Why Your Small Business Doesn't Work 💰

The Research Topic📘

Book: The E-Myth Revisited - Michael E. Gerber

Why Most Small Businesses don’t work and how we can make them work.

Additional Resources for Research Below…….

Understanding the Fundamentals:

Your business is nothing more than a distinct reflection of who you are.

Fatal Assumption when starting a business: 

If you understand the technical work of a business, you understand a business that does technical work.

This is not true at all, this is the main reason most small businesses fail.

If you love baking pies and want to own a pie business, it will likely fail.

Your love for baking pies will quickly be deterred as you now have to take on the responsibilities of marketing, systematizing, managing, creating production and so much more for your business.

Understanding the 3 traits in every entrepreneur’s journey:

Entrepreneur:

is the visionary, needs constant change, people seem to get in his way, they want control, they see the world as opportunities and dragging feet

Manager:

pragmatic, planning order and predictability, and structure, if the entrepreneur craves control, then the manager craves order

The tension between the entrepreneur’s vision and the manager’s pragmatism creates a synthesis from which all great works are born.

Technician:

the specialist, who focuses on getting the task done rather than innovation, specializes in technical work, passion is the actual work

“ Entrepreneur dreams, the manager frets, and the technician ruminates. “

Where the perspective shifts, is in the understanding of the stages of life in a business.

This is where we make the first change to our entrepreneurial mindset.

A change that allows you to understand the following actionable steps to grow your small business.

Let’s start with learning the phases of a small business.

A Deeper Dive:

3 phases of business growth:

Infancy, Adolescence, Maturity

Infancy: the owner and the business are one, the owner works nonstop on the business and is the only thing keeping it alive.

The infancy stage goes wrong when the responsibility goes up and you increase your time to meet it, but the work keeps coming in and gets too much.

The infancy stage ends when the owner realizes that the business cannot continue to run in the same way it has, and their needs change.

This is either when the business will fail or reach the adolescent stage.

Adolescence:

This stage begins at the point in your business when you decide to get help, from someone with technical experience in your field, for the work you don’t like to do.

Hiring someone for bookkeeping, advertising, managing, etc.

At first, you may feel free, but if you did not put the time into training and creating systems for your business it will likely go downhill.

Every adolescent business reaches a point where it pushes beyond its owner’s comfort zone:

• the boundary within which he feels secure in his ability to control his environment and outside of which he begins to lose control

A Technician's Boundary:

is determined by how much of the work he can do himself.

A Manager’s Boundary:

is defined by how many technicians he can supervise effectively or how many subordinate managers he can organize into a productive effort.

An Entrepreneur’s Boundary:

is a function of how many managers he can engage in pursuit of his vision.

When the business gets out of the owner’s control:

• The business can return to its infancy

• It can go broke

• It can hang on for dear life.

Adolescent Survival:

You are working at your business every day, and you manage to work through the issues but now you are going to explode, it becomes severely overwhelming, and there is simply nothing left to do.

To survive you must either start again or create a foundational system you must implement.

If your hires have fallen through from when you first reached out for help, you must rework the way you go about hiring completely.

You must template out your business into a series of questions you use to structure your foundation ( this is covered in the section: Actionable Steps to Success )

A business that gets small again is a business that is reduced to the level of its owner’s resistance to change.

To create a thriving business ask these questions:

• Where do I wish to be?

• When do I wish to be there?

• How much capital will it take?

• How many people does the business need?

• Doing what work?

The answers to these questions frame your start to improve the business you already have.

Maturity:

You are going to design benchmarks.

Create Contingency Plans.

Plan envision and articulate what you see in the business, yourself, and the employees.

A mature company is started differently than the rest, it is founded on a broader perspective.

It is started by building a business that works not because of you but without you.

It begins with foundational steps implemented and is the reason why companies like Federal Express, Amazon, and others are as big as they are.

How we will build our business foundation to mirror companies like these starts in the next section.

Actionable Steps to Success:

Framework Questions:

What will my business look like as a model when my dreams/visions are in place?

How would my business have to act to look like that vision?

How are we acting every day as a business to work towards the envisioned business model?

Devote your work to business development, not business.

Entreprenurial model:

• the model of business that fulfills the perceived needs of a specific segment of customers in an innovative way

Less to do with what is done in a business and more to do with how it’s done.

Create a vivid image of your customer, and customer model, and sell directly to that model.

How can I systematize my business in such a way that It could be replicated 5,000 times so the 5,000th unit would run as smoothly as the first?

How can I own my business and still be free of it?

THE BUSINESS DEVELOPMENT PROCESS

This is the process of 3 activities every business must pursue.

Innovation:

What is standing in the way of my customer getting what he wants from my business?

What is the best way to do this?

Ex: A salesperson may ask: “ Can I help you?” and the customer’s answer usually is “No just looking”.

Innovation is improving on this greeting to be “Hi have you been here before?”.

