Today’s episode features Mandi Ellefson . She is going to help us understand what being a passive owner is and why it’s so important if you want to create a sustainable business.
I’ve found that one of the two things literally every business owner needs to do if they want to create a sustainable business is to make themselves operationally irrelevant in their business. This is what we call being a passive owner. It’s also the place where many business owners have tons of fun and start getting the return in their business they deserve.
Mandi has a road map she would like to give you to help on your journey to become a passive owner. You can get it by clicking here.
In today’s episode we’ll cover the following items and more:
- What a passive owner is.
- How you would know if you’ve crossed over to become a passive owner.
- Why it’s so important for you to focus on becoming a passive owner.
- Why you need to move out of the time for money paradigm.
- Why a repeatable process is one of the keys to building a business where the owner can become operationally irrelevant.
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: Hey, how is everyone today? I’m really excited about today’s guest. Today, we have Mandi Ellefson with us. She is going to talk with us about one of my favorite topics and one of the two things I think that it takes for you to create a sustainable business, and that’s being a passive owner. Mandi helps business owners to choose how much they want to work. She helps them pull themselves out of the day-to-day operation of the business so they can create real value even when they aren’t there. Her framework enables entrepreneurs and private business owners to hire dependable staff who deliver consistent quality and then they put in place missing systems to make sure the business runs right when the business owner’s not around. I have to tell you that if you’re going to hire somebody to do this sort of stuff, if they don’t know how to make you a passive owner it’s probably not to be the best engagement you can possibly have so I’m very excited to have Mandi here. Let’s bring her in.
Hey Mandi, how are you today?
Mandi: I am fantastic. How are you doing, Josh?
Josh: I’m doing great. Tell people what passive ownership is.
Mandi: I think the first step in achieving that is being able to have your business run without you for three weeks. So, you can be gone for three weeks and it not going belly up while you’re gone. I think that’s the first benchmark to look at.
Josh: What do you have to do specifically to be able to go for three weeks and not call in – which is a big deal for me?
Mandi: Well, first of all, you need to have people in place to do this. I talk about getting your business to run without you. I think a lot of people think, “Oh well, it’s like internet marketing”, like selling info products type of stuff but I’m actually talking specifically about brick and mortar type of business where you have staff, so you need to have dependable staff in place and they need to be knowing what they need to be doing in order to deliver to your high quality standards without you there.
Josh: How would they know that?
Mandi: Well, I think this is probably something near and dear to your heart as well. They need to have systems. You need systems in place in your business. Everybody needs to know how the job is done and be moving in the right direction.
The most important system that needs to be in place is your value delivery system. I think that this is the first one you really need to have standardized and streamlined because it’s really one of the areas where there’s the most opportunity for profit growth, too.
A lot of business owners will think, “Well, you know what, I don’t really like the business run without me. I’m fine working in it. It’s something I really enjoy.” It’s not really about that necessarily. It’s, being able to get your business to operate without you is really an opportunity for you to step out of it so you can be working on your business, you can scale it up so that you off set your risk, knowing that if you are suddenly in the hospital for a week or two, you don’t lose all these clients and that you don’t have some really devastating things happen to your business maybe at a time that it’s quite terrible for you and for your family.
Josh: So Mandi, when you say value delivery system, what is that?
Mandi: Your value delivery system is your service, if you have a service business. It’s your product, if you have a product business. This is particularly challenging for businesses that offer any level of customization in their service because what happens with the business that customizes, a lot of the value comes from the owner. Even like the customers and the clients, they’ll sign up simply because of the relationship they have with the owner, there’s this expectation that the owner oversees everything.
So, the first shift that really needs to happen is to move from this time-for-money paradigm where it traps the business owner and a time-for-money model to deliver value and taking a look at “What is the outcome we’re providing for our clients? How can we deliver this in the most efficient way possible? How can we deliver this in a way that it’s going to be providing the best outcomes?” and then that allows you to move towards the value being derived from the system. It allows you to be charging based on value instead of the time that’s particularly based on the owner’s time, that leaves the owner very trapped.
Josh: We’re not going to get into this today but value building is one of my favorite things in the world. If the owner sells a business and a customer expects the owner to deliver the business, what does the owner specifically need to do so they’re not putting themselves in that position in the first place?
Mandi: Well, you need to be clear on the outcome that they’re providing, right? That’s the place where you could start building out a process for how it’s done. The way, most of the time, it’s done is that you’re looking at maybe 20% based on process and 80% custom. You need to flip that around so that it’s 20% custom and 80% based on a process. In order for the owner not to be stuck in the value delivery, you need to step by step, “How are we going to deliver this? And what are the different variables that go into customizing it so that the team can make decisions in lieu of the owner.”
Josh: What kind of systems specifically do you recommend for your clients that they put together?
