Brad Johnson: Today, I want to share with you a conversation I’ve never shared publicly before. In fact, this is a private coaching framework I’ve shared with hundreds of the most successful financial advisors over the last 20-ish years that has led consistently to some of the biggest breakthroughs I’ve ever seen. And most importantly, these aren’t just breakthroughs that impact them. They impact their entire team, their entire business, and building a business bigger than themselves to create the freedom that they actually want as an entrepreneur.
In fact, what I’ve found, this is one of the most misunderstood numbers in all of finance and for many entrepreneurs. Here’s what this number’s not. It’s not your EBITDA. It’s not your top-line revenue. It’s not the average rate of return that you can hope to get your clients on an annual basis. It’s a number that is exponentially more important than that.
And what we’re going to get into today is figuring out what that number is for you. And I want to make sure that I encourage you to stick around till the end because I’m actually going to share the exact same coaching framework I’ve shared in these private coaching calls that I believe can help you get the same impact, the same breakthrough that this has created for many of my private coaching clients. I just haven’t shared it publicly before. So, let’s get into it.
All right, let’s get to the math. So, first off, if you haven’t already, I would highly encourage you, grab a piece of paper, grab a pen, because as I walk through this, I’m going to try to do it in a way that allows you to get to this exact number for your individual situation, your practice, your business. So, hit pause. Go run and grab it if you haven’t already.
Okay, the first number we’re going to talk about is top-line revenue. We’re going to use nice round numbers to make this as easy as possible. So, in this example, let’s say it is $1 million of top-line revenue. As I record this, we’re mid-year, so what I found is easiest for most advisors out there, go back to your last full calendar year. Go to the P&L, go to top-line revenue.
All right, next number. How many hours you personally as an entrepreneur, as a founder, worked last year? Easy math. We’re going to say you took two weeks of vacation. We’re going to say you work 40 hours a week, so that’s 50 times 40. That is 2,000 hours for the year. Okay, now, here’s the number we’re getting to. Let’s do that. Division and total revenue divided by hours worked, $500 an hour.
So, this mysterious number is what is an hour of your time worth as an entrepreneur, as a founder. Here’s what I found from experience. Most in our space have no idea what this number is personally to them. And if you’re sitting there watching this and you just did the math, I’m curious, is that number higher than you thought it would be? Is it lower than you thought it would be?
What I typically find is most advisors like, oh, yeah, it’s not exactly where I wish it was. I’ve never had anybody ever say, oh, that number’s way too high, yet to hear that one. So, as we look at this number for you personally, there’s a few arguments that might go through your head. Oh, but I’ve got 10 team members. Aren’t those 10 team members responsible for this top-line revenue?
I want you to take some of these limiting beliefs out of your head and I want you to think about it this way. At the end of the day, if I’m leading the charge here, if I’m not valuing an hour of my time at the highest level that maximizes the value to this business when it comes to revenue-creating opportunities or revenue-producing activities, then it’s going to be really hard for anybody else that I oversee to do the same.
So, it all starts with you as the leader, as the founder. And now, I want you to start to look at this, and what we can start to do is make smart choices when it comes to allocating our time. As I’ve stated many times before, your time is the most valuable asset in your business because all of us as entrepreneurs have the same amount of hours in the day. So, now, the question is, where do we most efficiently allocate them for the maximum ROI inside of our business? Let’s get to that.
All right, now that we’ve gotten to the math, and hopefully, you’re sitting there and you’ve got what an hour of your time is worth, high level, now we’re going to talk about what’s getting in the way. So, I’m going to pull from, I don’t know how many hundreds of hours of advisor conversations that I’ve had over the years, but this is going to be based on different stages that you’re in in your business, whether you’re kind of advisor in charge, small team. Maybe you’ve started to step into business owner and you’ve started to create a marketing, a sales, and operations division. Maybe you’re a large firm and you’re a CEO with a C-suite. But no matter what, many of these common themes persist, and oftentimes, if you, the founder, have solved it for you, oftentimes it just means you’ve passed it on to the next advisor in line and you haven’t solved the problem organizationally.
