086 – How to Work Less & Make More as a Music Entrepreneur – with James Schramko

Are you working yourself to the bone? Do you have time to step back and enjoy life? Are you being effective with your time, or are you in an endless pursuit of productivity? In this episode of The New Music Industry Podcast, I talk to James Schramko and tease out some amazing insights into building a business and life you love. Download the PDF Transcription Podcast Highlights: 00:14 – Introductions 00:45 – What is Effective Hourly Rate (or EHR)? 09:31 – Overcoming mental blocks around building a team 18:03 – What holds business owners back from creating an offer that converts? 27:26 – How do you transition from hourly pricing to value pricing? 28:48 – Profit Formula Template 29:33 – Customer Lifetime Value 32:24 – How to generate referrals 35:29 – Ascension model vs. Chocolate wheel 44:11 – The recurring subscription business model 48:27 – What do you feel has contributed to the success of your book? 53:13 – How do you stay up to date in your industry? 54:05 – Closing remarks Transcription: David Andrew Wiebe: Today I'm chatting with the founder of SuperFastBusiness and author of Work Less, Make More: The Counter-Intuitive Approach to Building a Profitable Business, and a Life You Actually Love, James Schramko. How are you today James? James Schramko: I'm doing spectacularly well. Thank you, David. David: Thank you so much for joining me on my podcast. I'm really excited to talk to you. James: Well, I'm just very excited to be here. It's the morning here so you've got my maximum energy. David: Oh, fantastic. So, you're all fresh. James: Yeah. David: Well, I'm going to start right in with what I think is going to be a pretty straightforward question, but still an important one and something our audience may not really know about is what is effective hourly rate and why is it so important for business owners to understand? James: Effective hourly rate is a benchmark or a measuring system that I like to use to help people to start to get an understanding as to how they spend their time. If you want to calculate your effective hourly rate you would take your revenue for a certain period, let's say in this case we're talking about a year. Effective hourly rate is a benchmark you can use to get an understanding of how you spend your time.Share on X You take your revenue for a year. You subtract all of your costs, which are generally made up of fixed and variable costs. That leaves you your profit. This is like a profit before tax. Now, you divide your profit by the number of hours that you worked to get that profit and that is your effective hourly rate. So, if you had a job, let's say you worked in a music store and you had a salary, then that's pretty much your profit, because you don't have any real costs as an employee. Unfortunately, not that many deductible ones unless you work outside maybe you can deduct sun cream but that's about it. You divide that by the number of hours you work. That's what we all know as your hourly wage. Whatever is on your pay slip is probably your effective hourly rate if you have a job. But for entrepreneurs, most people have never actually sat down to work this out. Where it becomes a very effective tool is when you start breaking it down by different product lines. Let's say you are a session guitarist and you are getting paid to do studio time, then you could work out how long do you spend in the studio and how much you get paid. Then you might think, "Well, I might start a music business. I'll start a label." And then you might sink a lot of time into that trying to find artists and set up the label. Then at the end of the year it might make a small profit, but you might have spent hundreds and hundreds and hundreds of hours to build that up, so your effective hourly rate would be quite low. In this case, you'd want to be doing a fair bit of session time to bring up your income while you're buil...