Bottleneck Breakthrough Audiobook - Chapter 12 - What's the Goal? | Ep 33

Speaker A

00:00:01.680 - 00:16:59.530

Lever5vision if you're working on something exciting that you really care about, you don't have to be pushed the vision pulls you By Steve Jobs before you dive in to create your bottleneck breakthrough plan in chapter 13, I recommend spending some time refreshing your ultimate goal for your business. There are any number of reasons why you became an entrepreneur and took on the herculean effort of creating a successful business.

Your purpose and vision was a powerful source of energy to drive you then.

If you've lost that vision or purpose or find yourself buried by the mountain of demands and can't see an end in sight, then you likely need a new vision to pull you forward like a magnet.

You might also find yourself in a situation you never expected with less than ideal options to choose from as you think about what you really want now, regardless of what has happened up to this point, going through the next chapter to do some zero based thinking from chapter three about what you really want out of your businesses in order then use that updated vision to dive into Chapter 13 and create your bottleneck breakthrough plan with even more energy and intention than when you started this book with chapter 12. What's the goal? The cat says where are you going? Alice says which way should I go? The cat well that depends on where you're going. I don't know.

Then it doesn't matter which way you go.

This is a famous interaction from Alice in Wonderland, written by Lewis Carroll In 1972, at the age of 50, my grandfather Larry and two of his teaching buddies, Art and Hell, started an educational game company. It was more of a hobby than a serious business as they all loved the creative process and wanted to innovate methods to improve education.

They ran the production and fulfillment out of my grandfather's garage as they tested the games in their classrooms and at workshops in the area. After a couple of years toying around with it, they could see that they had something viable that deserved more attention and effort.

They rented a warehouse and office and started selling the games through educational retailers all over the nation.

Since they were all still happily teaching, their primary goal for the company was to provide a secure retirement for themselves as well as to provide jobs for college students, friends and family members. They also continued to be on the cutting edge of new products for K12 educators. Art was the business brain of the team.

Having a PhD from Stanford in the early 1980s on the heels of the Employee Retirement Income Security act that passed in 1974, Art saw an opportunity to develop a retirement plan that could be greater than what they were all expecting from their individual teaching careers. With these goals, they reached $1.4 million in revenue by 1986 and 3.4 million by 1992.

The profits from this revenue provided a solid foundation for ART to manage their retirement plans, growing the investment significantly through the boom during the 1990s. Their stable revenue provided worthwhile jobs for those who maintained it, and their games continued to influence education across the nation.

Their goals had been fully achieved. Then in 1997, my grandfather died of a heart attack.

Over the following years, it became apparent that he had been the community builder and peacekeeper in the organization.

Add the negative impact on the educational industry of the dot com bust in 2001 and the effects of decades of nepotism that was never managed properly and the company's success began to decline. In 2005, the remaining partners realized the sales weren't bouncing back as well as hoped, so they held a meeting to evaluate their options.

During the meeting, the founders confirmed that the goals they had set out to accomplish had been met, but keeping the company going would require too much of an overhaul. It was time to move on, so they opted to liquidate the company.

Looking back, my grandfather's company was a success because it achieved the goals they set for it.

Unfortunately, it was only a fraction of what it could have become given the other companies in the education field that had started around the same time and which grew into the tens of millions in revenue. The educational industry community was tight knit.

Our company was well respected, which opened doors to many conversations that gave us insight and how competitors were unlocking their meteoric growth. Even with this insight, once the company came up against the $3 million plateau, it was intentionally prevented from going past a certain level.

There are a number of reasons it wasn't allowed to grow, all of which stem from limiting beliefs. And again, we'll cover these in the next section.

In light of this, the following poem, My Wage by Jesse B. Rittenhouse, seems especially relevant when looking at your goals for your company. I bargained with life for a penny and life would pay no more.

However, I begged at evening when I counted my scanty store for life is just an employer he gives you what you ask but once you have set the wages, why you must bear the task. I worked for a menials hire only to learn, dismayed that any wage I had asked of life life would have willingly paid.

I was too young to be involved in the company when it had the most growth potential, since my grandfather died a week after I graduated high school. If we'd had the chance, I know we would have had a blast growing it together.

Before we get to your goals for your company, let's cover some common hangups I see Business owners get stuck on owning a job. The vast majority of business owners today simply own a job from which they can never be fired.

I first saw this piece of wisdom in Robert Kiyosaki's book Cash Flow Quadrant where he shows the difference between being self employed and being a business owner.

The business owner has a system that works for him to create wealth, while the self employed person has a never ending list of tasks they must do to keep revenue coming in. Good thing you have some tools to start building business systems from the last section.

Now, when you look around the business world, you'll recognize that all but a few business owners fall under Kiyosaki's definition of being self employed.

It applies equally to the local retail shop where the owner has to show up to manage it every day, the professional services firm where the owners are the main fulfillment team, and the software company that relies on the owner as the rainmaker to keep bringing in profitable clients.

