Creating the Anti-Job
Travis McMenimon recently left a comment on one of my recent posts about how it was that I had built a "system" in business that I could "walk away from". I thought his comment was interesting and I wanted to write a post discussing more about systems in businesses and some crucial mistakes many business owners make when going into business.
In all honesty, I'm not very versed on business models, systems, management structures and all that business school mumbo-jumbo. Instinctively, however, I knew one thing: that I wanted a business, not a job.
With that said, though, it is important to note that early on in all start-ups and small companies, the owner must essentially take on some sort of role and duties. Whether that's working as an everyday manager, being the bookkeeper, or acting more like a "real world" CEO and going out to raise millions of dollars of VC money to expand the concept, almost every business owner has a "job". The difference of being on the business-owner side of things from being on the employee side of things is having options and control. In addition to those, a business system provides numerous benefits (which I'll go into later). For now, let me introduce one of my inspirations...
This is the B-I Triangle. Robert Kiyosaki, author of the best-selling book Rich Dad Poor Dad, created this to illustrate a hierarchy of importance in building a business. Focusing on the inside of the triangle, the level of importance goes from bottom (most important) to the top (least important). This is not to say that the product doesn't matter, but that most people attempt to build a business based solely on the product and ignore things like system and cashflow.
Cashflow, for any business (especially young and/or growing ones) is by far the most important aspect. Profitability doesn't matter much if you can't manage the cash that's coming in and going out. And when you have to explain the difference between profitability and cashflow to your bookkeeper, get a new bookkeeper! However, cash, like most anything else, has a pattern... a trend. So in business, the sooner you learn that trend, the easier it becomes to manage that cash.
Systems, as you can see, are not quite as important as Cashflow, but more so than legal or - surprisingly - the product. For me, this triangle has been a huge blessing because sometimes it's difficult to juggle priorities. The long list of priorities that each business takes on becomes increasingly overwhelming, so it's good to have something like this to visit to keep things in perspective.
Business systems can provide many benefits to the company (owners and employees alike). When a system is set up (usually via some practices and procedures manuals and/or some form of technology that allows for easier use or automation), then the business itself can be sustained without the everyday interference of the owner(s). Managers and employees alike (if you run a labor-intensive business like I do) must have some sort of written, tangible protocol so that they know what to do in most situations. Once these procedures are in place, then the "upper" people like shareholders, executives, etc. can concentrate on the bigger picture items such as moving the business to the next level, whatever that level may look like. It also creates consistency in the work place for managers and employees and makes their overall jobs easier and much more automated so they can concentrate on other uncontrollable issues like customer service!
For more on the B-I Triangle, click here.
Aside from the B-I Triangle, there's the issue most businesses face that will almost always increase the risk of failure... they start a business because they're good at doing 'x'. For instance, you're a good cook, so you start a restaurant. BAD IDEA! However, this way of thinking is ingrained in (easily) 80% of the population, business owner or not. When people find out what I do, they always ask me if I'm a good cook. Fact is, I never cook (at least not in the restaurant setting). Owning your business or, as many put it, "being your own boss" is more than just starting a business around whatever it is you're good at doing. Because then what you have is a job consisting of doing 'x' (cooking, building bongos, whatever) PLUS all the stuff you never had to worry about before (bookkeeping, accounts payable, banking issues, legal issues, insurance, investors, employees, etc.). Sooner or later, you begin to hate the one thing that you use to love... that skill that prompted you to become your own boss.
The key is NOT to become your own boss, but to become an employee in a company in which you control. There is a very clear line between the two. Michael Gerber's book, The E-Myth is a great resource in learning the difference between being an entrepreneur and being a technician or a manager. And no, this book doesn't have anything to do with e-commerce. Just a bad name for a book that discusses what the author calls the "Entrepreneurial Myth."
In general, though, the approach to building a true business (as opposed to a really stressful job) is to do so from the beginning. Doing so before the beginning is even more ideal. Look at an opportunity and find where the system can be built. In fact, opportunity... true opportunity... is often found in businesses that have no systems built in just yet and the owner has owned a job and is stressed out, so he/she/they end up selling for far less than the business is actually worth just to move on.
Don't look at an opportunity just to be your own boss... you'll be the worse boss you've ever worked for.
October 29, 2004 | Permalink
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Excellent Post. Great job at laying out the BI Triangle. Robert would be proud! I think that every entrepreneur should read Cashflow Quadrant and E-Myth especially if you are trying to take a trade-based business and turn it into a full B business.
I am still amazed that you were able to take the very simple concepts in the two aforementioned books and apply them to your business and have such success in so short of a time.
Plenty of people have told me that it can't be done or that it can't be done in the timeframe that I describe (3-5 years). I just look to you for inspiration. It may be difficult, but not impossible. If it were impossible then everybody would be starting their own businesses right!?!?
Keep up the Good Work!
Posted by: Travis McMenimon | Nov 2, 2004 10:08:22 PM
Thanks for the comments, as always.
Personally, I think that many entreprenuers make this concept more complex and difficult than it probably could be for them.
The idea is to strategically build the business plan to be a true "B" business from the get-go. What most businesses face is the issue of the owner not being enough of an entrepreneur and being too much of a hands-on manager type. My guess is that there are a good majority of businesses out there where the owner(s) just make excuses as to why they can't leave yet. Fact is, it's either that they themselves are actually a part of the system and, therefore, the system can't survive without them (purhaps this comes from their inability of letting go of the controls) or it's because their pride doesn't like the fact that something could be fine (or in fact thrive) without their everyday presense.
So if they can convince you, or me - or anyone else - that it will take upwards of 5 or more years to do this, then they have built in a justification of why they are still where they are with their companies. And, of course, when others do it faster or better, then they can disregard that as a fluke, or as simple luck... simply because those who don't make excuses are, unfortunately, the exception and not the rule.
Posted by: BJ | Nov 3, 2004 1:20:34 PM
Great post. I am mulling over how do you teach these "system creation" skills - as Kiyosaki says businesses ARE systems but this isn't necessarily taught in school. As you, I also highly recommend the E-Myth (it was out WAY before e-commerce) as well as Kiyosaki's books. I also like how Kiyosaki lays out his concepts around leverage too.
Posted by: Evelyn Rodriguez | Nov 13, 2004 5:48:24 PM
Thanks for the comments.
The issue of what schools teach in regards to business is a touchy subject indeed. I think the primary reason that these ideals of systems aren't taught in schools (at least state- or federal-funded ones) is because those within the school system itself are employees by trade and they will simply teach what they know and what they understand.
There are numerous reasons why certain people can't exactly grasp the idea of building a business that can essentially exist without them and I think I could spend numerous other posts dedicated to those different reasons. But all in all, teachers are hired and told to teach what is traditional. Things that were applicaple 20, 30, or 40 years ago simply aren't these days anymore. But you simply can't change a system as political as the school system overnight. And that's unfortunate.
Kids these days are still being tought (for the most part) how to become good employees, how to find a job, etc. And, even worse, many others are being fed the idea that a job can provide security and a "guaranteed paycheck" when, in fact, we should all know that this is no longer the case.
There are becoming more and more classes available that teach entrepreneurship at the high school and college levels. But I also fear that these classes are not teaching the principles that are advocated in the E-Myth and Rich Dad Poor Dad, which is how to create a business that becomes an asset and not a liability-ridden job that you begin to loath.
Those are just my 2 cents anyway. ;-)
Posted by: BJ | Nov 14, 2004 6:30:40 PM
More on systems and business...
"There are three types of companies.
1. Companies that have lasted for 100 years.
2. Companies that are designed to last for 100 years.
3. Companies that will not survive for 100 years.
The companies that meet criteria #2 (designed to last for 100 years) will generally have ROIs (return on investment) of 20 percent higher on a consistent basis than #1 and #3." - From "What's Your Corporate IQ", by Jim Underwood
BJ, on the educational front: Speaking as an entrepreneur, this sounds like this training is a business opportunity as I don't see the public educational system changing any time soon.
Posted by: Evelyn Rodriguez | Dec 3, 2004 11:01:08 AM
Ummmm... nothing new was said here. This is right from RDPD book series.
P.S, since you're the CEO of Cilantro's Burrito Grill, try googeling Cilantro's Burrito Grill. Nothing!
I feel you should mind your business and focus on the grilled burrito business, seek ways to expand it, rather then spitting back what Robert told us over 3 years ago.
Posted by: Ralph Emerson | Oct 4, 2006 9:38:42 AM
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