So, let’s talk about the $500 an hour rule. Let’s say you’re an advisor that’s still doing your own applications or paperwork. And these days, that might mean e-apps. It might mean DocuSigns. But at the end of the day, this is how do we transfer the assets to the product, the asset manager, wherever we start to allocate those assets, to start to build the financial plans that we’re building. Maybe it is service work.
So, we brought on 20 clients this month, and now they are customers. Now they require servicing. Now we have to monitor the financial plan that we put in place. And if you think about what this can create back to the $500 an hour, I’ve seen a very common theme where this works great when I have no book of business, but five years later, I look up, and now half of my calendar are review appointments and I don’t even have time to see new people. And that is what can take your $500 an hour or whatever your specific number is. It can cap it, it can put that glass ceiling on it where you feel like you can’t break through, where you’re shackled and you’re just not moving as fast as you used to in the early days. So, maybe it’s service work for you.
Here’s one that nobody likes to talk about. Maybe it’s personnel, human resources. I can personally speak to this one. As our firm grew in the early days here at Triad, we were trying to drive top-line revenue. We were trying to bring in the business that allowed us to get where we wanted to go, that allowed us to cash flow, the hiring needs, the software build-outs, everything that a small business needs.
And before long, guess what? More people, unfortunately, sometimes that means more personnel issues. So, having someone that sees your team as their client, HR culture so that everybody can start to be more aligned, better communication, and grow. Oftentimes, this is one of the biggest things I hear getting in many advisors’ way that’s holding them back is they’re trying to meet clients. They’re trying to sit down and help people build their retirements, but on the other side of their desk, they’re putting out fires every morning when it comes to, oh, such and such can’t be here. Here’s why. So, this is a big one I see over and over.
And one more thing to get more out of this exercise. If you have different things getting in your way that are holding you back, different things besides paperwork, service work, HR, I’d encourage you right there next to what that hour of your time is worth. Write these things down. Here’s what’s holding me back. A, B, C. You might even pull up your calendar and start to look. Here’s an easy way. When you look at your calendar, what is the stuff you procrastinate? That is typically the stuff you’re not very good at and you don’t enjoy. So, start to write some of those things down. So, we now have clues that are, what are the things we need to start to delegate to get off of your plate so you can maximize your time and maximize your revenue?
Okay, I want to dive in here a little deeper. I heard it said one time, so let’s keep this magical number. I want you to keep your magical number, what an hour your time is worth in front of you. I heard it said one time, the most beautiful thing about being an entrepreneur is if you can write a check and never do things that you don’t enjoy doing and typically aren’t very good at doing, again, that is the power of being an entrepreneur, that is the ability to scale a business that’s bigger than you and hire people that have these strengths that you don’t, also hire people that actually enjoy the stuff that you don’t enjoy doing and aren’t very good at.
So, let’s just play with this for a little bit. Here’s a real life story. We did this exact same math for one of our Triad members. And if you think about this, okay, so say you hire a service advisor that also does paperwork, if you hire them at $500 an hour, you would be paying way over market, obviously. So, we can start to deconstruct the needs of the business and start to delegate and pass some of these responsibilities off.
And what’s really interesting when you start to think that way, it unlocks a whole ‘nother level of business. Real life story. So, one of our top growth firms has brought in north of $300, $400 million organically each and every year the last handful of years. We did this math. And this individual has actually worked his way out of doing appointments. But now, his goal is how do I maximize appointments for my team of advisors?
And so, if you think about many of the different marketing funnels that you do and what is the time that is allocated to those marketing funnels, one of his top marketing funnels when you dive into the ROI are public seminars, dinner events. We did the math for this individual. And this is a hack because if you think about $500 an hour, that is if we’re treating all 40 hours of the week equally. That’s not how it works in business.
The exponential returns on an hour of your time, they come from when you are sitting face to face, Zoom to Zoom across from a prospect you can help. And when they bring their assets on, that is where you create revenue inside of your business. So, if you think about it, if you have five appointments a week, that time is exponentially more valuable than the rest of the time where you turn on the coffee pot each morning, where you look at the paperwork that’s stacked up on your desk and say, oh, time to get to this.
