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How I Use This Nerdy “Money-Making Pyramid” To Prioritize Business Activities

Are you leading a business, new or old?

I’ve done both: I’ve started businesses from scratch and I’ve also taken over leading a business that was already a few years into the game.

Either way, the difference between success and failure is what you and your team are working on…and when!

Caution: If you entrepreneurs out there don’t grasp this, your business is very likely to fail (especially my friend who’s spending a couple of hours a week figuring out Quickbooks instead of focusing on making money!).

My marketing-guru friend and previous business partner Eben Pagan inspired the money-making pyramid (he called it the “productivity pyramid” in his awesome GetAltitude “Top Gun For Entrepreneurs” program — it’s a neat visual using a pyramid to illustrate what’s most important to work on in a business.

I’ve riffed a bit so blame me (not Eben) if you don’t like my “Money-Making Pyramid” version.

The money-making pyramid illustrates that the money-making in your business belongs at the top (most important) with the items below it less important the lower down on the pyramid.

The concept is simple. A business has all sorts of things going on in it, but none are more important than “money-making” (for you non-profits out there, just replace “money-making” with your main value measurement (e.g. Bill & Melinda Gates Foundation might use # of lives saved).

The money-making pyramid I use has three pieces:

  1. The high-impact money-making activities (the top of the pyramid)
  2. The activities that enable the money-making (in the middle of the pyramid)
  3. The lower-impact Support/Administrative activities needed to organize and scale the business (at the bottom of the pyramid)

What are the activities in each section you ask?

Glad you asked.

Let’s use an example of a fictitious business…a commerce Web site that lets people buy and sell used goods — let’s call the business “Commerce Locker ” (I actually own CommerceLocker.com and almost launched a business around it).

Commerce Locker takes a commission on each sale.

So let’s create a pyramid for Commerce Locker.

3 Questions To Answer To Build Your Money-Making Pyramid

1) How is it that you make money…what’s your business model?

In short, Commerce Locker needs buyers and sellers to come to a Web site and transact in a manner profitable for the business.

Pretty straighforward.

Let’s break down the 3 items I just mentioned:

  • Buyers — Without buyers, we have no transactions.
  • Sellers — Without sellers, we have no transactions.
  • A Web Site  – Without a Web site, we have nowhere for anyone to show up.

That leads us to question #2.

2) What are the top activities needed to achieve your business model (make money!)?

Let’s simplify the Buyers & Sellers and just call that “Sales & Marketing.” So, we’ve got two main activities that are key to Commerce Locker.

  • Sales & Marketing– The need to attract buyers and sellers.
  • Product Development — The need to develop a Web site.

Without Sales & Marketing and Product Development, nothing else in the business matters?

Now is where Commerce Locker needs to answer questions about those two activities:

Sales & Marketing — “What is needed to drive traffic of buyers and sellers to CommerceLocker.com?” and

Product Development — “What is needed to develop a Web site that facilitates sales?”

Here is an example of a money-making pyramid for the fictitious e-commerce company CommerceLocker.com, including more specific activities in each part of the pyramid.

For driving traffic to the Web site, Commerce Locker likely needs such items as:

  • Advertising — Buying ads to generate traffic.
  • An email capture form (to capture leads from visitors to the site)
  • An email marketing tool (to email potential buyers and sellers)
  • A blog (content is effective at attracting)
  • Analytics — Google Analytics to measure traffic/buying activity

For developing a Web site, they need things like:

  • A decent domain name
  • A web host
  • A database
  • A way for sellers to list items
  • A shopping cart process for buyers to buy items
  • A decent design

 

Note to entrepreneurs: This is why your first hires/time spent typically needs to be on Product Development (aka Engineering) and Sales & Marketing (as opposed to Finance, Operations, Legal or Customer Support).

Any time away from the money-making is going to put your business at risk!

Finally, once Commerce Locker is nailing the money-making, then you move to the final activities needed for a business…these are things that will support and administrate the money-making.

3) What Support/Administrative activities do you need to help organize and scale your business (once you’re making money)?

Here, the key question to ask is:

What is needed to keep all of this money-making organized as we grow the business.

Answers will include:

  • Customer Support — Now that you have buyers, sellers and tire-kickers, you need to take care of them.
  • Legal — Now that you’re making money, you need to protect yourself with trademarks and copyrights.
  • Bookeeping — Now that you’re making money, you need to track it through accounting systems.
  • IT Department/Help-Desk — Now that you’re making money, you’ll start to need to have the team’s computers supported.
  • Human Resource Stuff — Now that you have a team of people generating money (and likely being compensated), you’ll need payroll, benefits, vacation policy, etc. addressed.

This Is Not Black And White: There’s Lots Of Gray Area

Life is rarely black and white, and the money-making pyramid is no exception. Here are some examples:

  • Legal/Trademarks — if you are a Web site then your domain name is super-important — you may want to do an early trademark search of your name to make sure you don’t have to rename everything later on. You could do this without attorneys through Google and USPTO.gov.
  • Taxes — If you’re starting a new business and you’re personally putting cash at risk, you’ll want to consult a tax specialist to see how to optimize the losses you’ll likely incur in the early days.

The message is clear: try to focus your time and energy on the activities highest up on the money-making pyramid…don’t get caught up in the Support/Administrative tasks at the expense of the money-making!

1 Comment

  • http://moneyvisitor.com how to make money

    Your diagram shows the process in the better way.