Mandi: If we’re talking specifically about value delivery and each service delivery, product delivery, one of the most important parts of that system where there’s like huge bottlenecks created that it cost businesses so much money because it prevents them from bringing on clients fast enough and it prevents them from going out and marketing and bringing in more business. I see this as something about what we’re talking about as being something that can cause business owners hundred and thousands of dollars by not having the system in place.
And what I’m talking about is the on-boarding process. “How is the first hundred days experience for your clients? What are you doing from day one all the way to day 100?” That is the time where you have the highest chance for your clients leaving as well. So if you can really hit it out of the park during that first 100 days, then you have a higher chance retaining that client long term, for years to come. If the process is not based so much on the owner, the owner can go out and sell but it also allows you to get started on the project a lot sooner and a better result for your clients a lot faster.
One particular client I worked with, he has a custom software service. He had a staff that was working with – a pretty good staff, a developer that he was working with as well. So, like theoretically someone else should be able to help with this, but what it would look like was when he’d bring on a new client, it would take 12 weeks for the whole process of bringing on a new client before it got into maintenance mode at which point he can pass off to his developer. But what was happening, during this 12-week period of time, he was doing all the coding and pretty much building up a wait list of clients and he wasn’t doing any marketing. So, this is really costing his business a lot of money and it was also costing him and his health and time because it was so dependent on him that he was working into the wee hours of the morning sometimes in order to keep up.
What we did for him is we took a look at this process for on-boarding his clients to 12 weeks and we looked at “what are the common variables here”. He looked at them and said, “Everything’s complete custom and we do this because it adds more value to our customers.” And then I was like, “Wait, wait, wait. Let’s take a look at this, does it really? Does it really add more value to bring them on over 12-week period of time?” As we found out, that actually wasn’t adding value. And we were able to identify that certain different things that could be customized.
So we take a look at 100 different variables and we said, “Well you know what, what is going to be common in 80% of the projects that you work on?” And then we put together a checklist for how to get started on this projects and how to get—not the whole project complete but get to a certain level of completion within four weeks instead of 12 – in four weeks, so that they were able to see value immediately. Almost immediately, comparatively speaking. What that has done for him is it’s made the sales process a lot easier because he can show up with this sheet and say, “This is how we get started with your business and these are the different things that we can customize within the software for you.” It’s a lot more tangible for them.
Josh: You know, what’s really interesting is that I find that t business owners we work with, they love knowing exactly what’s going to happen and when it’s going to happen because then they get a sense that they’re in control. As we all know, private business owners are all control freaks. So, it sounds to me like your clients have the opportunity to really help clients understand that the people they have working for them are way more competent at what they’re doing than the owner is.
Mandi: Yes. That was exactly the case with Brandon because what he found was that when he broke that down into that system, they actually reduced project time by 67%. They cut two-thirds of the project time off. And now, on top of that, they doubled their rates.
Josh: I was going to say so, please don’t tell me they actually did it for less money. It sounds like they did it for more money.
Mandi: No. They doubled their rates and their clients are happier, so everybody’s happy.
Josh: The lesson here for everybody is if you systemize your business and you stop doing one-offs, you’re going to make yourself a ton more money. Would you say that’s true?
Mandi: Absolutely. And it’s made such a difference in his personal life too; because here, he was working until 2 o’clock in the morning every day and sometimes through the night. And now, he is able to cut out at 4 o’clock which means he can go to the gym, he can go pick up his kids from school. He says, he’s so happy about all these things that happened for his business. But really, what was amazing for him is what it did for his wife because now he’s made more money and his business too so that he has that security and his wife’s now able to stay home with the kids. So, it just changed his life and these are the type of things that can happen for you, in your life, if you take the steps and systematize your business. It just makes it so much more enjoyable business to run.
Josh: Why do think it is that business owners don’t systematize their business, especially when they’re under 25 employees?
Mandi: They don’t have time to do it. They know what they should be doing. Some of them simply just don’t know. They don’t know a better way. And some of them, they know what they should be doing and sometimes they’ll say, “Alright.” They go read a book like Work the System or they imagine, they’re like, “I’m just going to go out” and just systematize everything. So they go and lock themselves in the closet and try to like to play with all these systems and then they make almost no progress because they’ve spent so much time and it’s really for nothing because they went about it all wrong. And they tried this overhaul technique all by themselves and didn’t see enough results so they quit.
Josh: Yeah, that’s been my experience. What I see business owners doing a lot is instead of doing one thing at a time, they try to do 19 things at once and you know what happens when you try to do 19 projects.
