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How I Learned to Make Money

7 minute read
by Alex Hillman

Update: this discussion on Reddit proved more worthwhile than expected, especially considering it’s abrupt introduction.

Update update: And now, on Hacker News as well.


My relationship with money has evolved quite a bit over the last 15+ years, but regardless of who was paying me, or how much they were paying me, one thing has been consistent: I’ve tried to understand where my money comes from.

It didn’t even really occur to me  that there was a problem until after several coaching sessions with newly independent workers and talking to some of my friends about the aspects of bootstrapping a new business, but a lot of people don’t really understand where their money comes from.

Most people know who signs their checks, doles out promotions & bonuses. If they’re lucky they know when their next payment comes in and about how much it’s going to be. If they’re really lucky, they have some degree of control over how much money comes in, by working extra hours or earning extra commission.

But that’s not what I’m talking about. I’m talking about why that money shows up in the first place. Why does that person, be it a boss or a customer, choose to pay me?

You know how to receive money. But do you know how to make money?

Lots of people have forgotten, or never learned, where their money comes from. On the surface, the vast majority of people associate their time with money. “I give 8 hours of my day, 5 days a week, to this company to do what they expect, and in return, I get paid”.

Enter Broken Aphorism #1: Time is Money

When Ben Franklin first wrote this statement, he wasn’t talking about selling your time for money – he was actually referring to the “time value of money“, which is a formula for measuring interest on money over a given period of time. He was not suggesting a correlation between your amount of available time and your amount of potential income. That’s a limitation that we’ve put on ourselves by misunderstanding where our money comes from in the first place.

Enter Broken Aphorism #2: 80% of Success is Just Showing Up

There’s a quote from Woody Allen (I think) that says “80% of success is just showing up”. Even if that aphorism were true, the emphasis is on the wrong part. 80% successes are status quo. 80% successes are limited by the hours in the day that you can “just show up” for. 80% successes aren’t necessarily bad, but they aren’t good, either.

The secret is that in the last 20% of success lies an infinite multiplier of the potential for your success, and the secret to unlocking that potential is in understanding the value you provide.

No matter what your role is at a company, you can practice looking for the value that you bring to that company. The more you understand that value, the more opportunities you’ll see to bring new value.

What Would You Say You Do Here?

Think about the reason you were hired. Not your resume, not what you said during your interview, not what clever marketing copy you had on your consulting website. Think about the process from the other person’s perspective, the person who hired you. In order to make that decision, they had to look at the dollar figure they were committing to you, and make sure that you were able to provide at least that dollar amount or more to the bottom line of their budget.

So regardless of your job title, your position in the org chart, or the size of your office – there is some value that you bring to that business (or are supposed to be bringing) that keeps you in that role.

What is that value?

**If you’re client facing, maybe your value is in the comfort that you bring to interactions, and the trust that you build with the company’s customers. If you manage a team, maybe your value is in keeping the team motivated and working to meet goals. If you’re an interface designer, maybe your value is in understanding how a user is going to feel while interacting with your design. If you’re a software engineer, maybe your value is in translating business requirements into functional specifications to code. If you’re on an executive team, maybe your value is in being able to navigate hard decision making with lots of moving parts. If you’re a consultant, maybe your value is in providing visibility into problems that are best understood from an outside perspective.

In these (and any other) cases, the value often lies beyond your function.

This works for products & services, too.

In some ways, you can consider a vendor/customer relationship an extension of an org chart using this value exchange model.

If you’re providing a product or service, there’s a value that exists beyond your product or service’s core function. Maybe that value is that the product is easier to use than the competition. Maybe the value is that your choice of language is more familiar and comfortable to the audience interested in buying. Maybe you provide a feeling of reliability or control that your customer cannot achieve on their own.

Enter Broken Aphorism #3: Make and Sell Things People Want

“Lean Startup” junkies dogmatically recite things like “validate your idea with your customers before you start” as a key to success. Then they provide all kinds of hacks for learning (or guessing) what customers want based on what customers tell you.

I agree wholeheartedly with validation. I don’t believe in dogma.

The problem with this model is that what people want and what people value are often two very different things. It takes a keen skill (and a less dogmatic approach) to understand what people value – and they’ll rarely know exactly how to tell you. In some cases, your customers will know how to describe the function they want, but they don’t have the ability to look past the function for the value they seek. That’s not their fault – it’s up to you, savvy entrepreneur, to learn what they value and then deliver on that. Over and over and over.

Pattern #1: Optimize for value, not time

Once you get some practice understanding the value you bring to an organization, your understanding of your income changes as well. You realize that you’re not limited by your time if you can increase your value. When you transition from “just showing up” to optimizing your value, you start to produce the kind of activity that’s recognized by good bosses and clients alike.[1]

This doesn’t mean you need to be working 100 hour work weeks (or even 60 hour work weeks). It means using your understanding of the value your bring to the company to generate more value during the hours you’re “expected” to be present.

Pattern #2: Find new value to provide

Three possible ways that finding & providing new value can work:

  1. You’ve found a way to provide value that nobody else is currently doing. Do it.
  2. You’ve found a way to provide value that somebody else should/could be doing, but isn’t. Do it.
  3. You’ve found a way to provide value that somebody else already is doing, but you can improve it further. Do it. 

The Hidden Bonus of Bootstrapping

When you’re bootstrapping a new company, venture, or project, you have the closest relationship with the value you provide because it’s the main thing keeping that company, venture, or project alive.

When every dollar you make comes from the value you create, you improve your ability to understand that value – and your skills for identifying new value to create get sharper.

This is How To Make Money

It’s taken me practice, failures, and lessons from some incredible mentors, but I learned how to make money. Which means you can too.

Like you, I knew how to receive money, but I hadn’t really learned how to make money.

Now that I understand where my money comes from, I see incredible potential around me for making more money. And that’s an exciting world to live in.

[1] Bad bosses and clients aren’t something you can control or change – it’s like being in a bad romantic relationship. You just need to get out of it. Luckily, once you understand the value you can bring, you’ll have a much easier time looking for new people to work with and finding people wo appreciate you.

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Alex Hillman I am always thinking about the intersection of people, relationships, trust and business. I founded Indy Hall in 2006, making us one of oldest fully independent coworking communities in the world. This site is packed with the lessons and examples I’ve learned along the way. You can find me on Twitter, too! 🐦 Say hi.