Helping Individual People Can’t Make You Rich

In: Business Ideas| Education By: Brian Armstrong

8 Apr 2008

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?

14 Responses

Brian Armstrong

April 9th, 2008 at 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.

Quotes

April 9th, 2008 at 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

Tom Volkar / Delightful Work

April 9th, 2008 at 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.

Brian Armstrong

April 9th, 2008 at 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.

Anthony Kuhn

April 15th, 2008 at 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.

Mike

December 17th, 2009 at 5:01 am

Anthony: I completely agree. Maybe if our education system taught about all those things, we wouldn’t have so many individuals making poor financial choices and contributing to our national/international financial crisis.

mr.sanchez88@hotmail.com

April 21st, 2008 at 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!

Adam

May 28th, 2008 at 7:38 pm

You are one of the very few who reveal business secrets at no costs!
I find your post extremely helpful
Thanks

Brian Armstrong

May 31st, 2008 at 2:26 pm

Thanks Adam!

Vic Fernandez

October 9th, 2009 at 5:52 am

Thank you for reinforcing the value of going into business that teaches others to help themselves, create multiplication of time and wealth thru leveraging, and enlightening the painfull reality of so many friends stock in the race to mediocrity.

Brian Armstrong

October 11th, 2009 at 3:17 pm

Hi Vic, thanks for the kind words and welcome to the site!

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Helping Individual People Can’t Make You Rich

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