Mandi: It doesn’t work. Yeah, we see that too. What I would recommend we do instead is to focus on where the breakdowns are. So, “With here is that one, two or three things that are happening right on your business that are a painful problem?” And then as soon as you solve that, all of a sudden you freed up all this time, you may have brought in more money because that problem could’ve been costing you a lot of money, and then you have this [inaudible 00:11:04] to build on.
What I know makes the big difference here, is whether you do it yourself or whether you do it with your team. If you do it yourself, it’s going to take years to do and you might not ever get to—you might actually end up burning out in the process and not ever be able to get to that level in your business. If you do it with your team, then you can accomplish it so much faster and then you get more compliance with your team as well.
Josh: There’s no question about that. A while back, you mentioned another thing that’s dear to my heart and that’s checklist. Can you talk a little bit about why checklists are really important, how you actually get around to put them together, and what type of checklists work and what type don’t work?
Mandi: The checklists aren’t good for everything that you do but I think that checklists can be really good when you have some sort of task to ensure everything gets taken care of. I think on-boarding is a great place to have a checklist. So if you’re bringing on a new client, “What are the things that you need for the client to be able to proceed with their project?” And identify, “What are the breakdowns you’re currently having?” so that you can put that upfront in the checklist so that you have everything that you need before you move forward. The other thing that it’s good for is being able to make sure your staff know what they’re doing, and to ensure that they’re actually doing it, and they’re signing off on it.
Josh: It sounds to me like you would be advocating to your clients that they run their business with more transparency. Would I be correct in that assumption?
Mandi: Yes. I do think that running it with more transparency in a lot of ways. And I think that goes from “this is how we do things at Acme Company. This is how we run things. This is how we make decisions.” and really empower them to be able to make decisions without you there. If you’re not clear on how decisions are made in your business and what the standard is, then how are they supposed to make decisions that are of good quality, they are going to be heading in the right direction when you’re not there? The thing is they won’t be able to. They ought to keep tapping you on the shoulder.
Josh: So what happens, do you just tell your clients that you’re kind going away for a week and don’t come back and see what happens?
Mandi: No. I don’t recommend that. But I do recommend that they think through that issue like, “What would happen if you’re gone for a week?” What’s the first thing that’s going to breakdown? And how can you prevent that?” So, I would recommend that they would think through that before they leave so that they don’t come back to a big huge mess.
Josh: I was actually thinking about after they had put in some systems in place so they could test them but—
Mandi: Oh, I see. So, to test them. Yeah, I absolutely agree with you on that – on testing them.
Josh: You definitely don’t want to do it before the systems are in place otherwise we know there’s going to be a bloody mess when they come back.
Josh: Mandi, we have just a couple of minutes left and I’m curious about something you wrote in the notes to me which is “how to empower staff so they can consistently deliver quality.” What do you have your clients do when you start getting to that part of the world?
Mandi: Empowering your staff to have consistent quality, it consists of a couple of things, but first of all you have to make sure you have the right people in the right places. You don’t want someone who’s a creative person who’s terrible with details doing [inaudible 00:14:05] work. It doesn’t matter what you put into place, you’re going to have a disaster there because you need to have the right skill sets in place and just the right temperament of people in place to be able to get the results you want. I think that part’s important, I’m sure.
And then the other part is to make sure that they know what their job is. They know what their role is and why. And then it’s actually a really important thing that can make all the difference is if they understand why. So when you explain something to your staff and you might not even be able to give them all the details on it. But if you tell them why you want it a certain way then that gives them the opportunity to make decisions based on the outcome that you’re trying to achieve. And if you don’t give them the why, they will make decisions that are completely different and might be heading in a completely different direction so that’s why it’s really important to be telling them the why and then you can have smart people make smart decisions.
Josh: I could be speaking from the same pew as you. So, Mandi, we’re kind of out of time. In fact, we are out of time – not kind of. If folks want to get in touch with you, how would they go about doing that?
Mandi: What I’m going to recommend is one of the things I mentioned before is that one of the biggest things that’s holding back businesses from streamlining and systematize is that they just don’t have time to do it. What I’m going to do for our listeners here is I’m going to give you back 20 extra hours per month.
Mandi: I am hoping everyone will find that [inaudible 00:15:28], most people do. And if you want to go to www.mandiellefson.com/gettheroadmap – so, get the road map. Then, what that will do is you can sign up to receive my roadmap that will show you five steps to get out of our business in 180 days and it’s also going to give you access to find 20 extra hours per month and you’ll be able to have that within the next couple of days – something quick and easy, easy to implement.
Josh: That sounds like quite a gift. So, again, to find Mandi, just go to www.mandiellefson.com/gettheroadmap and get the free roadmap and save 20 hours a month, kind of. It sounds like a good deal to me.
Hey, Mandi, thanks so much for your time today. I really appreciate it.
Mandi: Sure thing, Josh. It was a pleasure being on your show.
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.