Income-Generating vs Non-Income Generating Activities

One of the lessons I learned early on in my career was the importance of distinguishing between “income-generating” activities and “non-income-generating” activities. Income-generating activities are activities that have the potential to generate revenue and non-income generating activities are activities that do not. No matter who you are or what field you work in, every business activity can be clearly delineated as one or the other.  

I first started implementing this concept when I worked as a financial advisor in Chicago nearly 13 years ago. The leadership team at the firm I worked for had decades of sales experience and distinguishing between profitable and unprofitable activities was taught to new advisors early on in the training process. Any and all income-generating activities were activities that we should prioritize and do first at the beginning of the day, and all non-income generating activities we were encouraged to reserve until the end of the day. Income-generating activities included responding to client requests, meeting with clients, and making prospect phone calls. It was straight-forward, and it worked.

Non-income generating activities included dictating meeting notes, updating client files, responding to non-urgent emails, preparing materials for meetings, meeting with administrative staff, updating expense reports, processing payroll, etc. While these activities were important to the overall process of running a financial services practice, by themselves they did not generate new business. 

While my days and priorities are a lot different than they were 13 years ago, they are still structurally laid out the same. I correspond and meet with investors, potential investors, and current and prospective investment fund managers in the first part of the day. And I perform all my deal analysis, presentation preparation, responding to emails, and administrative work in the second part of the day. Structuring my days in this manner prevents me from getting distracted and helps me to stay focused on what’s most important.

In my past professional experience working directly with entrepreneurs, I noticed that it was difficult for many of them to clearly separate which activities were income-generating, and which were not. For many entrepreneurs just starting up they would focus on activities that quite frankly didn’t contribute to revenue growth. Things like scheduling useless meetings, administrative work, office and/or website design, etc. When instead, the main thing they should have been focused on was finding product-market fit and developing an initial customer base. Working on non-income generating activities is essential, but it should never take priority over activities that drive revenue to a business. 

One of the challenges early on with any small business is that the business owner(s) is/are usually serving a dual role in a company. They not only have to generate sales, but they also have to perform all of the marketing and administrative work as well. I know firsthand how difficult it can be playing two roles in a small company. And when you don’t have an assistant or a back office to help, managing and prioritizing activities can become a little convoluted. 

I’ve heard many business coaches say that you should never let your business run “you,” but instead “you” should run your business. On the surface, this makes total sense. But in practice, it can be difficult to do. When I first started as an advisor it took me about nine months before I was able to “run” my practice effectively and I was fortunate enough to be able to hire someone to assist with non-income generating activities. But what I learned during that time and what I talk to many people about now, is the importance of separating activities into their respective categories and doing everything in their power to prioritize what’s “most important.”

In summary, no matter what profession you’re in, the activities you perform in your business either add or subtract value to or from the bottom line. All businesses or organizations operate on the assumption that everyone who’s involved is helping to move the company forward. If you seek to prioritize and segment income-generating activities from non-income generating activities you are more likely to help yourself and/or your team to be more successful in the long run. 

Cheers – KM

Photo by Adeolu Eletu on Unsplash

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