Michael Gerber set a great goal for the business owners in the Emyth Revisited to move up from being the technicians who fulfill clients and beyond the managers who support and guide the technicians to become the entrepreneur that sets the vision and direction of the company. I think that on a day to day basis that's a great goal to shoot for.

But there's actually more to owning a business than just figuring out what you want to do each day. Opportunity Cost As I mentioned in Chapter nine, every great leader I've ever known or studied chose not to shy away from confrontation.

And every wealthy person I've ever known is very familiar with and fully aware of the concept of opportunity cost. Now in terms of the standard of wealthy, I set it arbitrarily at a net worth of more than 10 million.

I find there are plenty of people that inadvertently build up a couple million and enough savers get to a million if they don't share the mindset of the truly wealthy. Now, opportunity cost is defined as the loss of potential gain from other alternatives.

When one alternative is chosen, knowing the hard cost of what it takes to run your business is relatively easy. This is the cash that comes out of your pocket every day.

This figure also makes it very easy to evaluate and make decisions since you feel the impact of that money coming out of your pocket every time you pay for something, whether it's rent, payroll, insurance, and so on. Every day you are continually choosing actions that prevent you from being able to choose another action.

This is not something to become neurotic about, constantly paralyzed by fear of missing out on something more worthwhile, but it is definitely something to start incorporating into your decision making. The concept of opportunity cost can be more of a challenge to grasp at first, so let's use a common example you might be familiar with with hiring.

A mountain of data shows that there is a tremendous opportunity cost throughout the recruitment and hiring of staff. In any business.

You know the hard cost of what you spend on ads, on job boards, or using a recruiter who has a clear fee associated with their results. Then you have the salary, benefits and taxes of the new hire, as well as any equipment or tools you might need to purchase for them.

Even with all of those expenses, I guarantee that the opportunity cost of hiring someone is far greater than the hard cost it requires, especially in the areas below your time. Unless you have an HR department that does all the vetting, hiring and training of your staff, you're involved in the process.

Every minute you spend reviewing resumes, doing interviews and negotiating their earnings packages takes time away from other revenue generating activities. Now you could very well have the long term perspective that recruiting is your way to scale growth, which is awesome.

Just know that you must have sufficient cash flow and profits to commit to this long game. Onboarding is the next part.

No new hire hits the ground running from day one, so they need to be trained and supported until they're up to speed and capable of doing their job without constant oversight. This time is very costly because it doesn't generate revenue or keep current operations running while it's being done. Then there's their performance.

This is where the largest amount of opportunity cost can show up. Let's say the new hire was only a C level player.

They make mistakes frequently, but they try hard so you have a difficult time challenging them to step up their performance. Their mistakes require a lot of error correction by you or other staff pulling others away from their own activities.

Then one of their mistakes ends up costing you a client because they simply dropped the ball and the client never got a notification that their order was going to be delayed, leaving them in a bind when they didn't have it for their project.

In sales roles, the opportunity cost of low performing hires is the difference between hitting or exceeding quotas and always putting up with excuses of underperformance that could change the trajectory of your growth from achieving 30 to 40% each year down to 5 to 15% instead. If this happens in a $10 million company.

That's a cost of millions of dollars in lost revenue and potentially tens of millions in lost value when selling the company in the future. Then there's turnover.

The worst outcome arises when you keep poor performers on the team as the opportunity cost continues, compounding in comparison to the growth you would realize if you replaced them with a better performer. So eventually you end up letting them go because you see that it's just not worth the cost of having them around.

This restarts the entire hiring cycle and further delays the gains you should have made during the time you employed them. If you were quick and let them go after only six months, you might have $40,000 in hard costs for their recruitment, salary and training.

The opportunity cost to your company would be in the neighborhood of $400,000.

This accrues from continuous underperformance in taking your time and that of others away from other revenue generating activities as well as the chance of losing clients because the employee let their responsibilities fall through the cracks. This is based on data that shows that the opportunity cost of a bad hire is 10 times your hard costs.

Now the solution to all of these hiring related opportunity costs is to develop a robust recruiting system that goes beyond the default job board and resume process. Your goal. You started your business for a very clear reason.

Nobody just falls into a profitable business, waking up years later wondering how it happened. The effort and risk involved to get it up and running is too great for anyone to do it without intention.

Whatever your original goal, you are here now and it's time to revive it to best serve you. Now let's begin at the end and define an amazing outcome that would leave you awestruck.

Are you like Tim from the first chapter who sees the best outcome as growing the business so you can sell it as soon as you can and walk away with enough money to never have to worry about income again? If so, I found that number needs to be a minimum of $5 million today.

Anything less and taxes and inflation could erode it, limiting your lifestyle enough that you'll feel restricted and have to start something else.

