,” or difficult to wrap your brain around — I felt this way, too. Remember that the higher up the ladder you get, the more you will have to think your way through and around problems. You’ll come to find out (if you don’t know already) that it is EASY, and simple, to get new clients and drum up new business.
Marketing handles that! It is a bit more complex to build a team to do this for you. It’s been my experience that most consultants don’t even know this next level of leverage is possible – so they never seek out the wisdom or the training to accomplish it. That’s why I’m spending a good amount of time here to show you that relying on ‘stilts’ as a foundation isn’t the limit for you!
PEOPLE & CULTURE
Here’s a huge lesson learned in the school of hard knocks and how painful it can be to get it wrong. I remember the first time it dawned on me that I had made a really bad hire, and didn’t know how to fix it. For the sake of his privacy, I’ll use the name Sam (I’ve never had a Sam work for me – so it’s a safe alias!). We hired him to help us with our client success / client management…
We brought him in on a decent salary (I believe it was around $65-70k) and he really wanted the job. In fact, when we were interviewing around for the position, I remember getting several emails from him following up with us in between candidates just to see how his chances were. That kind of drive and aggression level in a new hire is always a good sign, but I didn’t know how to efficiently screen for culture at the time.
We hired Sam and immediately we started having problems. He didn’t like it if you texted him and he wasn’t “in the office” (odd since he actually worked from home, oh well!). He had several rough interactions with clients and word got back to us. Let’s just say about two weeks in, Chris and I both knew he probably wasn’t the right fit and wasn’t going to take us where we wanted him to take us.
So we did the “smart” thing and didn’t let him go for almost 3 months! It sounds juvenile but, at the time, we didn’t know how to let anyone go. It seemed mean to fire someone and instead we ended up causing stress and turmoil for everyone involved. The first thing you need to come to terms with is that when you make a mistake and you don’t fix it – you are hurting everyone involved.
In hindsight, keeping him around was one of the more selfish things we could’ve done. You have to be willing to admit to someone when they are on the wrong team, and allow them to find their calling elsewhere.
Here are three things that happen when you keep the wrong people on your team.
- You rob people of finding their calling elsewhere.
An interesting point is, I have never let someone go on any of my teams where they weren’t expecting it at least a little bit. People know when they’re not meeting the mark, and humans (myself included) hate letting people down. If you really get honest with yourself, avoiding the tough conversations with people in this regard, isn’t protecting them – it’s protecting your own feelings.
Make the tough calls. Just because someone isn’t able to win on your team doesn’t mean they don’t deserve to win anywhere else, either! Let them go, encourage them on the way out — and don’t be responsible for holding them back.
- You penalize the people on your team who are supposed to be there.
People love playing on a winning team. They hate playing with people who don’t seem to be on the same mission as they are. One of the ways we reward our teams (in all the different companies, not just the consulting side) is this: letting them play with other winners who are headed in the same direction.
If you’ve ever been on a team where there’s just one outlier who hates being there — you know it can be damaging to everyone on the team! By allowing this person to stay on the team for so long, we essentially penalized everyone else for three months because they had to deal with him.
- You siphon off your energy, reducing your level of output and service to the people who deserve it.
My highest calling is helping the leaders on my team succeed. The more they succeed, the more I succeed. True leadership is partnership. What happens when you have a squeaky wheel who isn’t supposed to be there?
The people who are supposed to be there, get your leftovers. We let this person go, and like magic, the whole team got healthier. What was a shocker at the time (but not in hindsight) is, when we told this person about the decision to let him go, he seemed relieved. I’m telling you – people don’t like being in a spot where they don’t feel like they’re winning…
CAVEAT: a good player in a bad culture = a bad player.
About a year after the scenario I just shared with you, Chris and I got into a season where our culture started feeling toxic. We had a lot of expectations for people, but they weren’t very realistic, they weren’t well communicated, and ultimately, we were just being poor leaders.
It will be difficult for any A-players to come into your team and outperform a toxic culture. If you want a team that will make it through good times and bad times – you must invest into creating the “partnership” culture (others call this a culture of ownership) amongst everyone on your team. It all starts with hiring strong talent… because what I’m about to coach you on will not work with a weak team.
The cost of a weak team member (as demonstrated earlier) will likely bankrupt any chances you have of scaling beyond yourself. There are only a few reasons I’ve seen for an employee or team member not measuring up.
I’ll go over them now.
WHY TEAM MEMBERS FAIL
Capability is obvious… but we never want to accept it, at first. Someone is hired to be a sales person for you — they suck at sales. You train them, they still suck at sales. You keep training them, they never improve. Then you get a bitter, sucky sales person who begins ruining your culture simply because you left an incapable team member in a role they couldn’t succeed at.
Misplacement is the proverbial figure of speech, “right bus, wrong seat.” It’s when someone is on the team, you know they are a good fit culturally, but for some reason they just aren’t the best suited for their ROLE – whether it be a personality OR a capability issue. Your job is to orchestrate a move in their role so they can be on the team where they’re gifted to be on the team.
Expectations – by FAR, the #1 reason people don’t succeed is because of poorly managed expectations. Unmet expectations happen for three reasons:
1) Uncommunicated expectations: likely self-explanatory, but these are things you expect of a team member yet you never told them! They’ll probably never measure up simply because they don’t know what the bar is…
2) Miscommunicated expectations: this happens in a scenario like this… “My expectations of you are XYZ.” Time goes by, and you begin to get agitated with this employee because they’re doing XYZ but they’re not doing ABC… when in reality, you only told them to do XYZ and so in their mind — they’re executing on the expectations and have no idea you’re now expecting something different!
3) Misaligned expectations: this is tricky, but it’s hurt us more than once and it always comes back down to a problem in compensation. For instance, if someone is paid to do “XYZ” but you are communicating to them to do “ABC,” there will always be confusion and (worse) an internal conflict with that person to pick and choose… to either get paid, or to please the person they are reporting to. For this reason, we always try extra hard to align a person’s compensation with our expectations of them. When there is alignment, there is no confusion.
You might be asking for an example of that last point – here is a quick example for you. If you bring in a sales person and you pay them to sell – but you are spending a disproportionate time trying to get them to master a pipeline or a client management system… they will likely be confused.
This happens in every area of the business and it’s important to think through the scenarios with this question: “Am I paying this person to deliver on what I have COMMUNICATED that I want from them? If the answer is yes, you are aligned. If not, you are likely misaligned and will need to fix it.
If you want a high performance team, you need clearly marked out (and communicated) standards of what “high performance” means to you. What does it look like to be successful working for you? If that question has a vague answer — you will have hit or miss performance.
FOCUS ON LESS TO SCALE MORE
Another interesting topic Chris has built into the teams is the idea of “columns” and “levels.” I want to cover it here. Once you have a business that is generating cash, your next step is to build structure, and create focus. There is a horizontal level to this, and also a vertical level. For the vertical aspect, we’ll use the term “levels,” and for the horizontal aspect we’ll use the term “columns.”
All progress is preceded by clarity. Therefore, your first assignment for this exercise is to identify the following:
1) What is your current level?
2) What do you need to hit the next level safely?
If you’re like most people, you’ve probably felt like ALL you are doing is keeping the business going. Like you’re the person holding everything together — and you can’t imagine stepping out even for a moment, or it might crumble… well I, for one, have felt this way. To fix this feeling you must answer the question:
“What do I need to hit the next level safely?”
When taking clients through this, we focus on the first things first. Let’s first identify some of the columns in your business. Step 1 is always to get clarity on where you currently are because without context it’s very difficult to make changes. You can’t get into a car and set the directions for a road trip if you are blind to your current location.
Column #1: Marketing
Column #2: Sales
Column #3: Fulfillment
Column #4: Operations
Keep in mind, these are “tactical” areas of your business — we aren’t identifying the categories inside a business, so your columns might look a bit different depending on your line of work and your goals. The two primary keys to growth are #1 and #2…
To have sales, you need conversations – and conversations come from marketing. To have a healthy foundation, you must answer the question: “Am I replaced in this area of my business?” This feels uncomfortable, at first… but it is vital if you want to truly scale. You cannot scale to $100M (or even $10M sustainably) if everything relies on you and only you.
So let’s say you are currently earning $50,000 per month and in column #1 and #2 you are needed, not redundant, not replaced. In columns #3 you are halfway removed and in column #4 you are 100% removed. This is good simply because it is clear – and clarity is the main needle mover. To get from $50,000 per month to $100,000 per month is simple, because we have clarity.