So, if we start to think that way, now revenue-producing activity is exponentially more valuable than any other time. So, how do we create more of that as you are a revenue-producing advisor inside of your firm? Well, this advisor, like I said, he had removed himself from appointments. So, how does it apply now? We calculated for this advisor. He typically, when he did dinner seminars between one hour to one and a half hours of his time was worth over, not $500 an hour, $40,000 an hour for every 60 to 90 minutes he spent in front of a room of potential clients. Think about that math.
I’ve heard it said many times, oh, I hate seminars. Oh, like, I’m tired of doing seminars. Are you tired of spending an hour that generates 40k of revenue? I think that’s something you want to start to reconsider. So, it was really interesting when we had this conversation with him. We’ve hired a lot of amazing speakers here at Triad. Fortunately, we’re like, dude, your time is more valuable than some of the public speakers we have come in and we pay to speak to Triad members.
And so, I want you to focus on that shift in thinking, where can I allocate my time where it is most valuable to the business I’m trying to build? Okay, I told you earlier, stick around till the end. We’re going to get to the exact conversation I’ve had with some of the biggest breakthroughs I’ve ever seen as a coach. Here we go.
Okay, so here’s what you’re going to have to do to make this as impactful as possible for you. I’m going to encourage you to remove the limiting beliefs. Play along with me. We’re going to go to imaginary world here, but I want you to apply this to your own business. I want you to kind of believe it along with me, imagine along with me. You just get done watching this video. Like, wow, that was interesting. Brad hit a couple points there. I might want to explore.
And you hear a knock at your door, like, wow, I wasn’t expecting anybody. And you look through the door and it’s Sue. And Sue, a little context here, she works for your biggest competition in town. In fact, you’re familiar with her because sometimes you do events at the same spaces. She’s super nice, but she’s kind of the competition. You’re like, what could she be doing here?
So, she walks in, she says, “Hey, I’m so sorry. I didn’t really schedule any time with you, but I wanted to talk to you because the advisor I’ve been working with the last 20 years, he’s retiring. And unfortunately, I’m not a spot where I can retire, so I kind of need a job. And I was wondering, I know you’re in a similar business. I know we run into each other in finance. Would you be open to sitting down and having an interview with me?” So, you think about this and you’re like, wow, what interesting timing and coincidence because I just identified all of these things, the paperwork, the service work, the HR that are all getting in the way of me maximizing what my time is worth here. This stuff’s bogging me down.
So, well, let’s sit down with Sue. So, you bring her in the next day. You sit down for a formal interview. You bring in a trusted team member because you want an unbiased opinion and you’re 15 minutes into this interview. And guess what? We’re living in imaginary world here, so I can make up any scenario, right? Paperwork, check. She actually does the service work for this advisor, check. HR, she happens to do that too. Sue does it all.
And about 15 minutes in, your team member that you brought in, she’s kind of giving you the old knee under the table. She’s like, oh, my gosh. Not only does Sue have all the technical know-how, but she’s one of those people you feel like five minutes in, you meet her and you can tell her your whole life story. Great people skills, great relationship skills, great soft skills, which is oftentimes missing in our business.
So, you’re sitting there, you’re like, what are the odds? I watched this random video from this guy named Brad on the internet, and the next day, I get blessed with a potential team member that could take care of all of this for me. So, you’re like, there’s got to be a catch, right? Here’s the warning. Here’s the trick question that’s coming, but at least I’m telling you about it. So, Sue says, “Hey, I hate to be so forward, but if you can do this one thing, this one thing,” and she grabs a piece of paper. She folds it in half and she passes across the table to you.
Here’s the trick question part that I warned you about. So, Sue says, “If you can pay me this, I’ll start tomorrow. No questions asked.” Keep in mind, what was an hour in this example we used? What was an hour of your time worth? So, if you’re sitting there with your number, the number that Sue passed you is the exact same hourly wage that you currently earn, what an hour of your time is worth?
