Free money?! Maybe. But, what’s the point?
Ever hear of the people that win the lottery and end up being broke or in a worse off position a couple of months later? The statistic that is thrown around is 70% of lottery winners end up worse off than before. There’s many factors that will go into that but one big concept is this idea of chasing after more.
If there is a hole in your bucket and your goal is to fill the bucket, turning up the faucet to max won’t be as efficient as plugging up the bucket.
In this article, we will lay the foundation of recapturing and reallocating resources, so that you can figure out how to plug up that hole in your bucket before turning on the faucet to max, allowing you to get closer to what you want rather than just opting for more.
*Note-This is a small section within the larger strategy methodology covered within the Certainty Series available to The Guardian Academy (TGA) members: Wolf Pack Leaders, Alpha Wolves, and Guardians.
Foundation: Solvable Problem™
Having an understanding of a Solvable Problem™ (developed by Dan Nicholson) conceptually before diving into this article will be more effective.
Feel Like You Need More Time, Attention, Money, Energy Or Effort (TAMEE)?
You don’t need more X to get more X.
“I need more money to make money.”
“If I had more time in the day, I could do more to be able to free up more time.”
You already have it, you just need to recapture what is being wasted and stop hemorrhaging the resources so that you can reallocate it.
Stop Hemorrhaging What You Do Have.
The time being lost, the money being wasted, the energy being used not going toward your Solvable Problem™ are all resources being hemorrhaged. If you can recapture and then reallocate some of those resources toward the most important thing (to you) then you’ll start moving the needle and getting what you want.
Redirect it to initiatives that create more resources (or fund priority)
One of the simplest ways we can recapture and reallocate is using a principle called, Two Oreo.
This concept comes from Dan Nicholson who realized he had gained a bit more weight than he wanted to and it was a byproduct of years of thinking that if he ate a couple of Oreos a day it would be no big deal. Little “things” that seem like nothing done for long enough period of time can lead to a big change.
So how can we utilize this?
If we are talking about financial resources, you can sit down and pull all your records, bank statements etc. and find all the expenses that have accumulated to recapture those funds.
Solvable Problem™: $7 Million Dollars in 6 Years
This is an example of someone’s Solvable Problem™. Your Solvable Problem™ will be different, it is not recommended to just copy someone else’s.
In order for this person to have everything they want out of life they need 7 Million dollars in a time frame of 6 years.
After going through the Two Oreo principle, they found $50,000 a month by eliminating redundant softwares, mastermind’s they weren’t using, and other recurring costs. You may be thinking I don’t have $50,000 a month and after going through your own Two Oreo you recovered $50/month, that is NOT insignificant to recapture that because it will be relative to you.
Two Oreo Math
Would an extra $50,000 a month be better than your best sales person?
We will make an argument that it probably is.
Let’s assume a 20% profit margin (you would adapt this to your own situation).
$50,000 recaptured= $250,000 in sales (x .2 profit margin =$50,000)
So if your biggest problem before reading this article was:
“If I could just make an extra $250,000 in sales I’d be set and my problems would be solved.”
You just found a much faster and easier way to get the same result.
Remember, even if you got $250,000 in sales this doesn’t account for any resources that go into the sale AND the delivery.
This is why we believe that recapturing is going to be more effective in a majority of times.
How Much More?
$50,000 a month in a compounding calculator over the course of 6 years at 12% interest would lead to $5,337,851.53 recaptured.
How Much Closer?
In TGA we don’t operate with “how much more” instead we prefer “how much closer?”
Consider: Effort, risk, options, and probability in reality that I actually get what I want (in the case of the example it’s 7 million in 6 years).
TGA methodology, which was adopted from the Certainty U methodology: Will I be able to get what I want that makes me (and the people around me that I care about) happy?
In order for you to be able to achieve your target balance of 7 million in 6 years you would need 24.4% return annually before 40% tax rate. This can be done of course, but would require a greater risk to be taken (which lowers your probability) of getting what you want.
After going through the Two Oreo principle you found $50,000 a month/reoccurring. This was added to our initial 90,000 + 50,000= $140,000 and since the capital is reoccurring it’s added as an additional monthly investment, 60,000 + 50,000= $110,000.
After being able to recapture and reallocate the capital, it changed our needed annual return from 24.4% to 0%.
What does that mean?
As long as we put the money in the safest vehicle possible (to ensure not losing it) we’d achieve our goal in 6 years and we would not need to do anything different.
Does this example help bring some light into the difference between opting for MORE (how much more do I need) versus CLOSER (how much closer am I)?
More will always lead to bigger and bigger numbers with no information as to when to take less risk, when to modify behavior.
*All of these calculations were done on the Certainty App.
Prioritize By Constraint
We want to improve the through put for our efforts and resources.
Imagine a hose with multiple kinks in it. In order to get better water flow at the nozzle we tend to try and solve the kinks all at the same time. In real life this would look like devoting energy and resources to each of the kinks.
You want to get more leads into your business. You spend money on facebook ads, twitter ads, instagram ads, LinkedIn ads, organic marketing, etc.
In the case of a complex system or a large goal we would want to recapture those resources and reallocate them to an immediate constraint that will free up the most resources that we want.
We realize that Facebook ads are where 90% of our customers are finding us and has the lowest money spent per conversion. The other 10% from Organic traffic. We recapture some of the resources being spent (time, money energy) from the other platforms and utilize them on the two drivers of our business.
This requires us to be able to identify the constraint that would be the biggest needle mover. After solving the biggest constraint we can then move onto the next one and repeat the process.
- Kinked hose.
- Recapture the waste.
- Prioritize by constraint.
- Reallocate to most immediate constraint.
- Removing the most immediate constraint frees up more resources (which we didn’t have to go and find because we recaptured it).
Where Do I Look?
TGA will do more deep dives with this topic with our members.
The information provided so far is more for self starters who can take the knowledge and run with it, but we will cover some quick ideas on this topic.
Three Rhythms (CCA Framework)
- Business- Decisions that you could be utilizing the Two Oreo principles (ex. redundant programs or reoccurring costs).
- Industry- Part of your industry that you can’t change (tax deadlines, Black Friday, holiday sales, New Years “resolutioners”).
- Personal- Personal to you.
- Credit care processing fees
- Redundant softwares
- Ineffective advertising
This is not an all encompassing list, just some ideas to get you started. If you are paying 4% on credit card fees, what if you could get it down to 1%? That’s 3% saved on every transaction. Might not seem like much, but what if you’re doing 3 million in revenue a month that’s $90,000 a month being recaptured.
If your advertising isn’t generating many new leads or it’s costing you a ton to get one client, might be something to recapture.
Where in your business can you see recapturing some resources?
- Natural deadlines
Every industry has a natural deadline and rhythm. In the fitness industry you’ll typically see a boom from New Years Resolutions, E-comm (Black Friday, Cyber Monday, etc.)
What decisions are you making based on these industry rhythms and where are you hemorrhaging resources if you don’t understand these rhythms?
As an example in the fitness industry, if you gain lots of new attention during the New Year but if you hire lots of people on salary to keep up with the demand. What happens toward the middle or tail end of the year when client fall off and the business slows down?
You still need to pay the salary for those employees, but you have less overall revenue coming in. Hemorrhaging resources for the end of the year.
Lots to cover here and will be better as a discussion. The main aspect is know yourself.
- Are there times you binge?
- Times you purge?
- Make unnecessary purchases/use of your energy?
Live To Learn. Give To Earn.
Our hope is that you don’t just read this article, but also implement and share.
If it’s effective for you we encourage you to turn around and teach someone else so that they may also benefit from your wisdom.
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