Now no matter if the answer is yes or no, use a prototype like this:

Let me take a minute to show you the program for new customers just like you, where we can personalize your experience!

or

Let me take a minute to show you the program we have for existing customers that personalizes your deals based on what you have previously liked from us!

This will then transfer to you showing a product line and starting a sale.

You need to have a program in place for this to work, but the idea here is to innovate to capture each client that enters your business.

Quantification: 

Measure every aspect of your business.

Just a few examples:

• How much traffic to your business do you get every day?

• How many in the night, in the morning?

• How many sales are made from leads?

• How many people don’t go through with a sale and why?

We can use the innovation process to make quantification useful.

By generating how much customer traffic we have in a day, and how many sales are closed; we can infer a percentage of sales.

This then can be broken down into how we greet the customer, the sales pitch, and so forth.

And just as in the innovation section, use the numbers as an identifier to innovate our processes, in which specific areas.

Record these numbers, and compare them each week/month to determine the health of your business.

Orchestration:

The elimination of choice at the operating level of your business, creating order/systems.

Orchestration creates a consistent outcome for your customers by setting a structure in your systems. ( the manager in you should love this section ).

If you haven’t orchestrated it, you don’t own it, and if you don’t own it, you can’t depend on it.

Now it is your job to orchestrate your business, by implementing these ideals, and taking on The Capital Challenge……

The Capital Challenge:

The Capital Challenge is an actionable quest where you will implement the research from this article to reap the benefits of these strategies.

Here is today’s Capital Challenge:

Design your Business Development Program.

Here is the format to do so:

1. Primary Aim

2. Your Strategic Objective

3. Your Organizational Strategy

4. Your Management Strategy

5. Your People Strategy

6. Your Marketing Strategy

7. Your System Strategy

This format is the skeleton for your business, it will determine the strategies, systems, and processes you will create.

This is meant to be a structure, that you fill in and incorporate into your business.

Your Primary Aim:

What do I value most?

What do I want my life to look like?

Who do I wish to be?

Write down thought-out answers to your question.

These are meant to be complex, and not answered shortly, take your time and save it in a place you will consistently return.

Your Strategic Objective:

A very clear statement of what your business has to ultimately do for you to achieve your primary aim.

It is the vision of the unfinished product that is and will be your business.

Write out answers to these questions:

• How big will my company be when it is done? $Valued a 300,000 company? Valued a $1,000,000 company?

• How much money do I need to live the way I wish?

Is your business an opportunity worth pursuing?

A business that can fulfill the financial standards you’ve created for your primary aim and strategic objective.

When will my prototype be completed? 5 years? 10 years?

Your Organizational Strategy:

Develop an organizational chart. Delegate responsibilities in your business.

At first, you will have one or two people who will take on the roles of the entire business.

In order to organize your business in a way that one day you may hire, you will need to establish positions and their contracts.

Your business will have positions such as:

Shareholders

COO: Responsible for executing the strategic objective, and reporting to shareholders.

Vice President/Marketing: Accountable for finding customers and finding new ways to provide customer satisfaction.

Vice President/Operations: Accountable for keeping customers by delivering what is promised

Vice President/Finance: Achieving profitability standards

And then the smaller positions such as:

• Sales Manager

• Advertising Manager

• Accounts Receivable and Payable

• Production Manager

• Service Manager

Now that you have the idea, you will assign yourself to all of these positions, or if you have a partner split them up.

Before splitting up the work, you will design position contracts, which define specifically what is expected of each position.

You will write out position contracts for every position, and sign each position you take accountability for.

Your Management Strategy:

It is a system designed into your prototype to produce a marketing result.

The marketing aspect of managing is the manager’s job to create an excellent outcome for the customer.

This retains customers, which is a part of the marketing system.

Now that we have created position contracts, we will use these to create an operation manual comprised of all the positions coherently working together.

This manual will be given to each employee who will complete their tasks to the standards systematized in the operation manual.

Your job in the management strategy is to design this operation manual and get your team of employees to strictly follow it.

Your People Strategy:

Getting people to strictly follow a system is the challenging part.

Hire people based on willingness to learn, and ones that align with your mission.

The people strategy works with a strong knowledge of human psychology and the implementation of systems.

How you know whether to hire your team, is dependent on your judgment and the alignment of their values with your mission.

Your Marketing Strategy:

Two pillars of a successful marketing strategy:

Demographics and Psychographics.

Create polls/surveys that you deliver to your customers.

Feedback here is super important!

We can market based on learning the demographics of your customers, and why they buy, the psychographics.

It is as simple as implementing feedback systems to generate information that we use to market.

Your System Strategy:

A system is a set of things actions, ideas, and information that interact with each other and in doing so, alter other systems.

Think of the system strategy as the serendipity of these strategies combined.

Your computer is a system, your sales pitch is a system, and your quantification is a system.

The systems strategy is the piece that highlights tying all of these ideas together.

To build one coherent business that will produce enough profit for you to one day prosper.

Now start filling in your program, start building your business, and implement your systems.

Additional Resources: