By Michael Walsh
We believe that productivity in business is a function of design and structure. Intent and enthusiasm are valuable, but without an adequate structure, a business will be limited in its growth.
There are 4 main types of people in business. Let’s look at this from a systems perspective.
E B
(In) (Has)
S I
(Is) (Funds) *
* Source: The Cash Flow Quadrant by Robert Kiyosaki.
E = Employee: This person works IN the system. This applies to most of the employees in companies.
S = Self-employed Person: This person IS the system. Business owners and professional practitioners with revenues anywhere from start-up to between $1 million and $2 million in sales generally fall into this category. If the entrepreneur/professional were to leave for more than a couple of weeks, the business would start to run into problems.
B = Business Owner: This person HAS a system. The system is capable of operating without the daily control of the business owner.
Businesses that grow from $1 – $2 million anywhere up to $10 – $12 million evolve into companies that fall into this category.
If an owner can leave the business for 3 – 6 months or more and…
- First, have a business to return to;
- Second, have it be just as, if not more profitable than when they left it;
…then that person HAS a system, and a "B" type business.
I = Investor: This person FUNDS the system. Investors work with their businesses to increase the asset value, and to serve the owners’ personal goals and commitments in life.
7 Reasons People Get Stuck in "S" and Never Get To "B"
Most small business owners never get past the equivalent of a self-employed practice with help. Businesses with up to 10 employees are usually oriented around the skills of their owners.
The other people assist and the business owner provides the core talent to deliver client or customer results.
Where there are two or three owners, sometimes this may grow to 20 or 30 people, but the same point holds true. You usually find that you have one owner for up to 10 employees, or "helpers". This still falls into the "S" category, identified by Kiyosaki in his book The Cash Flow Quadrant.
Why do small business owners get stuck into "S" type businesses? We have identified 7 core factors that account for this unfortunate
truth:
1. Small business owners are good at serving their clients and customers, not at growing businesses. They have their success due to their diligence at plying their skill, whether it be in dentistry, landscape architecture, or hanging door frames. The skills at generating customer satisfaction are where these entrepreneurs thrive, not in growing a business that offers that service.
2. These people have never grown a "B" type business before. I rarely meet anyone who currently has a $1 million, a $2 million, or even a $5 million business who has experienced owning and operating a $10 million business in the past. This lack of experience in running a larger business shows. People just aren’t sure how to grow. This keeps these owners stuck in their smaller businesses, unable to grow them to the size they want.
3. Many small business owners are under the misguided notion that hard work and plenty of it will get them their goals. This is simply not true. Productivity is a function of design and structure, not your good intent, and not your hard work. Hard work just won’t get it done. Like it or not, that is a fact. Without the appropriate structure, you can work all you want, but you won’t achieve the results you desire. Most small business owners fail to recognize that fact.
4. Most small business owners get caught in a "success-trap" within an "S" type business. I have seen it often, where people are so good at what they do that they attract many loyal repeat and referral customers to them, all with individual needs that must be addressed. This increased demand eats up the owner’s time, leaving little if any time to design and grow the new, larger business.
Yes, success can be a trap that thwarts you from your goals.
5. Most business owners don’t know how to train others or transfer what they do to other staff. You may have gained a loyal following from your intuitive skills, but that is very different from a distinct set of skills called training and transferring your knowledge to teach others your profession. Without this additional competency, it is very difficult to scale at the level needed to become a "B" type business.
6. Owners of "S" type businesses don’t know the perspective that is required to develop and operate a "B" type business. People who own and run "B" type businesses think of things from a much different perspective. While an "S" person, when faced with a challenge, will think, "How can I get that done for my client", a "B" type person will look at the same issue and say, "How can my business be structured (without me) to tap this opportunity for all future clients?" Subtle, but very different thought processes leading to vastly different results.
7. There hasn’t been a place to go to learn how to take a business from "S" to "B". Most available training either require small business owners to adopt large business methodologies (which do not usually work in smaller businesses). They are expected to stop their own companies and try to build their own business like a franchise of hundreds of locations, while still trying to make ends meet. None of these strategies has proven to consistently work to move the owner of an "S" type business into the "B" realm.
Our goal at Kaizen Consulting is to do just that: support people who own "S" type businesses in growing them into strong and profitable "B" type businesses. We have found that if an owner is effective at delivering a strong customer experience of value at their current size, we can help them meet their goals for growth.
