Dan Martell is an entrepreneur, angel investor, and thought leader. In 2016 he founded the SaaS Academy.
Below, Dan shares 5 key insights from his new book, Buy Back Your Time: Get Unstuck, Reclaim Your Freedom, and Build Your Empire. Listen to the audio version—read by Dan himself—in the Next Big Idea App.
1. Figure out your buyback rate.
Every person should understand what their buyback rate is. They do this by figuring out how much they can afford to pay another person, either part-time, contract, or full-time, to do tasks that they’re currently doing. To start, take your income and divide it by 2000. Two thousand is the average number of hours that a normal person works per year; that’ll give you how much income you generate per hour. Take that number and divide it by four because you want to get four times return on investment (ROI) on your buyback.
For example, your salary might be $70,000, plus $20,000 from profit or distributions and then $10,000 for discretionary expenses. Your combined income, salary, profits and discretionary expenses, is $100,000. If you take $100,000 and divide it by 2000, that’s $50 an hour, divide that by four, and that gives you a buyback rate of $12.50. This means you shouldn’t be doing anything in your calendar that you could pay another person $12.50 or less an hour to do. If you do, you are working against yourself. In the same way, if you’re just starting your business, you shouldn’t pay anyone more than $12.50 an hour to do a task you could do. You want to keep the high value work for yourself and buy back the lower value things that take your energy.
2. Execute a buyback loop when needed.
What do we do when we hit the pain line? The pain line is anytime a business owner feels that if they grow their business anymore, their calendar will explode. Some people are in it and some people know it’s coming, but once you hit the pain line, you must implement the buyback loop.
There are three steps to execute a buyback loop. First, you do a time and energy audit. Identify the things that take your energy versus give you energy, and have a low cost if paying someone else to do—say a $1 task versus a $4 task.
“Once you hit the pain line, you must implement the buyback loop.”
With this, you move on to step two, the transfer. All the low cost tasks are put in a bucket and transferred to someone else. Either you hire someone or use someone on the team with renegotiated expectations, or get an intern. It doesn’t always require dollars to be creative, but you must find a way to transfer and clean up your calendar.
The final step is fill. Here you identify opportunities to do more of the work you love, do what will generate the most income, or invest in skills and development: Learning new growth strategies, creating playbooks, or whatever skills you feel you have a deficit in. You can also audit beliefs, world beliefs, money set beliefs, people beliefs, any beliefs that are not serving you, and get some coaching or training on them. This can also be character traits, like consistency, mental strength, etc. Every time you hit the pain line, execute a buyback loop and continue to build a business and a life that you don’t want to retire from.
3. Climb the replacement ladder.
How can you hire people in the right sequence to get the most out of those hires? This involves a five step ladder, each with specific outcomes.
Level one is the executive assistant—million dollar companies weren’t built on $10 tasks. Having someone organize your inbox, run errands, do your purchases, complete research tasks, or organize vacation or travel will free up your time.
Level two is delivery, or anything that’s involved in your post sale transaction: fulfilment, onboarding a new customer, taking payments or customer support.
“If you have to tell somebody how to grow that area of the business, then you made the wrong hire.”
Level three is marketing. Marketing is about understanding what campaigns you’re going to run to generate leads and what your sources of traffic are; foot or online. Someone needs to wake up every day and monitor this, ensuring a higher quality and quantity of traffic. At some point, this should no longer be the CEO; someone else can build a lead generation system to grow the company.
Level four is sales—hiring a salesperson, but only when the first three levels are filled. If not, you’ll have someone who doesn’t have enough leads to make money and they’ll quit within three or four months. Hire a salesperson who can do all the initial calls as well as the follow-ups.
Level five, the highest level, is an executive leadership team. This is when you start investing in leaders to take over complete functions of your business. It could be the fulfilment side, the marketing side, sales, operations, whatever you need, based on your calendar, using the buyback loop. The key is to have them own and be accountable for the strategy, outcomes, and targets of that department. If you have to tell somebody how to grow that area of the business, then you made the wrong hire. Following this sequence will ensure that you always move up the ladder in the most efficient and effective way.
4. Follow the 10/80/10 rule.
This is for the creatives in the crowd: the podcasters, artists, those that feel what they do is very unique and special, that no one else can do. Eighty percent done by somebody else is 100 percent awesome. The first 10 percent is the ideation and you do this with the person that’s going to own the process. It’s your opportunity to talk about the creativity, the through line, the storyline and the outcome goals and all aspects of the desired needs. Then the 80 percent is the person taking that information and moving it forward through research, prototypes, outlines or drafts—someone who can take your concepts and turn them into a first draft. The last 10 percent is the integration: taking something that’s almost finished and adding your finishing touches to it like someone would in a restaurant. When the plate comes out, they give it a final look, put the garnishes on it, clean the side of the plate, and hand it to the server to bring to the table. That’s the 10/80/10 rule.
Steve Jobs is a great example of this. He would follow this rule with Jony Ive. They would go into the design studio and come up with various concepts. Jony and the Apple team would then put together a bunch of prototypes, run the CNC machines, contact vendors, get costings and raw materials, and try to figure out how to build these crazy ideas that Steve and Jony had come up with. Steve would famously then do the final 10 percent: the presentations on stage, the demos at their events. The 10/80/10 rule allows creatives to buy back their time and still feel that they have their fingerprint on their projects.
5. Create your 10x vision map.
This looks at four key areas of your life and gives yourself permission to dream, to think into the future and 10x your current life. It’s easier to 10x your life than to 2x your life.
The first of the four key areas is team. To scale up any dream, it’s all about the people you work with. To get unstuck, reclaim your freedom, and build your empire, you need to identify your team.
“It’s easier to 10x your life than to 2x your life.”
The second of the four key areas is the primary business. Every person that’s created wealth or resources in this world has had a primary focus in their business. So, what is that current focus and if you were to 10x it, what does that look like? Try to be as specific as possible when looking into the future. Most people can explain what their current day looks like, their team size, profit, revenue, sales, but if you ask them, what does that look like in ten years, what does that look like at a 10x level, they draw a blank or just say “better.” But if you can do this, you unlock the empire, the third key area.
Every business owner out there, from Richard Branson to Warren Buffett to Oprah Winfrey, all either exited their primary business, took that resource, and reinvested it—or, they created multiple copies of their primary business, versions that were complimentary or close cousins. Understanding what your potential empire is, your current business at 10x scale, is key. What is that empire, that bigger business with more leverage and more resources?
The final key area is your lifestyle. This is the big one because the buyback principle isn’t just applicable at work; it should be applied at home and in your personal life. If you are clear on what you want to achieve in life, then you won’t make the mistake of climbing the ladder of success, only get to the top and find out it’s leaning against the wrong wall. That’s what the 10x vision map allows you to do: focus on the destination, the what, without worrying about the how. It’s a powerful framework to give somebody a real sense of direction, clarity, and confidence towards building their future.
To listen to the audio version read by author Dan Martell, download the Next Big Idea App today: