there's a scary reality about starting a small business 50% of small businesses fail within their first year 75% of those that passed the first year fail in the next 5 years how are you going to beat those odds how can you create a business that doesn't fail runs smoothly and gives you the time and money to enjoy life that was the question spinning around my head until I found an answer through Michael E Gerber's book The emth Revisited why most small businesses don't work and what to do about it if you're thinking about starting a
business or if you have started one but feel stressed and busy all the time then this video is for you this is one of those books that I wish I had read before starting my business okay let's get started part one the Fatal assumption this is you you work in a company for somebody else you're good at your job damn good you are one of the best employees but things aren't going well for you you might not feel appreciated or you don't feel like you are paid enough one day you're at work and for some
reason you don't like your boss's Behavior maybe he said something or did something the reason doesn't matter much you just didn't like it suddenly a voice in your head said why am I working for this idiot guy I know the job better than he does this business would collapse if I weren't working here why don't I start my own business and be my own boss from that day on you just couldn't stop thinking about creating your own business the entrepreneur in you woke up and wasn't going back to sleep the excitement of being your own
boss and becoming independent was irresistible you had to do it so you start your business but here's the thing you didn't realize yet you were about to go from hating the idiot boss to becoming the idiot boss yourself including myself most people start a business this way before starting they were doing some technical work for a company and one day they decided to start their own business but this is a recipe for failure because the person who starts a business this way makes a fatal assumption and it's this the technical work of a business and
a business that does the technical work are two totally different things just because you understand the technical work of a business doesn't mean that you understand a business that does that technical work just because you are a skilled video editor doesn't mean you know how to create and run a video editing business unfortunately most people fail to see this this happens to millions of technicians daily a barber opens a barber shop a hairdresser opens a beauty salon and a musician opens a music store the tragedy is that when the technician Falls prey to this fatal
assumption the business that was supposed to free him enslaves him he used to do one job when he was working for somebody else but now besides that job he has to do 10 other jobs that he has no idea how to do one day you wake up and realize that you don't have a business you have a job and it is the worst kind of job you were running away from your boss but now your business is your boss and it is the worst kind of Boss soon the job you used to love becomes the
job you hate the journey that started with excitement turns into Terror exhaustion and failure in the next part you will understand why this happens and how to avoid it part two the entrepreneur manager and the technician everyone who goes into business is really three people in one an entrepreneur a manager and a technician the easiest way to understand this is if you've ever been on a diet everyone who has tried dieting knows there's a fat guy and a skinny guy inside them skinny guy know know what you have to do to get skinny diet and
exercise all you have to do is chisel skinny guy out of you like a marble statue but fat guy doesn't want to go on a run fat guy likes junk food you can work out later maybe tomorrow or never anyone who has ever experienced the conflict between the fat guy and the skinny guy knows what I mean you aren't just skinny guy or fat guy you're both when you're skinny guy you're always making promises es for the fat guy to keep and when you're the fat guy you're always making promises for skinny guy to keep
if you've ever felt like fat guy and skinny guy you know that you can't be both someone has to lose and they both know it well that's the kind of war going on inside the owner of every small business but it's even worse because it's a three-way battle between the entrepreneur the manager and the Technic unfortunately it's a battle no one can win understanding the differences between them will quickly explain why first is the entrepreneur the entrepreneur is the Visionary the dreamer this is who was inside you daydreaming looking at the clock imagining a better
life they live in the future never in the past and hardly ever in the present they are your innovators and always best at working with the unknown engineering chaos into harmony they have a strong need for control because they need the control of people and events in the present to make their Vision or dreams come true this causes a big problem they live in a world made up of too many opportunities and everyone around them is just slowing them down this means they usually do whatever it takes to make their projects move forward even if
they have to bully harass or scream at their employees to entrepreneurs most people are problems that get in the way of their dreams next is the manager the entrepreneur has the Future Vision for the business but the manager within you keeps the business running smoothly in the present they are practical the manager wants to keep things organized and in order it's their job to clean up the mess of the entrepreneur if you're like me you have a junk drawer in your house it might be in your kitchen in a desk or office but there's a
drawer that's just full of random items you don't know how it got there but one day you woke up and it was full of junk rubber bands old mismatched Keys a broken watch batteries that might be dead and always some loose screws and nails waiting to poke you when you reach inside this is what the manager sees when he sees an entrepreneur's business they can't work in this mess he sees a junk drawer that needs to be cleaned and organized instead of everything being shoved into a drawer or tossed into piles a manager would go
to work with a label maker everything has a place and everything should be put back in its place keys are on a key ring screws and nails are in plastic bins labeled screws and nails batteries are tested and then either thrown out if they are out of power or put into clearly labeled bins by size managers treat people and tasks in a business the same way they handle junk drawers they plan for problems to happen everyone has their place and their jobs to do and they make sure it happens the technician if you're watching this
video and you want to quit your job you are a technician if you've ever thought to yourself if you want it done right do it yourself you are a technician technicians love the feeling of getting things done having their hands on projects and living in the present they don't care about the future of the business or the problems of yesterday they just want to get to work they want to know how to do it and they want everyone to get out of their way everyone gets in the technician's way the entrepreneur creates new and interesting
work for the technician but they are always interrupting or distracting the manager is also a problem because they want to make technicians part of their system if it were up to the technician they would go to work every day and never worry about the future this is the worst mentality if a business is going to survive for many years in your life you can probably see these three characters in action you can see how one part of you craves a sense of order while another part of you dreams about the future you can see how
another part of you can't stand being ID and jumps into work and feels guilty if he isn't doing something all the time so to sum up this part there are three people in you the entrepreneur the manager and the technician the entrepreneur dreams the manager worries about everything and the technician gets the job done part three three phases of a business businesses grow just like people there are three stages that a business will grow through infancy adolescence and maturity infancy the technicians phase this is how most businesses start as a technician L business you are
finally free of the boss it's an exciting start that's about to be exhausting you are now going to be a master juggler every day from now on you will be juggling balls in the air doing all of the work inside your business one ball is managing the business's money and the other ball is selling your products and services all while juggling advertising marketing legal fees and taxes in the infancy stage all you do is work work and more work hours are long you might work 12 to 14 hour days you work every day 7 days
a week even at home you're working you are totally invested in your business but there's a big problem there's more work than you can handle you work harder you put in more time but you can't juggle at all balls start to drop and hit the floor you can only work so hard alone infancy ends when the owner realized es that the business cannot continue to run the way it has been in order for it to survive it will have to change when that happens when the reality sinks in most business failures occur the technician locks
the doors and walks away the rest go on to adolescence adolescence the manager's phase this is the moment when you decide to finally get help with your business every business that lasts must grow into the Adolescent phase every business owner who survives needs help what kind of help does an overloaded technician get technical help someone who can do the work that isn't getting done which is usually the work you don't like to do if you like sales you bring in someone to build the product if you like production you bring in a salesperson if you
don't know who to bring in it's usually an accountant because most small business owners hate accounting so you hire your first employee Harry Harry knows accounting he's an experienced hard worker Harry has been crunching numbers longer than you've been alive he's worked in businesses just like yours all his life and now Harry is going to find out the deepest secret you've been hiding he will soon discover that you don't know what you are doing day one on the job and Harry goes to work on your books he's looking over the mountain of spreadsheets printouts and
paperwork you've given him and in a moment it hits you you don't have to do that job anymore you can now be a manager and not just a technician a few weeks later you realize Harry can do more than just accounting he can answer the phone he can work with customers he can tidy up the storefront he can do a little bit of everything life gets easier with Harry you start taking longer lunch breaks and relax a bit but there's a problem you let Harry take over tasks inside your business instead of telling Harry what
to do this is a dangerous game because if you aren't telling Harry what to do he does things his way this means your business is slowly changing from the way you did things to a new and unrecognizable business Harry needs more help so he hires new employees because you are so busy working and growing the business they answer to Harry instead of you you keep this up because it frees you up to do what you love until problems start happening mistakes start piling up unhappy customers start complaining that things aren't the way it used to
be deadlines get missed this poor management begins to take its toll you begin to realize that no one cares about your business the way you do you begin to realize that you never should have trusted Harry you never should have trusted anyone you should have known better as the balls continue to fall at an overwhelming rate you realize no one is willing to work as hard as you work no one has your judgment or your ability or your desire or your interest if it's going to get done right you're the one who will have to
do it walk into any adolescent business and you'll find a busy owner they are trying to do everything even though they are paying workers to do it the more the owner does the less the workers do because you don't know how to do it any other way every adolescent business reaches a point where it pushes Beyond its owner's comfort zone you lose control over your business and can't even manage your Harry when Harry came you just threw things at him and ran away but Harry has needs too he needs more Direction he needs to know
why he's doing what he's doing he needs to know where the business is going and what's the overall strategy if you can't manage Harry how are you going to grow instead of growing the business you'll say forget this we'll go back to the old way when it was just you and you alone we won't worry about all these employees and expenses so you shrink down the business where you feel comfortable but you don't realize that you have already been there you have already been small and you couldn't do it so you shrink down the business
where you feel comfortable things go fine for a while but one day you wake up and realize I don't want to do this anymore you're lying in bed and don't have the energy to get up then you turn to your partner and say I'm not feeling well I think I'm sick I don't want to go to work and your partner says the quiet truth out loud but if you don't go and work no one else will right at this moment you realize you don't own a business you own a job and it's the worst job
in the world because if you take a sick day you don't get paid if you don't show up today there's no one who will do the work for you and you can't sell this business to anyone because You' just be selling them a job you hate when the dream is gone the only thing left is work you might ask what will happen if I don't go small and keep growing well you'll eventually self-destruct let's say Against All Odds you survive because you're stubborn and determined to stay in business you do whatever it takes to keep
the lights on and you have to be working all the time you're consumed by the business day after day is the same you never change the business doesn't fail your body and mind do you get sick you get hurt but you keep going you're like a fan that's been left on 24 hours a day and with one final wee the fan blades stop spinning this is how most small business business owners feel today but it doesn't have to be this way there's a better solution up until this point we have described the problems that cause
most small businesses to fail in the rest of the video we'll talk about the solutions it starts with the maturity phase maturity how to create a business that doesn't fail it's not guaranteed that all businesses that go through infancy and Adolescent end up at maturity if you're lucky you might reach this stage but here's the key point maturity is not the final result of the previous two phases you can skip them and start as a mature company from day one yes you heard it right you can start as a mature company from day one famous
companies such as McDonald's Disney IBM and apple didn't end up as mature companies they started as mature companies a company can start as mature if the entrepreneur has an entrepreneurial perspective let let me explain this perspective with an example Tom Watson of IBM said from the beginning I had a clear picture of what the company would look like when it was finally done I had a model in my mind of what it would look like a dream a picture then I realized that unless we acted that way from the beginning we'd never get there IBM
had to act like a great company before it became a great company the entrepreneurial perspective asks the same question as Tom Watson of IBM how must the business work from an entrepreneurial perspective business is the product not whatever the product is produced in business this doesn't mean the entrepreneur doesn't care about the product they do but they have a more holistic approach here is how the technician and entrepreneur perspectives differ the entrepreneur sees the business as a system it produces results for the customer the technician sees the business as a place for him to work
to make him money the entrepreneur starts with a Clear Vision and then Works backwards words to make that Vision a reality the technician doesn't have a vision they just have work to do and money to make today the entrepreneur sees the business through their customers's eyes the technician sees the business through their own eyes to the entrepreneur a new customer is a new opportunity to the technician a new customer is a problem because it means more work here's the thing you can't teach the entrepreneurial perspective to a technician don't even try what you need instead
is a business model that allows the entrepreneur within you to do what needs to be done at the same time that business model should satisfy the needs of the technician and the manager a business model that satisfies the needs of all three is called a franchise prototype in the next part I will explain this business model in detail part four franchise prototype model the easiest way to understand this business model is just to look at McDonald's please keep in mind that I'm not telling you to get into the hamburger business we are talking about their
business model here now you can say many things about McDonald's you can say their food isn't healthy you can say that people shouldn't eat junk food but what you can't say is they don't deliver on their promises because they do they have a system that works like a Swiss watch this is because every step of the business was tested tweaked and improved until it could be copied in every McDonald's restaurant food is made and served the same way across the globe frozen meat patties are the same size and shape pickles are put on buns in
the same patterns so they don't slip off the sandwich fries are kept warm for 7 minutes before they get soggy and food will be served to customers in 60 seconds or less basically every problem has been thought through documented and systematized in a way that you can take any 18-year-old from the street and he would be able to do the job now how can you create such a system in your business first you have to change your perspective about what a business is the problem isn't your business it never has been the problem is you
it has always been you and it will always be you nothing will change until you change your perspective about what a business is and how one works second every day should be spent working on your business not in it see your business as a product on the Shelf see it as a machine with interconnecting parts and ask yourself how can I get my business to work without me how can I get my people to work without my constant interference 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 pretend that you are going to franchise your business pretend your business is a model that you will copy and create 5,000 more businesses like it not almost like it but just like it perfect clones after asking all these questions you will realize that you need to create systems for everything you need to create a system dependent business not a people dependent business if your business success depends on hiring experts it will be extremely hard for you to succeed experts are hard to find and are
expensive instead set up systems in such a way that even someone with the lowest qualifications can do the job effectively this doesn't mean you go and hire just anybody from the street for example if you need an accountant you still need someone with accounting knowledge however if your business system is built well you will not need a top expert a less experienced accountant can also do the job well this is what the author means by building a system dependent business to build a system dependent business you need checklists for every task you need how-to manuals
with step-by-step instructions so that anyone can do what you do I know this is a boring part and I hate to do it but it is absolutely necessary if you skip this step you will waste so much time and fail I have personally skipped it and hired people and here is what happened since I didn't have the proper system they couldn't do the job 100% they could only do 90% of it and I had to help with the last 10% now imagine you have hired 10 people and have to help each of them with the
last 10% this will probably consume all your time again I have made this mistake and I've seen others hiring a bunch of people and then after a short while firing them all for the same reason I just described so you need to build the system first now some of you watching might might say what the hell is this system you keep talking about so let me give you an example imagine you're opening a cake shop each position in your shop would have a detailed job description this Clarity ensures that every worker knows exactly what to
do and how to do it from buying the ingredients to keeping the shop clean sweeping floors scrubbing pans and handling transactions at the register for Bakers there would be clear guidelines on how to bake the cakes the temperature settings for the ovens how long each type of cake should bake and the secret recipes that make your cakes special after all it's not just any cake shop it's your cake shop it's your prototype you want your cake to look and taste the same it should deliver a consistent experience to the customers building the Prototype of your
business is a continuous process it's not like you do it once and finish the author calls this a business development process which we will cover in the next part part five business development process this process consists of three steps Innovation quantification and orchestration Innovation is asking the question what systems can we improve in our business to help our customers please keep in mind it's not the product that requires Innovation but the way your business operates and sells its products and here's the thing you don't need to implement big Innovations for example what color suit should
your employees where to make the most sales is it a brown blue or black suit for 2 weeks test it you might find that even your best salesperson makes less money when they wear a brown suit and your worst salesperson sales almost doubled when they wore a blue suit here's another test to try instead of greeting customers the old way by asking may I help you say hi have you been here before this simple change switches the conversation from a yes or no question to an invitation to talk if they say they've been to your
store before great we're so glad to have you back here's a special offer we're running for our repeat customers if they haven't been to your store before welcome we have a special discount for new customers it's small tweaks like these that can have dramatic changes for your business but how can you find out if the Innovations and the tests you did are working this is where the quantification comes in which is the second step in the process this means you're going to find the data of your business instead of vague feelings you'll know for a
fact how the business is performing after making a change think back to the different colored suits you can track and see how much money was made by each color if sales increased by 16% for salespeople wearing blue suits this becomes the new uniform the trick is to track data for a short time to get a baseline so you know what's normal in your business then you make a change if the data shows the business improves you keep the change otherwise keep things the way they were or try another test after you're finished with your tests
you decide what to keep this final step is called orchestration you take all of the Learned lessons from Innovation plus proof from quantification and create a new system for your business if you found out that black suits and this new greeting doubled your sales then your standard uniform becomes a black suit and you teach all of your employees to greet customers asking if they've been here before you didn't guess you tested it you proved it you repeat this process for every step of the business to create a system that can work for anyone this was
the last part let me recap everything we covered in this video we started with the Fatal assumption just because you understand the technical work of a business doesn't mean that you understand a business that does that technical work every entrepreneur is three people in one the entrepreneur manager and the technician each wants different things and they pull you in different directions the entrepreneur is the Visionary and innovator the manager wants smooth operation and Order and the technician wants to focus on immediate tasks and nothing else business phases infancy the owner handles all tasks leading to
exhaustion and failure adolescence delegation begins but poor management leads to chaos and the owner is forced to shrink down the business maturity maturity isn't the end result of the previous two phases you can start a mature business from day one you have an entrepreneurial perspective franchise prototype model this model focuses on creating a business that can operate without you like a franchise to build such a model you need to build a systems dependent business not a people dependent business you need to see the business as a product and work on your business not in it
finally we talked about the business development process which consists of three parts innovation continuously seeking ways to improve how the business serves its customers quantification measuring the effects of changes to understand what improves business performance orchestration implementing successful Innovations as standard operations thanks for watching I hope it was a useful video