If you are taking 50 calls per month, spending half of your time on marketing and half of your time on sales… you simply need to now take 100 calls per month, keeping the same ratio! You’re seeing the problem, now, I assume? Doubling the amount of time it takes to make more money means you don’t really have a business – you have a job and you’re paid hourly. Accept the truths, even (especially) when they’re hard.
You have three options to get this fixed. Take one column at a time (do not try replacing yourself in multiple columns at the same time), make a list of all the tasks involved, and do the following with each of them:
Notice what is missing on this list? “Do them yourself” is missing! Just sitting down to do this exercise for the first time made me lighter as an entrepreneur. I had a giant dotted journal and I made list after list after list — crossing activities out that were just irrelevant (delete/ignore), and circling things that needed to be delegated or automated.
You want your involvement to be reduced significantly within 60 days of doing this exercise, and if you follow the advice earlier in this chapter about team and expectations chances are you can be 100% replaced within 6 months.
“But Taylor, there are some things I just HAVE to do! How am I supposed to complete this exercise?”
There is a fourth option, I didn’t tell you about it because I’ve found that most of the things we think have to be done, don’t have to be done by us. There are, occasionally, items that only you can do…
There are many things that can take your attention away from the main things. It’s important to always be prioritizing because, things will always come up in plentiful fashion, but your time is always limited. If you are struggling to hit your revenue targets, you are going to need to prioritize on having conversations with prospects and making sales higher than you prioritize getting a website done or forming an LLC.
First things first should not be a funny saying but, rather, a modus operandi that you allow to guide your thinking (and your activities). As Chris says, “Fix your BIGGEST problems FIRST.” That’s a winning strategy!
We learned this the hard way. Towards the end of 2015, when we first started Traffic and Funnels, we didn’t have any marketing turned on. No website. No business cards, nothing. We just had a small handful of people on the phone and we started making offers to them. We now teach this whole process “soup to nuts” to our clients – but back then we were just inventing as we went. We asked them questions, discovered their problems, and then made them offers that aligned with those problems.
The first sale was $3k and we sold three clients into it that first week. I wish I could say that we expected it! But the truth is, we were shocked. That was more money than I’d ever made in a week. The funny thing is, after the first week, the temptation to get distracted kicked in… we had to make a choice between going off into ‘la la’ land and getting distracted with fancy business cards and LLCs — or we could double down on what was working.
Within two weeks we had our marketing put together, and deployed. It didn’t work the first time, we had to change it, testing and optimizing as we went. But that’s not the point here — the point is we just drilled down on what was working and we pushed everything else down to the bottom of the list!
The only way to truly scale an organization without sacrificing quality of results is to replace yourself in every area. If you are necessary at any level to a business succeeding or failing, you are likely not going to be able to scale as high as if that were not the case.
THE CASE AGAINST SCALING
An important item to consider: maybe you don’t want to scale. That is perfectly fine. The final ingredient to scaling a business to “big” is complicated: a reason. It’s tough to manufacture, and hard to imitate someone else’s reason…
Probably 75% of our clientele don’t want to out-scale themselves. They enjoy the work, they love the service they provide, and they’re making plenty of money with plenty of surplus and have no reason to keep scaling. There are some businesses that we own in which that is the case for us as well. Not everything needs to be “big.” Some things are better when they’re small, intimate, and maximized for the sake of enjoyment.
Beware of the temptation to scale simply to “keep up with so and so.” That is a fleeting motive and will likely not sustain you through the ups and downs of building a solid team.
You can build an amazing living from your expertise. You do not need to scale to $6M or $10M or $20M to live an amazing life… always stay grounded in reasons. If scaling benefits a purpose you feel called to, do it. If you just enjoy learning and mastering the game of business, do it. If it’s only for bragging rights — it won’t be worth it.
I have run small businesses and I have run large companies, and I will end this article by saying this: the most important piece is alignment. Your first goal is to create the environment where you can survive… shortly thereafter you need to graduate to a place of thriving…
The ultimate goal, though, is impact. Living well is awesome – but the ultimate destination for me (and the people I look up to) have all found their way to a place of enabling other people to live out their gifts and their passions. We are committed to making our companies a place where people can do that!
In your service,