In this episode Josh Patrick will talk with us about how to take your business make it successful and then make a sustainable. In today’s environment, having a successful business isn’t enough. If you want your business to provide benefits to you besides a great current income you’ll want to listen to this podcast and learn why sustainability is a crucial key to long-term financial health, both for the business and for you as a business owner.
In today’s podcast you’ll learn:
- What a sustainable business is and why you should care.
- How we help business owners develop options become sustainable.
- Where mistakes fit in with helping you become successful.
- How leaving your business for months he equates with sustainability.
- What the differences between working as an owner and working as a coach or as a player and how playing the role of owner is where you want to be.
Narrator: Welcome to the Sustainable Business Radio Show podcast where you’ll learn not only how to create a sustainable business but you’ll also learn the secrets of creating extraordinary value within your business and your life. In the Sustainable Business, we focus on what it’s going to take for you to take your successful business and make it economically and personally successful.
Your host, Josh Patrick, is going to help us through finding great thought leaders as well as providing insights he’s learned through his 40 years of owning, running, planning and thinking about what it takes to make a successful business sustainable.
Josh: Welcome to today’s podcast. We’re going to have a little bit of a different tack today. Instead of having my usual guest, I’ll be talking with you by myself. We’re going to talk about a really important subject and that is “How do you take your successful business and turn it into one that’s sustainable?” We’re going to spend a little bit of time today talking about that and what the steps that keep you from getting there, as well as some of the things that are getting there.
Just on another note, every once in a while, I’m going to be doing a solo podcast where there’s a topic which I think is really important, I’ve not been able to find someone to come on and talk about it who’s an expert and it happens to be an area that I have an expertise in. Moving from success to sustainability is something that I have spent the last 35 years studying, trying to learn about and how to help you get there. Let’s jump in and start right along with this.
Let’s start off where we are today. If you’re like many of the private business owners that I work with, here’s where you are, you’re making a good living in your company. You have at least five employees and you might even have a few hundred employees. You’ve been in business for at least 20 years and you’ve built what others consider a successful business. But here’s the problem, you don’t believe you have a successful business. It’s not that you have this thing that’s jumping out at you every day and saying, “You know, I have to have a successful business, I need to change things.” But there’s something there in the gut that’s making you believe and says, “You know, things aren’t as good as they should be” even though it looks to the outside world like I’m successful.
Here’s what we do when we run across somebody like you who has a successful business but hasn’t quite reached sustainability. What we do is we help you become economically and personally sustainable. What that means is you have enough money to live your life, save, grow your business and have a safety fund. And on a personal level, you’re not burned out, you love coming to work every day. You love what to do and you’re engaged in which you’re doing.
So, the way we do this is we help you develop options that you can have. Without options, it’s just you sort of feel like you’re stuck and we don’t want to have you feel like you’re stuck. We want to help you get unstuck. If we do this successfully, and you do it successfully because we work with this on a collaborative basis, you’re going to have a better life. Now, isn’t that something that you would like to see for yourself?
Here’s something that you might notice. You’re missing some things and here are some things you might be missing – you know you look successful and to the outside world you probably are success but to yourself you might be a little bored. You’ve been doing the same thing for over 20 years and although you try to back away from things, you’ve not been very successful at it. You’ve been doing the same thing over and over and over for a very long time and that’s what kind of leads to your boredom. You’re dealing with day-to-day issues. The reason you’re dealing with day-to-day issues is you’re kind of afraid of letting other people handle because they might be making mistakes that you wouldn’t make. Even though you’re making a nice living, cash always seems to be tight. There’s just not enough cash around to do what you want to do, in the way you want to do it. Finally, you know you should be saving for retirement but there never seems to be enough cash around for you to get around to doing that. You know, you have all these other needs and wants for your cash and you’ve always chosen growing your business or reinvesting in your business instead of investing in yourself. Those are the things that are keeping you from being sustainable, even though you look like you’re successful to the outside world.
