Hidden Multipliers - Jason Cohen

Partial Excerpts (antilibrary)

Table of Contents

AI skills implementing ideas from this book: https://skills.hiddenmultipliers.com

Introduction: Hidden Multipliers

In the quiet of the night, after the cacophony of pings and tasks and tickets and chats finally subsides, you have the space to think, and thus to worry. Your inner voice whispers the truth you’ve been avoiding: You’re working so hard, on so many things, but it’s not making enough of a difference. Not enough growth, not enough profit.

Everyone looks to you at company-wide meetings for The Answers; you speak with the confidence they expect to see, but you’re just guessing, and they know it.

You promised yourself you can build this company, that you are a Person Who Builds Companies, but you’re not sure what to do, and you know it.

If tremendous effort isn’t working, you are working on the wrong thing. If you knew what the right thing was, you would have bought a book about it. The reason you bought this book is that although you have a list of things you could do, you don’t know which one will actually make a difference.

You hide your lack of progress behind words like “experimentation” and “iteration.”

Despite your best efforts, growth isn’t materializing. Where are the answers? The answers are in this book. They are the hidden multipliers.

Anatomy of a Multiplier

Running a business requires doing a thousand little things

But a year from now you won’t remember anything you did today, because none of it will have meaningfully increased revenue or profit, nor boosted your growth rate or competitiveness. It all seemed necessary, but it didn’t matter.

But some things do matter. In the last twenty-five years of building companies, I have found a few consistently reliable levers:

These dynamics are universal because they exploit mechanisms common to most businesses. They’re not “all or nothing” methodologies, but rather they can be applied incrementally; even partial effort yields significant results. They don’t require monetary investment or special expertise, so you can implement them today with your existing budget and team.

Levers with all of these characteristics, I call multipliers

My promise to you, sleepless reader, is that in these pages you will find a few multipliers that will create breakthroughs of your own

To see how a multiplier works, let me show you an example from the world of affiliate marketing

When my startup WP Engine was scaling quickly, just seven affiliates - the top 1% - generated 50% of all revenue from our entire affiliate marketing channel

Signing up (or losing) just one of the few top affiliates created a huge difference in the overall growth of this marketing channel, which means small changes had a large impact on growth

And as we’ll see next, our existing team could take immediate action. These four facts qualify “top affiliates” as a multiplier

your team should spend a disproportionate amount of time exploiting multipliers

In the long tail, most affiliates don’t command a large audience. But a few have massive audiences, so converting just one of them would justify months of effort

When you understand the power of a multiplier, you can do smart things that look “crazy” to everyone else

We asked ourselves this question: How much would we pay if an affiliate agreed to promote only us - never our competitors? Probably a lot, at least for the top ten affiliates, since they are multipliers

So we did something that might seem crazy to an outside observer. Top affiliates were earning $100 per sale. We offered $200 - double the going rate - in exchange for exclusivity. According to typical financial metrics, this was crazy. But it’s not crazy when you understand that “top affiliates” are a multiplier.

we quietly created a reliable growth channel, simultaneously preventing competitors from using that channel

Another beautiful thing about multipliers: They reward you for every inch of progress. You don’t need complete organizational alignment or a new corporate religion or a twelve-month project. Signing up just one top-ten affiliate is real money

The math is forgiving because the leverage is so extreme

Multipliers are good investments because you reap benefits along the way, and you can stop at any time. Flexibility is a virtue.

And sometimes you hit the jackpot. Sometimes you exploit a multiplier so thoroughly that you create one of those legendary transformations

Why Multipliers Are Hidden

Some extreme asymmetries are well-known, like how the top Google search result receives 40% of all clicks for that keyword, how 99% of social media content is created by just 1% of its users

Conversely, the multipliers in this book are hidden - you’re either unaware of them, or unaware of their power and how to exploit them.

Why would multipliers be hidden? The first reason is that you lack the data to identify them. In a perfect world, you would have a detailed mathematical model of your business. (cf metric graph)

Then someone would run an analysis and empirically identify a few areas of the business that are multipliers, where small changes generate significant growth and profit. But we don’t live in a perfect world, and you can’t build that model,

The second reason some multipliers are hidden is that you fail to recognize them, even when you’re staring right at them; they look like ordinary ideas. Or you sense their importance but don’t know how to exploit them, so you work on other things that are more comfortable and familiar.

Or - and this is the most painful one - you know exactly what the multiplier is, but you’re terrified to face it. Your cancellation rate is high because your product doesn’t deliver on its promises. Your marketing conversion rates are low because your positioning doesn’t resonate and your pricing is wrong.

In the chapters that follow, we will tackle and solve all of those problems.

Twenty-Five Years to Discover Eleven Hidden Multipliers

I know how you feel, and I know what to do, because I’ve been where you are

I’ve built four companies over the last twenty-five years. One company withered and died; one turned out fine and was sold; two are now valued at several billion dollars each

I’ve invested in and advised sixty startups

I’ve also seen many ideas work for one company but fail for another

sometimes the same advice kept working for company after company, across industries, across decades, with the number of successes too numerous to track. These are the experiences that lead to the hidden multipliers in this book.

