People who own small business, work far more than they should - doing the wrong work.
Within 5 years, more than 80% of businesses fail.
Systems can transform any small business into an incredibly effective organization.
The reason most businesses fail: “if you understand the technical work of a business, you understand a business that does that technical work.”
The technical work of a business and a business that does that technical work are two totally different things.
Everyone who goes into business is three people in one: The Entrepreneur, the Manager and the Technician.
The entrepreneur is the dreamer, the imagination. To the entrepreneur, most people are problems that get in the way of the dream.
The Manager is pragmatic - there would be no planning or order without the manager.
The technician is the doer. “If you want things right, do it yourself“- technician’s credo.
Three Phases of a Business’s Growth:
1. Infancy: The owner and the business are one and the same thing.
Too much work, you can’t do it all. Technician can’t trust anyone to do it like them.
Need to hire good help and delegate to move past this phase.
The purpose of going into business is to get free of a job, so you can create jobs for other people.
Once the technician lets go, you make room for the rest of you and your business to flourish.
2. Adolescence: When the business gets help - hiring your first employees.
Biggest problem: Employees are not properly trained. No Standard Operating Procedures. Need proper training and SOPs.
Every adolescent business reaches a point that pushes beyond the owner’s comfort zone - where the owner feels like he is losing control.
The technician’s boundary is determined by how much work he can do himself.
The manager’s boundary is defined by how many technicians he can effectively supervise or by how many managers he can organize into a productive effort.
As a business grows, an owner effectively relinquishes more and more control.
If control and management isn’t given to the correct people, the business may tailspin. When this happens, you don’t own a business, you own a job.
Don’t go too fast and be a russian roulette business “going for broke.”
Businesses that fail the adolescence stage and return to infancy die.
The job of the owner is to prepare yourself and your business for growth.
Where is the business going?
What are the key objectives?
Grow systems.
3. Maturity:
A mature company is started differently than the rest. It’s founded on a broader, entrepreneurial perspective - a plan.
A mature business knows how it got to be where it is, and what it must do to get where it wants to go.
Must have a very clear picture of what the company would look like when it is finally done. A vision and plan.
To be a great company, must act like a great company from the very outset. A template must be followed.
Entrepreneur vs. Technician:
Entrepreneur asks - how must the business work?
Tech asks, What work is there to be done?
Entrepreneur sees the business as a system for producing results / profits.
Tech sees the business a place to work inside of to produce income.
Entrepreneur starts with a plan and well-defined future.
Tech starts with an uncertain future and takes the business one day at a time.
Entrepreneur envisions the business in its entirety, derived from its parts.
Tech views the business it parts that make up a whole.
For the entrepreneur, the development of the business is measurable / qualitative.
Tech - work is done for the sake of work itself without a higher purpose.
The Entrepreneurial Model - A model of business that fulfills the perceived needs of a specific segment of customers in an innovative way.
Less todo what’s done in a business, but more with how it’s done.
Does not start with a picture of the business to be created, but of the customer for whom the business is to be created.
To the entrepreneur, the business is the product. To the technician, the product is what he delivers to the customer.
The Turnkey Revolution:
The Business Format Franchise provides the franchisee with an entire system of doing business.
The true product of a business is the business itself - not what it sells, but how it sells it.
The McDonalds hamburger wasn’t the product - McDonalds was.
The product was the business and the franchisee became the first, last and most important customer.
Must create a business that works once it’s sold, no matter who buys it.
All McDonalds offer the same product - not the best product, but dependable.
Systems dependent business, not a people dependent business.
Work on your business, not in it.
Apply the thinking of the industrial revolution to a business.
Franchises have a 75% success rate over 5 years, whereas only 20% of independent businesses remain in business over 5 years.
At McDonalds, every possible detail of the business was first tested in the Prototype, then controlled to a degree never before possible in a people-intensive business.
Keys were discipline, standardization and order.
Franchisee must go through a rigorous training program in order to operate the franchise.
The franchise is a proprietary way of doing business that successfully and preferentially differentiates every extraordinary business from every one of its competitors.
Your business is not your life, but rather rather its own organism - something apart from you.
The primary purpose of your business is to serve your life - not for you to serve your business.
When planning your business (even if you aren’t planning to franchise) at least pretend you will later franchise the business.
Rules to franchising:
1. The model will provide consistent value to your customers, employees, suppliers and lenders beyond what they expect.
2. The model will be operated by people with the lowest possible level of skill.
If your business depends on highly skilled people, it’s going to be impossible to replicate.
Need a system where ordinary people can produce extraordinary results over and over again.
Systems dependent, not people dependent.
3. The model will stand out as a place of impeccable order.
Order equals dependability and trust.
4. All work in the model will be documented in Operations Manuals.
Designates the purpose of the work, specifies the steps needed to be taken while doing the work and summarizes the standards associated with both the process and the result.
5. The model will provide a uniformly predictable service to the customer.
Be consistent and provide a consistent and repeatable service.
6. The model will utilize a uniform color, dress and facilities code.
The colors of your business and branding must be consistent to deliver your business as a package. Brand association.
Creativity thinks up new things. Innovation does new things.
How the business interacts with the consumer is more important than what it sells.
Innovation continually poses the question: What is standing in the way of my customer getting what he wants from my business?
The result of scientifically generated and quantifiable needs and expectations.
Without quantification, how would you know whether the innovation worked?
Quantify everything:
How many customers are seen? How many leads? Per day.
