A simple and provocative thought below from Shane Parrish, even though my first response was a major caveat of: “for way over 90% of the world’s population, they have neither enough money nor enough time, so to even consider the balance between money and time is a massive privilege”. Still, putting that huge caveat to one side, this is a thought many readers can choose to look at from a personal level at different stages of life.
Now, taking that to lessons around Elite Mindset for business leaders, I always recommend for leaders to take time to focus on the “M” in the formula above, to take time out from their busy schedule to apply their intellect.
This often seems difficult. Almost always I find clients feel they have insufficient time to think. For some, about the only time they give themselves to think is the time they diligently create for regular calls and meetings with me.
Why are they so busy? Typically it comes down to a focus on driving the “P” in the formula above. That formula of V=P x M means Valuation = Profit x Multiple. Every business is valued at a multiple of the profit it generates, ie based on expected future profits that can be realised. Yes, one of the oldest formulas there is, and one that is timeless and inescapable.
So, for busy business leaders with no time to think, they are most often taking that time to drive the “P”, the Profit this year for the business. Assuming they are running a thriving business, it also becomes harder and harder work to increase the valuation by increasing the profit. In fact, the word I associate most with the “P” is that it takes Effort.
Now imagine that a leader had more time, what could they spend it doing? One area is to really take time to think about the “hidden assets” of their business, of seeing what potential buyers of the business might see that they cannot as they are “head down” driving the “P”. They would take time raising the “M”, the factoring in of higher future profits by leveraging their hidden assets rather than driving their income.
Let me give you an example. One start-up client I am working with is so busy with demand for their services that they have no time to think. They are working really, really hard in an industry niche that is innovating at breathtaking speed and their revenues and profits are rising rapidly with that demand.
I recently asked them how it would feel to double or triple their profit. “Hard”, “Tough”, “:Difficult”, “Challenging” were some of their answers. Driving “P” take Effort.
I then put it to them that I could see that their unique lead in their niche could see them being approached by a much larger company (and soon!) who would want to buy them so that they could then leverage that leading position with their own larger scale of resources. This could see this client being valued, overnight, at least 2-3 times higher than they are currently seeing. However, in order to achieve that valuation on a sale, they would need to take time to focus on what those potential buyers might be seeing and position themselves well both for sale and for seeing themselves as those potential buyers may see them. Elevating the “M” takes Intellect.
So, just as on a personal level: “Rich People have money, Wealthy People have time”, in business perhaps I could rephrase it as: “Busy leaders make money, leaders who make time to think create wealth”