Let’s talk about what sustainability is in the first place. In my world, if you have a sustainable business, you’re able to leave your business for months at a time – not just weeks or days at a time. Take a long weekend here or a week off there and maybe once in a blue moon, you take two weeks off. You’re able to leave for months – three, four, five or six months at a time and when you get back, everything is just the way you left it; in fact, sometimes even better.
Sustainability means you’re spending most of your time working as an owner. You spend your time working on what we call the $5000-per-hour activities – we’ll spend a little bit of time later on, talking about exactly what that means, and you have a business that creates enough excess cash that provides you with the following four things – you have a great lifestyle, you have money – enough money, not just money but enough money to save for retirement, and you have enough money to grow your business, and you’ve been able to put away money for an emergency fund because as we all know when cash is tight, you’re going to make decisions you might come to regret later on.
The real thing with sustainability is, it’s at the point where others really want to own your business. Now, I want to emphasize that word – REALLY, because others will want to own your business. The question is “Do you want to sell or do you not want to sell?” It’s not, “Can you sell?”
So, most of the time, when people reach a sustainable business, selling is not at the top of their list. But, if you’re at the age, or you’re at a health crisis, or something else comes along that you would rather do, you’d be able to sell your business. And not only sell it but sell it for a reasonable price.
Now, I’m going to be that you just heard that definition of sustainable and you’re going to say to yourself, “Hey, I want to be sustainable. But I don’t know how to do it. I kind of feel stuck.” So, here are the things that we see that happen over and over again. There are about seven things where we see the same problems occur that keep a successful business from moving into the world of sustainability. Here are some of them.
You’re too involved in the day-to-day operations of your business. That means things run through you all the time. The reason they run through you is because you really never learn the art of delegation nor have you learned to trust your employees enough to let them take over the day-to-day operations. You seem to have to fight way too hard to get new sales in the door. You don’t have a system for marketing and you don’t really have a system for sales. Now, you create new sales and you’ve gotten new sales over the years but it’s a very lumpy activity. It’s not something that happens along and you can do on a regular basis. Now, you’ve heard about recurring revenue but it never seems to appear in your business. Every year, you’re starting over from scratch. It’s not like I’m waking up on January 1 with enough business or a process to have enough business or I don’t have to worry about enough sales walking in the door. That’s some place we see a lot of business get stuck.
Here’s one of my big ones that you might want to be thinking about – you’re the bottleneck. In other words, because you’re so involved in day-to-day operations and everything is flowing right through you all the time, you’ve become the bottleneck in your business. You can’t get out of your own way. Oh, you can get out of your own way but because you’re demanding everything comes through you, you become a bottleneck. Your business is stuck because your span of control only can go so far and you haven’t learned how to make it bigger than that it is. Your employees are going to make too many mistakes.
Now, we all know that we all make mistakes and it seems that a lot of private businesses that we work with, the owners are kind of okay with them making mistakes but they’re not okay with others making mistakes. So, let me ask you a question about this. “How is it that you learn? Do you learn because you make mistakes or do you learn because to do things right?” Now, let’s talk about your employees. Do you think your employees learn when they make mistakes or do they just go and make the same mistake over and over again? That comes down to how you handle mistakes.
Now, if you treat mistakes as learning opportunities and every time a mistake is made, you ask yourself and others in your organization, “What did you learn?” Those mistakes are probably pretty good things but if you don’t go that and you have a blaming conversation instead what’s going to happen is your employees are going to say, “Hmm, can’t make mistakes, don’t want to go outside my comfort zone because I’m going to get yelled at.” And on the top of that, you don’t let them do it in the first place.
You’ve never taken off more than two weeks in your business and that second week only happened once or twice. Well, if you’re only taking time off every once in a while, you don’t have a sustainable business. You might have a successful business. You might be making a fair amount of money but if you stop, the business stops. And finally, your business isn’t sale-ready. That doesn’t mean you’re going to want to go and sell your business. It just means your business is not sale-ready and – although might be able to sell it, you’re probably going to hold a lot of paper and you’re probably not going be in a position to get the type of price that you want to get.