Although every company is different, the following eleven patterns consistently transform growth and profit. Each chapter explores one of these hidden multipliers

1. THE PROFIT WHALE’S TAIL
10% of your customers are ruining your business

2. CAROL LOVES YOU FOR YOU
Win ideal customers despite your weaknesses

3. SPEAKING CAROL INTO EXISTENCE
Pinpoint the customers who love to buy and stay forever

4. A ROSE BY ANY OTHER NAME
Products don’t sell themselves; your words do.

5. PRICE IS JUST A NUMBER
Raise prices while also increasing signups

6. PRICE IS NOT JUST A NUMBER
Earn the customers who want you to raise prices.

7. AND AFTER ALL THAT, THEY LEFT
Outrun the churn that's quietly capping your growth

8. SPLITTING THE SURPLUS
Accelerate growth from the customers you already have

9. YOUR FALSE-POSITIVE FACTORY
Design winning ideas from principled experiments

10. A MULTIPLIER OF ONE’S OWN
Unearth your company’s unique multipliers

11. TO THINE OWN SELF BE TRUE
Play games you are built to win, flaws and all.

There are also more than a dozen AI skills that facilitate implementing the ideas in these chapters. Find them at: https://skills.hiddenmultipliers.com

How to Read This Book

Read this book straight through to discover things you didn’t know you needed to hear. But if one of the problems below is the thing keeping you up at night, you could jump to the most relevant section:

Growth has stalled.

I can’t get product/market fit.

I don’t know which market to target.

Competitors are crushing me.

I don’t know what to charge.

Customers are leaving.

We don’t make enough profit

I’m not sure I can do this.

CHAPTER ONE The Profit Whale’s Tail

10% of your customers are ruining your business.

Also called Customer Profitability Analysis (CPA) in academic literature. Robert S. Kaplan created the name and concept of “Profit Whale”

The idea is to order your customers by the profit each one individually generates. The financial term is “gross profit,” meaning the profit (or loss) incurred by each customer alone - not including expenses that aren’t specific to that customer, such as marketing, sales, product development, office space, accounting, and other administration

Finally, you graph a running total of those gross profits. This graph is the Profit Whale.

There are many insights lurking in this data. We will zoom in on two aspects - two hidden multipliers where just a few customers are making an enormous difference in the overall profitability of the company: the head and the tail.

The Profit Whale’s Head: Surprisingly Profitable

CHAPTER TWO Carol Loves You for You

Win ideal customers despite your weaknesses.

the next question becomes, “How do I get more customers like the ones in the head?”

Recall the numbers from WP Engine: Just 5% of our customers represented 40% of our profit. Let’s call those “ideal” customers.

What’s not obvious, and what few companies have the wisdom or courage to do, is to focus all marketing, branding, sales, and product development on only that ideal top 5%.

It is wise to focus on those ideal customers only, and if you gather the courage to implement this wisdom, you will completely transform your business - the pull of your product across your entire target market, the loyalty of your customers, the ease with which you prioritize features, and even how much fun it is to sell and to build.

The Glorious World of Selling Only to Carol

Imagine Carol: your ideal customer

for now we can just imagine the facets of Carol’s perfection. Every problem your product solves, Carol has. She not only has those problems, she needs to solve them urgently. She’s already allocated the budget to solve them, and she wants them solved in exactly the manner your product solves them. The words she uses to describe what she needs are already on your homepage. She has a personal interest in analyzing and solving these problems; it’s fun and fulfilling for her. She is a customer for life, which she shouts to the world on social media and in product reviews. Carol is ideal.

What would it be like to work at a company where every customer is a Carol?

Advertising would be easy

Website conversions would be easy

Sales calls would be easy

Support would be easy:

Product prioritization would be easy

Selling to Carol optimizes every aspect of the company.

That would all be lovely, and clearly a multiplier, if it weren’t for an apparently fatal objection: Targeting Carol means excluding everyone else, and most of your target market is not Carol

This appears to be a deal-breaker; that appearance explains why this multiplier remains hidden. Let’s now see why targeting Carol wins your entire target market while also differentiating you from the competition

Carol, Diana, Eddie, and Subaru

Subaru has always understood its position in the pecking order of cars: not cool, not powerful, but affordable and safe. Starting in the 1960s, they were brave enough to say exactly what it was - ugly, but cheap

Every product has strengths and weaknesses

Subaru’s Carol, by definition, values everything on the left and rejects everything on the right. To her, the items labeled “weaknesses” are actually strengths, because she wouldn’t be caught dead in a Porsche, her lifestyle isn’t sporty, and she disagrees with your definition of “cool” and “ugly.”

CHAPTER TEN A multiplier of one’s own

Unearth your company’s unique multipliers.

what new multipliers are hidden in your particular business - multipliers not articulated in this book? That’s what we’ll answer next, with this procedure:
Extract insights from customers　 →　 Combine insights with multipliers　 →　 Specific actions