To work only four hours per week and still lead a life of adventure and luxury - Tim Ferriss says you can do it, in his book «The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich
This is Part 4 of my series on T4HWW. An overview of the series can be found here.
Money for nothing - Automation
You can earn money while you're asleep, says Tim Ferriss. To avoid too much premature excitement: it doesn't work without an idea and an idea is what the book does not give you. What it gives you is the process around it, the one that lets you sleep (or do more interesting things than business) well. The ingredients of this process are:
- Geo-Arbitrage: Outsourcing as it should be
- Find your «Muse»
- Test your «Muse»
- MBA: Management By Absence
Geo-Arbitrage
«Geo-Arbitrage» is newspeak for «outsourcing». To Tim, it doesn't mean to scan the world for the steepest wage differential to exploit. What's more important is the cost per completed task. Depending on the task, various personal (virtual) assistants (PAs / VAs) located in various parts of the world may be the right choice. Different time zones may become important if you wish to delegate tasks in the evening and find them done, in your mailbox, in the morning.
If the results are poor, it needn't be the PA's fault. Good preparation is up to you. Only delegate well-defined and time-consuming tasks. To eliminate is better than to delegate, since a nonsensical task just eats up money, whether in your country or on the other side of the globe. To avoid the need for permanent explanations, processes and rules have to be in place upfront - which gives you a good chance to separate the wheat from the chaff. Because remote management and communication aren't natural skills, Tim recommends that you experiment and delegate more and more tasks to become familiar with geoarbitrage.
But beware:
- Don't employ lone fighters but agencies instead. Otherwise you introduce a single point of failure, which is bad. A single point of contact within the agency, on the other hand, is a must-have.
- Use only safe methods for payment, e.g. credit cards, but never debit cards or money transfer services.
- Don't give away your passwords, rather create dedicated new accounts for each of your PAs.
- Never just accept the first person suggested as your PA, but state the skill requirements upfront and check whether they are met.
- State your tasks in a foolproof way. If you can't do that, then probably the task isn't for outsourcing.
- Set tight deadlines (remember Parkinson's Law), define the order of execution and request periodical status reports.
Find your «Muse»
Our goal is to own a company and to invest as less time as possible into maintaining it. That's why Tim doesn't talk about a «business», but about a «muse»: an automated vehicle for generating cash without consuming time. By definition, all service businesses are excluded, then. You need a product.
A good muse, according to Tim, can be tested for under 500$, automated within 4 weeks and maintained within a maximum of one hour per week.
Other than you may think, the muse isn't the starting point. Instead, the right order of steps is:
- Find the market first, then the product
- You need to be member of the targeted group, it's not sufficient to just speculate about it
- A promising niche has at least a few magazines that are bought and read by the targeted group
- You use brainstorming (not prototyping) to find candidate products: the main benefits must be laid out in one sentence; the price tag will be around 50-200$, to deter problematic customers and to earn a sufficient margin; the product can be manufactured within 3-4 weeks, and it can be fully explained in an online FAQ, to minimize the need for support. Product piracy can't be avoided altogether, but if your product is information, it gets harder to simply copy it and get away with it.
- There are more options than just do-it-yourself. You can earn money as a reseller or licensee as well.
Since PR matter, it is essential to be perceived as an expert on the chosen matter. Tim lists a few tips and tricks, including becoming member of relevant associations and publishing magazine articles.
Test your «Muse»
Never implement your muse without testing it first.
You study your competitors and create a web site that is better than theirs, in some ways (e.g., shorter paths to product information). Some advertising variants are tested - Google AdWords lend themselves to this purpose, and you can find the ideas for variations from online keyword suggestion tools. Success is measured by evaluating the log statistics of your web server.
«Successful test» means: potential customers pushed the order button, opposed to only having read the information on your site. Since you haven't got anything to deliver yet, that button click just ends at a «We regret…» page for now.
MBA: Management By Absence
Everything, really everything that is part of the overall process must be outsourced in the end: web design, call center, production, fulfillment, orders and payments…
That happens in the end, but to start with, Tim recommends to allow for three phases::
- Phase 1 means you do it all yourself. Goals are to save money for the next phase and to gather information that will be incorporated into your online FAQ: what questions does the product raise? How does a fool-proof process look like? What are the show-stoppers?
- Phase 2 (more than 10 product units sold, per week) serves to publish the online FAQ. Tim recomends to employ smaller service companies now that need the business and thus are more cooperative during negotiations. Our goal here is to be able to fund the next phase.
- In phase 3 (over 20 product units sold, per week) the whole process gets completely automated using professional service companies, to minimize your maintenance efforts.
At all stages, distracting factors get eliminated, which Tim describes as mainly problematic customer behavior or even problematic customers. Offer less ordering options (no phone), less payment options (avoid exotic, risky and troublesome ways) and less delivery options (no express delivery, it just raises a stream of worried requests by anxious customers). Don't fill your customer database by giving away something for free, in return for adresses - rather sell something inexpensive to gain customers who are willing to pay. Deter semi-professional resellers by granting discounts only for orders bigger than 12-100 units, by requesting a tax ID, orders by fax only, in short: request anything that a garage business can't provide without effort. Tim Ferris considers his customers as an exclusive club: make it a bit hard to enter but treat the members well, once hey are «in».
Seen from outside, you should look big, so:
- …you don't put «CEO» or «Founder» on your business card - that would be screaming «Start-up!».
- …you offer multiple email addresses o your website (sales@…, marketing@, info@…), even if all mails end up in your own mailbox
- …you never use your residential adress for business purposes
- ..you may rent a voice-controlled phone system that routes all calls to - you
My impression, so far
For sure this is the most striking part of the book. Once more, I'm surprised by Tim's relentless frankness. I wonder how you can keep selling your product if you tell your customers in public that your costs are just an eighth of what you charge them. The same applies to all of his tricks, e.g. to appear bigger than he is.
Can such tactics be successful? I think that you turn off potential customers by e.g. putting up fake order pages, even if they are online for a few days or weeks only.
Anyway, since I haven't got an inspiration yet for a good muse, I'll postpone testing Tim's ideas to later. ;-)
To be continued…
Coming soon: Tim Ferriss' The 4-Hour Workweek (5/5): Getting away from it all - Liberation. There is also an overview on the series.
[Update: The fifth part of the series is available: «Tim Ferriss' The 4-Hour Workweek (5/5): Getting away from it all - Liberation».]