Or maybe you love your business like my client Teresa and just want to keep increasing its profits and streamlining the systems so you can take as much time off as you want. Then you can sell it anytime you want as you near the end of your working life. Whatever the goal, define it now, the more specificity the better.

Put a timeline on it. Play around with different timelines until you find one that makes you feel both excited and at peace.

Excitement with anxiety means the timeline isn't quite right for you and will create resistance as you try to achieve it.

Don't focus on minutiae like what you'll do on a daily basis, but rather what you want to accomplish with the business, both financially and charitably, and what level of autonomy or free time you want to get from it. And don't worry about this goal being set in stone. You can always update it and let it evolve.

As you continue to evolve as a business owner, as the profit grows, you may find yourself like a friend of mine who limits her income to 300,000 and stashes the rest in various long term assets.

Or maybe you'll end up with so much time off that you'll start investing the surplus profits and flipping classic Ferraris like another friend of mine. If you find that you've been so mentally trapped by your business that you can't think of an inspiring goal, you need a recharge.

I always suggest taking some time off to fill your emotional tank. For me, it's doing something active with friends like riding my motorcycle or playing tennis.

It might mean sitting on the beach and reading a book for half a day, or renting a hotel room and just getting room service and watching a movie and sleeping in the next day. Whatever gets you recharged, make space to do it.

That's the only way you'll come up with a worthwhile vision for your business that actually inspires and excites you. Define reality like the Alice in Wonderland quote that opened this chapter.

If you don't know where you want to end up, it doesn't really matter which way you go. And without knowing where you are currently, there's no way to know how to get to your destination.

So you need to take some time to define where your business is today before you can make the plan to bring your vision into reality. Here are a few what's your revenue? If it's fluctuating, just look at the last six months. What about profits?

Get the actual dollar amount as well as a percentage of total revenue. What about your income and net worth? Are they stagnant or growing? How are your staff performing? Are they all stars or the Bad News Bears?

Do you like your clients? Do you wake up worrying about them? Are you excited to work with them? Is your industry growing or taking a beating?

Are there clear opportunities you can exploit in the market? How stressed out are you running your business? Be honest. Nobody's judging you. How much time are you spending running it every week?

What are you missing out on that you'd rather be doing? Are you deferring life for some reason? And finally, how's your marriage? Are you using the business as an excuse to avoid investing in your spouse?

Work backwards now that you have a vision that gets your business to serve you as much as possible and also have an assessment of where your current status is, the next step is to fill in the gap. This is best done by working backwards to define rough stages that help close the gap. You're not going to know exactly what to do at each stage.

You will need to adjust as you move forward, so just start sketching out your ideas for each stage. You'll get more polished as you continue with this process.

You might have to do some research before you fill in the gaps to make sure you know the key factors you need in place to make the goal feasible. Tim found the larger companies in his industry would pay around six times ebitda.

That's earning before interest, taxes, depreciation, and amortization.

For a company his size, after paying off their equipment debt and splitting it between his two partners, he found that they needed about 30% more revenue to hit the magic number. This is a tremendous insight that will help him fill in the gap between where they are and where they want to be.

The beauty is that this entire book is built to help you fill in the gaps at every stage that comes up.

We'll get into how to start doing this in the next chapter, but before we do that, here's one more nugget to help you stay on track with your vision and goals.

Seddon days in July 2015, I had the privilege of attending a webinar with a guy from the UK named Mike Seddon that transformed my life and that of many others. Mike had just found out that he only had weeks to live as he had been diagnosed with an inoperable and incurable cancer.

A friend suggested doing this webinar since he was very much at peace with his mortality and felt he had some wisdom worth passing on.

Mike put together the webinar in which he covers five key questions he he asked himself regularly during days he would take off to reflect on his life.

From these questions, he found clear actions he needed to take to continually improve his life and step more completely into his most fulfilling purpose. After the webinar, attendees started taking a day off to reflect and take action, calling them Seddin Days.

In honor of Mike, you can watch the hour long webinar at BBG LI Seddin S E D D O N Do it Tonight with your spouse. I can't think of anything more significant for you. Here are the five key questions for future reference as you take your set in days what is my why?

What does success look like? Am I enjoying the journey? Am I hanging out with the right people? And what would happen to my loved ones?

Action Steps Regardless of how clear you are on your ultimate goal for the business, I strongly recommend the following Tune up before you dive in to tackle bottlenecks in the next chapter. First, go back a couple of pages to answer the questions to define your reality as it is today.

Second, carve out an hour and watch the Seddon Days webinar and answer the five questions I just listed. Third, devote at least 30 minutes without distraction to sketch out some notes on what an inspiring final goal could be for your business.

Don't judge what comes out, just let it flow. Fourth, look at where you want the business to go and compare it to the answers in step one that define reality today.

This gap will help you find and fix your biggest bottlenecks in the next chapter. To get to your ultimate goal.