How many people call each day?
How many estimates are converted?
How long do conversions take?
Break parts of the business down in order to analyze and quantify how the help the business grow.
Business Development Program (Seven Distinct Steps):
1. Your Primary Aim
Must have the existence of a purpose to be achieved.
2. Your Strategic Objective
A very clear statement of what your business has to ultimately do for you to achieve your Primary Aim.
Where your business is going, how it intends to get there and specific benchmarks it will need to hit.
3. Your Organizational Strategy
4. Your Management Strategy
5. Your People Strategy
6. Your Marketing Strategy
7. Your Systems Strategy
The difference between great people and everyone else is that great people actively create their lives, while everyone else is created by their lives passively - waiting to see where life takes them next.
The difference between a warrior and an ordinary man is that a warrior sees everything as a challenge, whie an ordinary man sees everything as either a blessing or a curse.
What do I wish my life to look like?
How do I wish my life to be on a day-to-day basis?
What would I like to be able to say I truly know in my life, about my life?
How would I like to be with other people in my life - my family, my friends, my business associates, my customers, my employees, my community?
How would I like people to think about me?
What would I like to be doing two years from now? Ten years from now? Twenty years from now? When my life ends?
What specifically would I like to learn during my life - spiritually, physically, financially, technically, intellectually? About relationships?
^^^All part of the primary aim.
Standards for your Strategic Objective:
1. Money: How big will your company be when it’s done?
What will your gross revenue be? Net margins?
How much money do you need to make to continue growing your business?
2. An Opportunity Worth Pursuing:
Only follow through with your businesses if it can help you achieve your life dreams - your primary aims.
The product is what your customer feels as he walks out of your business - not what he feels about the commodity acquired. Revlon sells hope, not cosmetics.
Many times people aren’t interested in the commodity - people buy feelings.
When will the prototype be completed?
Where will you be in business? Locally? Regionally? Nationally?
An organization Chart can have a more profound impact on a small company than any other single Business Development Step.
Organize around accountabilities and responsibilities, rather than around people.
Include job descriptions for each position, build the org. Chart like it’s a huge business.
The business owners must hold all positions, until the business starts to grow and can fill the positions accordingly.
Start hiring for the easiest / cheapest work first at the bottom of the org chart - find other people to do the tactical / easily trainable work.
Look at each position in the business as though it were a Franchise Prototype of its own.
As an owner, replace yourself when possible with a system.
If the rules don’t apply to you, the leader, why should you expect anyone to follow you?
The best manager you can afford is a good management system.
Find out what the customer wants, where you can improve, etc. - then do it.
Have an Operations Manual that describes the steps the business takes to create a grade A customer service experience step-by-step.
Make sure it’s organized. Color guided for each phase of business.
Make sure there are supervisors to make sure nothing falls through the cracks and everything is covered.
Take all employees seriously. The boss needs to take everything seriously.
Need great training procedures / programs.
The work we do is a reflection of who we are - if we are sloppy at work, it’s because we are sloppy inside… etc.
Make sure employees understand the idea behind the work they are being asked to do. The idea behind the work should be more important than the work itself.
1. The customer is not always right - but where he/seh is or not, it’s our job to make them feel that way.
2. Everyone who works here is expected to work towards behind the best as they can possibly be at the tasks they are accounted for.
3. The businesses is a place where everything we know how to do is tested by what we don’t know how to do.
Look for employees who want more than just a job.
Management Rules to the “People Game:”
1. Never figure out what you want your people to do and then try to create a game out of it.
2. Never create a game for your people you’re unwilling to play for yourself.
3. Make sure there are specific ways of winning the game without ending it.
Need to give employees victories - or else they grow weary.
4. Change the game from time to time - the tactics, not the strategy.
5. Never expect the game to be self-sustaining. People need to be reminded of it constantly.
6. The game has to make sense.
7. The game needs to be fun from time to time.
8. If you can’t think of a good game, steal one.
People need a place of community that has a purpose, order and meaning.
Need integrity, intention, commitment, vision and excellence.
The Hiring Process Components:
1. A scripted presentation communicating the Boss’s idea in a group meeting to all applicants at the same time. The presentation describes the idea of the business, the businesses history of success and the attributes required for the employee candidate to succeed.
2. Meeting with each applicant individually to ducss the employee’s background and experience and why they are right for the role.
3. Notification of the successful candidate by phone.
4. Notification of unsuccessful applicants and thanking them for applying.
5. First day of training, including:
1. Reviewing the boss’s idea.
2. Summarizing systems.
3. Taking the employee on a tour and introducing them to new employees.
4. Clearly answer any/all questions.
5. Issue the employee his uniform and Operations Manual / Employee Handbook.
6. Review the Operations Manual with the new hire.
7. Complete employment paperwork.
Marketing Strategy - forget about what you want from your business, what do your customers want from your business.
Customer decides whether they will buy or not within 3-4 seconds.
Demographics and Psychographics:
Demographics - who is your customer.
Psychographics: Why does he buy. Perceived marketplace reality.
Study color psychology with branding.
A system is a set of things, actions, ideas, and information that interact with each other, and in doing, alter other systems.
The purpose of a system is to free you to do the things you want to do.
Three kinds of business systems:
1. Hard systems - inanimate, unliving things.
Ie: computers.
2. Soft systems - living ideas.
Ie: an employee or the script of Hamlet.
3. Information Systems