I’m gonna be honest with you… business is not easy.
We all have big dreams and we’re going to do whatever it takes to make our dreams come true, right? Of course, we will. That being said, sometimes what we don’t know is what to do. You see, many business owners, think they understand what a business is and so they jump ahead creating a logo, a website, and developing a product. Next, they start working on figuring out how to start selling their product.
The downside is few owners take the time to learn the basics of business and sometimes this is detrimental to their success. So let me start at the beginning to help the Dreamers (what we call people in the part-time or “dreaming of starting a business” stages) and those solopreneur business owners that are hitting a wall or that feel stuck.
What is a Business? Definition:
A business is a system, which is run mostly by other people (employees and managers), to produce a socially needed value (a product or service) that can be sold at a profit.
So to make things short and sweet – Business Is A System.
What exactly does this mean and why is it so important? If you are a business owner or CEO, your job is managing the people, that work the system, that creates the product or services, that you sell. I know what you’re thinking… but I’m a Dreamer or Solopreneur, I don’t have employees yet or even want employees. This may be true, but that is also part of the problem. If you are not thinking of your business as a system for employees to work, then you are misunderstanding the reality of what a business is. Instead, you have created, or are creating a J.O.B. for yourself, not a business.
You may be thinking, but at least I am creating a cool job for myself, right? To that, I would answer… NO! Temporarily you may be able to create a cool and fun JOB for yourself, but it is never scalable if the business relies on you to do the work, worse if you do not start with the system, it means you probably didn’t create systemic processes for HOW you do what you do which leads to not being able to be successful when you hire people (freelancers, consultants, part-time or full-time employees).
Think about this if you were hit by a bus and killed… would your business go on without you? Could it go on without you? If everything revolves around you the answer is obviously a resounding… NO! You may be asking yourself… “why is this important?”. Well if you are 20 years old, maybe it isn’t, but if you are married and have kids you might want to build something that not only gives you a weekly paycheck but the business that also becomes an asset that brings in monthly recurring income (passive income) without you DOING. ALL. THE. WORK.
So how can you build a business model that is an ASSET delivering monthly recurring revenue if you work or not?
You must start with the end in mind. You must think about this stuff ASAP. You must build a BUSINESS YOU CAN SELL instead of a PRODUCT/SERVICE YOU CAN SELL. Often business owners start with the product or service and it is what THEY know how to do. Michael Gerber calls this person… THE TECHNICIAN in the book E-Myth Revisited. Everything revolves around you doing the work or creating the product or managing those that do the work they way they DO THE WORK.
This is a management problem.
You need to be managing WHY you are in business and HOW you do what you DO, not actually DOING the work or managing people DOING the work. You see you must tell your people… “this is how we do things at our company.”. You must build systems and processes on HOW YOU DO IT and then you must TRAIN PEOPLE TO DO IT YOUR WAY. Then you manage the people running the systems instead of managing the people doing projects HOW THEY DO IT. If you or an employee is sick and you do not have a documented WAY OF DOING BUSINESS, then no one else can do the work. Worse if those people ever leave, you will have to continually hire top performers in the area to DO the work. This means highly paid experts instead of hiring unskilled people with a great attitude and culture fit that can be trained to do excellent quality work because they just follow your brand of systems to the “T”.
Think of McDonald’s… they hire high school kids and train them on the McDonalds’ way of making burgers, fries, and shakes. They train then on the McDonalds’ way of taking orders, filling orders, cleaning the restaurant, and pretty much everything an employee does is documented and trained on leaving nothing to chance. If you do not build this same concept into your business, you will never be able to scale.
If you can not scale, then you will always be trading time for money just like a job.
This will keep you from building an asset. Early on you need to find a business model that allows you to step back from the business and still brings in cash. If you do not start with this concept early on you will build a JOB and 2 years down the road, or 5 years, or 10 years, or 20 years you will say… “oh shit, how am I going to retire from this business?”. This is when you realize that all this time I thought I had a business, but now understand it was just a JOB and you are the worst manager you’ve ever worked for.
Let’s use an example of a pie shop.
If you are a great pie maker and the business needs you to make the pies you are doomed to scale. Now let’s say you hire chefs that can also make pies, but your current chefs make the pies the way they know how to make pies and sometimes the pies are a little sweeter, and sometimes the pies have a crispier crust, and sometimes the pies have natural organic filling made from scratch, and sometimes the chef is busy and just using filling from a can. Can you see how there is no consistency? Can you see how every pie you buy might taste different every single time you buy it? Will you keep going to this shop if everytime you buy a product it is hit-or-miss on the quality or your personal preference? This limits customer loyalty. Now the other problem is because the whole thing relies on a whim instead of systemic process, there is no way to train employees for what ingredients to keep on hand and how to make ANYTHING.
On the other hand, a good example of a recurring revenue model would be something you build once and sell to many… like software.
With software, you develop the software program and sell licenses. Yes, you have to keep the software up to date, but you are working on only ONE PRODUCT and selling it to MANY CUSTOMERS. This takes you from 1-to-1 service to 1-to-Many service. That is called leverage. The more you can leverage yourself and your products/services, the more you can scale.
Let’s go back to McDonald’s for a minute.
McDonald’s is a franchise because they systematized EVERYTHING to guarantee that every McDonalds offers consistency. Whether you like McDonald’s or not, you know exactly what you are going to get EVERY SINGLE TIME you go. 98% they deliver the exact same experience no matter what city, state, or country you visit. You see… McDonald’s BUILT A SYSTEM right from the start and the system just works!
Granted you may not want to be as big as McDonald’s, but know that this is not the point. Even if you only ever have one shop, if you can not systematize it the way McDonald’s has, then IT WILL ALWAYS BE A J.O.B. and not a business.