So, here’s the trick question part. Do you hire Sue? What I want you to do is I want you to put some deep thought into this. So, if you need to hit pause and if you happen to write down your version of the stuff that’s getting in the way, here’s the concept. Sue is asking for exactly what you make an hour of your time, what it’s worth as a salary. But on the positive side, all of the stuff that is holding you back, Sue can step in tomorrow and take off your plate immediately. So, hit pause and here’s what you have to get to. It’s a black and white answer. It’s a yes/no. There’s no maybe or well, with these circumstances, it is a black and white. Yes, I hire her. No, I do not.
All right, so if you answered no, let’s think about this. All of this stuff that is holding you back from making your $500 an hour, what that time is worth to you, you’re never going to be able to get there if you’re constantly getting sucked back into this. So, let’s think about it this way. Let’s say hypothetically that this paperwork is $20 an hour work. So, what we now do minus 20, what’s that leave us with? Your time is now worth $480 an hour. So, let’s stop there. I now never have to do paperwork again, and if I do nothing, if everything else stays the same, I decreased my hourly wage from $500 an hour to $480. And I never have to do something I hate again. Some people would say, wow, that’s interesting. I’ll take that trade.
But what does that also create? You just freed up your time every hour, every two hours of e-apps, paperwork, chasing money, whatever that may be that’s under that category. You just freed that up to give you more time to focus on being face-to-face with prospects. So, that should immediately bump that $500 an hour to a higher number. But you still might be thinking if you’re a no. Well, that sounds great, Brad. But basically, I just took all of the money that’s coming in to me and it just got transferred to Sue. So, that math still doesn’t work, and I don’t feel like I can outgrow that. Fair enough.
Okay, let’s flip to the yeses, the yeses out there. So, here’s what you might be thinking. Wow, that’s a really expensive hire with Sue. I just gave all of my revenue to this new hire, but good news, all of this stuff that was bogging me down, that was keeping me from taking this to the $40,000 an hour, the example I gave earlier, if I didn’t have to do this or this or this, wow, my calendar just opened up tremendously. Now, I just bought 20 hours back, and now with that 20 hours of additional time, wow, I could take this $500 an hour to a thousand dollars an hour, $2,000, $5,000 an hour. And that’s great thinking. That is entrepreneurial thinking. But also, that’s a really expensive hire.
So, if you’re out there and you’re like, yes, whether you’re a yes, whether you’re a no, what I did here intentionally, I kind of put you in a catch-22 moment. Sue could take everything off my plate that’s holding me back. But at the same time, she’s incredibly expensive and I just drain the bank account to do it. Well, whether you’re in the yes group or the no group, both of you are partially right, because here’s the punchline, you’ve already hired Sue. Sue is you, $500 an hour. You’re already doing the stuff that’s holding you back. So, basically, Sue is the equivalent of you as a founder, you as an entrepreneur turning paperwork into $500 an hour work, turning service work into $500 an hour work, turning HR into $500 an hour work because you’re currently doing it. And that is what’s getting in the way.
So, I hope this conversation turns on a light bulb for you. Here’s where I’ve seen the application after this conversation. Take what that hour of time is worth today. It doesn’t have to be perfect. It’s a snapshot. It’s a litmus test of where you are today. Put it on a sticky note. Put it on your laptop. Put it on your bathroom mirror. Put it somewhere where you see it on the daily. And every time you catch yourself doing work inside of your business that cannot justify that hourly wage, I want you to have another sticky note, a journal, write it down. That is the path to the stuff you should no longer be doing.
If you want to grow a business bigger than you, if you want to maximize your time, maximize your revenue, and eventually someday, maximize the multiple that you could someday sell your business for, it has to be a business that’s built not just on you, but on a team and that passes the hit by bus test. So, I hope today’s conversation was helpful. I hope this created a little light bulb moment for you.
And I would love if you haven’t already subscribed, turn on the little bell, so every time we drop a new episode, it’s there for you. And leave a comment below, which part of this conversation was the most impactful? What created that aha moment for you? I’d love to hear it so we can make sure to craft more of that type of content in the future for you. Thanks for tuning in today. Catch you on the next one.
