Helping Individual People Can’t Make You Rich
People tell me their business ideas all the time. They usually want to start a restaurant, or sell something they made, or give their advice as a consultant or coach.
But those businesses don’t scale. The only way people get rich is by developing a product or service that can help a LOT of people, not just a few.
If each person that you help requires your personal time then there’s only so many you can help, and you probably won’t get rich doing it. (Even if you don’t care about getting rich and just want to help people, helping individuals is still an inefficient use of your time, more on this later.)
Sure you can make quite a bit of money in the right job working hourly. Doctors and lawyers get a high hourly wage. But they still have to help each person individually which is why they can never be as rich as someone like Bill Gates who has a scaleable business. His software gets written once, and then distributed to millions of people with very little additional effort for each person who is helped. Bill Gates makes money from his software while he sleeps, whereas doctors and lawyers still have to keep putting in the hours to get paid.
Scaleable businesses require much more work up front, but once they are off and running they require little or no additional time per person. That’s power because once your business system is in place, your time is still “preserved” for you to work on your next business idea and help even more people.
Compare each of the following. Which one scales better?
- Giving a speech to a group of people vs. making a recording of that speech to distribute
- Flipping houses vs. building a real estate portfolio over time
- Cooking for a bake sale vs. licensing your recipe
- Your band playing at a local festival vs. selling songs on iTunes
- Talking to customers over the phone vs. taking taking orders through your website
- Accepting checks vs. accepting credit cards
- One-on-one coaching sessions vs. selling a book
- Keeping in touch with friends by email vs. writing to your blog
- Being a freelance programmer for one client vs. selling subscriptions to your software to many clients
Even if you don’t care about making money and just want to help people, I’d still argue that you need a system that scales. You can do the same kind of comparison for non-profit work…
- Volunteering your time at a homeless shelter vs. developing a city wide program to help thousands of homeless
- Feeding a hungry family vs. improving education/changing legislation/etc
It might give you a warm fuzzy feeling to help an individual, but in general I think you’re setting the bar too low when you do that and selling yourself short. Spend your time on something that will really have an impact.
Making a scaleable business is not easy (otherwise everyone would do it).
While working hourly, you can see a paycheck in as little as a few days or weeks. It’s dependable. But while building a scaleable business, you can see zero return for months or years (or maybe never). All the work is up front.
It’s the old linear vs. exponential growth. That’s why most people don’t get rich. They don’t want to put the time in up front to see the big payoff down the road.
The next time you have a business idea, try to think about how it will scale and if it could ever really help a TON of people. If not, is it really worth pursuing?
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Brian Armstrong said,
Wrote on April 9, 2008 @ 1:52 am
By the way, didn’t mean to pick on doctors and lawyers. They often get rich as well following many of the same principals. Doctors who create some innovation in the medical industry and patent a new procedure or device have the ability to help many more patients than they can see on their own. Same for lawyers winning certain cases etc, there are probably plenty of other ways to go beyond the one-on-one help they can provide.
[Reply]
Quotes said,
Wrote on April 9, 2008 @ 12:44 pm
Hey Brian.
Good post. I don’t think it’s a coincidence that the biggest fortunes are made in businesses that scale well. The Walton fortune was made in retail. Warren Buffett made his by investing (largely in insurance). Gates, Paul Allen, Larry Ellison all made theirs in software.
It’s worth noticing that the thing that makes all these businesses scalable is the low variable cost. The cost of the ‘next’ copy of Windows or the ‘next’ bottle of Coke is negligible. All the expense is in product development and marketing.
Contrast that with Ford, GM, Boeing, etc. The next car that rolls off the assembly line is going to cost a lot to build. The variable costs are higher.
So when evaluating business ideas, consider the scalability of your time as well as the variable capital cost. And remember what Warren Buffett said: “When a management team with a reputation for brilliance joins a business with poor fundamental economics, it is the reputation of the business that remains intact.”
For more quotes like this on business, you might like to check my site: http://www.quotationcollection.com/tag/business/quotes
[Reply]
Tom Volkar / Delightful Work said,
Wrote on April 9, 2008 @ 4:49 pm
Excellent post Brian, serving one at a time can be fulfilling but it is still trading time for money. True freedom is found by creating income streams that do not require your physical presence. It’s the leverage in such systems that create the wealth and the freedom.
[Reply]
Brian Armstrong said,
Wrote on April 9, 2008 @ 11:54 pm
You’re right about “variable cost”. Others might want to read up on fixed cost vs. variable cost. Your most precious asset is your time.
[Reply]
Anthony Kuhn said,
Wrote on April 15, 2008 @ 4:01 pm
Brian: Wealth creation ought to be taught in high school right beside Checkbook 101 or Credit Card Debt. Why is it that savings accounts are no longer the way to financial freedom in old age, and why can’t a wage earner be expert enough to be in high demand and draw in the big bucks? Small thoughts, those, when compared to passive income streams and return on investments. Thanks for shaking up the bee’s nest a bit.
[Reply]
mr.sanchez88@hotmail.com said,
Wrote on April 21, 2008 @ 2:55 pm
Great Post Brian,
May I add that by reading this post dont just go home and spent countless hours being frustrated in thinking up ideas. The best Ideas are thought of mistakenly. Take your time and keep a very open mind of everything around you. Seek solutions to everyday life problems we face. Once you do this you will be very surprised at the ideas your brilliant mind coughs up. Good Luck!
[Reply]
Inspiration To Quit For The Week said,
Wrote on May 3, 2008 @ 9:34 pm
[…] Sivers discusses the exact point I made a few weeks ago (with a much better example than mine) If you sell pens for a living and someone […]
8 Great Business Ideas You Can Steal said,
Wrote on May 28, 2008 @ 1:02 am
[…] well and don’t require your personal time for each person you […]
Adam said,
Wrote on May 28, 2008 @ 7:38 pm
You are one of the very few who reveal business secrets at no costs!
I find your post extremely helpful
Thanks
[Reply]
Brian Armstrong said,
Wrote on May 31, 2008 @ 2:26 pm
Thanks Adam!
[Reply]