Now, I’m going to assume that you really do want a sustainable business. Just in case you don’t, here are the things that are going to happen to you that you’re not going to find is a very happy or successful outcome. You’re not going to be able to retire. You’re going to be stuck in perma-five. Perma-five is this thing that says, “I know I have a problem with my business. I know I have things to fix. I’m not really quite sure what it is I have to fix but, five years from now, it’s, magically going to fix itself. And then I come back and I talk to you two years later and, guess what, you’re still thinking it’s all going to be five years away. And then three years out, it’s still all going to be five years away.
Your business isn’t really transferable. I mean, you could probably sell your business but you’re going to have to hold about 50% of the purchase price as a seller’s note. In case you don’t know, seller’s notes aren’t always paid. You need to have some consistency in your business and that comes because you don’t have systems. People are doing things their own way and they all do it differently. Without systems that everybody can run, you just don’t have consistency in your business.
If you really want to have a sustainable business, you’ve got to figure out how to get yourself out of day-to-day operations. Remember, we talked about this but it really is the key. The two things that make a business sustainable is having a recurring revenue source and having you, the owner, become operationally irrelevant in your business. And you want some personal financial freedom but it never seems to come. It’s always around the corner but it never seems to come.
So, what’s keeping you from getting there? You don’t think you can afford mistakes. It isn’t that you can’t or you can afford mistakes. You don’t want to have mistakes that are going to put you out of business. In fact, there are a very few mistakes you can make to put you out of business but you need to know that you not only can afford mistakes, you have to afford mistakes. You have to learn to fail fast, fail cheap. You allow people to delegate up to—you need to know what I call the secret of EIA. E-I-A stands for Expect – Inspect – Accept.
Now, we’re all pretty good at making expectations. We’re all really bad in inspecting to make sure they happen and then we often never get around to accepting the work with do. So, the place that you’re getting stuck here is likely on the inspect stage. You’re doing a good job of setting some expectations but because you don’t expect, you’re constantly disappointed and you say, “Can’t delegate because nobody ever takes responsibility.” If that sounds like you, take a look in the mirror. You might not charge enough for your products.
I’m going to bet that most of the businesses that I run across are underpriced. The reason they’re under priced is that we put a little word in our heads about what our customers are willing to pay. We don’t test. We don’t push the envelope and we’re too scared to try. Does that sound like you? If not, you need to stop. Innovation really hasn’t happened in your company. The reason it hasn’t happened in your company is you might be putting too much effort into these gigantic projects. The gigantic projects just never seem to work out well. If instead, you learn what’s called agile planning where you fail fast, fail cheap, do small things, have pieces that get online every three or four weeks, none of those innovations will feel like they’re earth-shattering to you but if you look back over a couple of years of doing innovation that way, you’re going to find that you’ve come a long way. Now, it’s important that when you think about this, that we remember to look back is looking forward because if we’re not looking back, we don’t see what we’ve done in the past.
Finally, it really comes down to trust. I have a thing I call the trust formula which came out of a book called The Trusted Advisor. The trust formula is very simple, it’s competence + reliability + intimacy / self-interest. So, when you’re working with other people, if you don’t trust them, one of those four things is out of whack. Maybe they’re not competent as much as you would like. Maybe they don’t do things when they said they’re going to do so. Or maybe, you feel like they don’t really care about you or your business. In that case, it’s going to be harder for you to trust them. Or, you feel like they’re working in their best interest and your company’s best interest is just being left by the wayside. Those are all things that get in the way of you delegating and you trusting your employees and allowing them to make mistakes.
If somebody’s competent and they make a mistake, you figure, “Okay, they’re going to learn.” But if you don’t think they’re competent and they make a mistake, you’re not going to want to do it because you’re not confident that they’re going to correct the mistake and learn from it. So, think about that for a second. Is that something that you’ve got an issue with? If it is, then it’s something I hope you take some time and plan around.
Let’s hear about how we’re going to become sustainable. And this is what I think is really important for you. I want you to do eight things. I want you, first, to get yourself totally out of operations – not just out of operations but I want you totally out of operations. The way you’re going to do that is you’re going to systematize your business. First, you’re going to start off with systematizing what it is that you do and then you’re going to train somebody in your organization to do it and you’re going to coach them with little projects at a time, little delegation at a time. Allow them to make mistakes and your coaching’s going to be “What did you learn?” Not, how do you correct but “What did you learn and what are you going to do differently next time.” You’re going to measure the right things.
A lot of times, when we look at our profit and loss statement and maybe we look at the balance sheet but those aren’t the things that drive our business. Those aren’t the things that make our business successful. We’re going to figure out what things we need to measure and we’re going to put them in place. Those are called key performance indicators.
We’re going to have a formal innovation process in place. We’re going to be thinking about and we’re going to have plans on how to make not only new products but also make the operations within your company become better. Innovation is not only something new you sell your customers. Innovation is also how you run your business and the things that you do. You’re going to put together – and you look at this at businesses that are sustainable, they all have what I call cultural mistakes. It isn’t that they don’t want mistakes to happen because nobody really wants mistakes to happen but they all realize that mistakes do happen, and when a mistake happens the question always becomes “What did you learn?” You want to make sure everybody is personally responsible for how they do their job.
Too many times, I go into a company and the culture is when something goes wrong, I blame you or I justify my behavior. If that’s happening, there’s no way you’re learning from mistakes because you’re spending all your time trying to figure out what it is that somebody else did wrong. You want your people to say, “Hey, it was my fault. Here’s what went wrong. Here’s how it happened. Here’s what I learned. And here’s what I’m going to do differently in the future.” When you do all that stuff, man, you’re going to have a great company.
You’ve got to make sure your business makes enough money. You’ve got to provide high value for your customers, that’s where it all starts. If you’re providing high value for your customers, make sure you’re charging enough so you can do those four things we talked about earlier. Remember, have a nice living for yourself, have an emergency fund for your business, have enough money to save for retirement and save for retirement and have enough money for business growth. So, once you do all the other things, you can afford to grow your business and not be frustrated because you can’t. Finally, you’ve got to be brutally honest with yourself. If you’re not willing to look in the mirror and say, “I caused this problem and here’s what I’m going to do to correct it” – it’s never going to happen.
Thanks a lot today for joining us. I hope you got a little bit of a sense of what it takes to make your successful business become sustainable.
Hey, if you want to learn some more about what we do and how we do it, you might want to download some of our e-books. You can to www.askjoshpatrick.com. There are four e-books that you’re going to want to take a look at. One is the Objective Review which talks about our comprehensive strategic process that helps you figure out what you want to do and why it’s important. We have an e-book called The Four Boxes of Financial Independence. That e-book is going to help you figure out how much money you need to be saving on the outside so you can afford to leave your business some day in the future because I can promise you, for most of you listening; your business is not going to get you retirement all by itself. Our third e-book is Relationship and Roles which I think you’re going to really like because that’s going to help you figure out what you need to do to become the owner in your company and really spend your time working on those $5000-per-hour activities. And finally, there’s Key Metrics in Your Business. That e-book is going to help you figure out what it is that you really want the measuring in your company, how to set up those measurements, and how to put together a dashboard.
Finally, if you want to have a conversation with me and learn more about how you can take your business and move it from success to sustainability, shoot me an e-mail. My e-mail address is email@example.com. I’ll send you back a link so you can schedule a time and date that work for you to have our conversation; or you can just call 802-846-1264 ext 1 and talk with Melissa about getting some time on my schedule.
Thanks a lot I. hope you enjoyed this episode. I know I did. From time to time, we’ll do it again.
Narrator: You’ve been listening to the Sustainable Business Podcast where we ask the question, “What would it take for your business to still be around 100 years from now?” If you like what you’ve heard and want more information, please contact Josh Patrick at 802‑846‑1264 ext 2 or visit us on our website at www.askjoshpatrick.com or you can send Josh an e-mail at firstname.lastname@example.org.
Thanks for listening. We hope to see you at The Sustainable Business in the near future.