The Bottleneck Breakthrough Hierarchy | Ep 1

Speaker A

00:00:01.040 - 00:25:01.630

This is episode one and I'm going to cover what a bottleneck is and how to know where to look for them in your business. This is the Bottleneck Breakthrough podcast.

I'm Josh Long and this is all about helping you find and fix the biggest challenges in your business to unlock growth and profits.

My name is Josh Long and I'm going to dig into what bottlenecks are, answer your questions and hopefully help you get a better framework of how to tackle stuff in your business.

The reason I started focusing on bottlenecks was it was just the way my brain worked and saw that it worked really, really well for small business owners to get some sanity, get some time back and be able to grow their business to the level they want and profits that they wanted to hit. Because I, I believe at the end of the day, the whole point of starting a business is to make it serve the lifestyle that you want.

Otherwise we can go get jobs and go do all these other fun things that don't cause as much stress and don't take as much off of our life when we're getting them off the ground. If you're not familiar with me, I'm the author of Bottleneck Breakthrough. It's at Amazon, it's at Barnes and Noble.

There's a hard copy, there's a Kindle version, there's now an audible version if you like learning from audio sources. So that's all available and I have a group on Facebook, this stuff will be posted there. It's called Bottleneck Breakthrough Method. It's free to join.

It's all focused on finding and fixing your bottlenecks in your business.

So feel free to go there to get more resources, engage deeper, get Q and A, other questions, see other answers from people that are tackling these things in their business. So the basis of bottlenecks, right?

So I started in my mortgage brokerage back in 2004 or five, tackling fixing things in the business and I just had a pile of stuff everywhere. It was overwhelmed. It was white noise in my head, I couldn't organize, I didn't know what to do next.

It was just the latest and loudest, walking around, putting out fires every day, had lots of got a minute meetings with clients and I started realizing I have all this pent up demand. There's all these people that want to work with us. In the mortgage business there was endless opportunity.

In California in the early 2000s, the market was crazy. There was lots of opportunity and I saw all of this opportunity like these dollar signs on the left Side.

But inevitably, I couldn't get all of it fulfilled. There was some restrictions somewhere.

And so it was like this funnel that restricted growth, and it only allowed a certain amount of money out on the backside. And so I just started calling it a bottleneck. I was like, I can't.

In hoses, in pipelines, in actual soda bottle, the neck of the bottle is the most restrictive point.

And all that can come out, even though you may have this huge volume of capacity behind it, all that can come through is whatever fits through that bottle neck in the bottle. And so that's what I started seeing, was there's constraints, there's a restriction in my business.

And if I focus on working on this one specific bottleneck, whatever that is, and in my mortgage brokerage, at the time it was getting loans underwritten, it took like 30 days to get an approval. It seemed forever. And I was like, you know, I think there's a faster way to do this.

If we do it faster and we get approvals faster, we could probably serve more people, stop wasting as much time going back to the same file, stop following up, stop bugging our clients for more documents. And so we focused on expanding that flow through of that bottleneck.

We reduced the amount of time it took to get loan approvals, went from 30 days down to three days.

And so, as you can imagine, when you improve the approval or the improve the efficiency of a process by 10 times or 90% reduced time, there's so much more free time to get to other proactive stuff, the opportunity cost is lessened, and so got approvals done faster, and lo and behold, more money came through.

And so that's when I started realizing, gosh, if I tackle the next friction point, the next most restrictive point in my business and keep improving on it, more money will come through. And so that's how the bottleneck theory came about.

It was around 2006, and then when I worked for Chet Holmes as a consultant with him and his marketing company, consulting company, and then became his marketing director, I was tackling bottlenecks all the time. And I just found if I go from one bottleneck to the next, growth happens.

And then going out on my own as a consultant, I had clients that said, what do you think we should do? Instead of coming to me and saying, I need a website or I need Facebook ads or something, I had a few clients say, what do you think we need?

And then taking my time and going through it, realizing these bottlenecks exist. The same stuff is coming up over and over. That's when bottleneck breakthrough really got formalized.

And so the challenge a lot of us have is that we don't know what we don't know, and we don't know where to start.

And I think this quote fits best, and it says we can't solve the problems we have today, essentially by using the same kind of thinking we used when we created them. And obviously a really smart guy named Einstein said that.

And so my goal is to equip you with a framework over the next six weeks and a lot of different tools to be able to look at your own business so that you can add a different perspective and add more knowledge, stop having ignorance about what you're supposed to do each day and be distracted by the latest and loudest. So today, what I wanted to share is what I call the bottleneck hierarchy.

Now in the book on page six, I talk about the bottleneck matrix, and we'll talk about that probably next week, where we get into the typical revenue plateaus and the typical bottlenecks at each one, and the typical solution for those. But this bottleneck hierarchy is really to give you a perspective of what is next for you to tackle as you go through your business.

And these are different stages, the different levels of bottlenecks that I solve with clients all day, and I'm just going to march through them. We're going to probably take 10 or 15 minutes on that, and then we'll dig into Q and A.

So the first, most important step in a business is getting clients, right? Peter Drucker says the purpose of a business is to create a customer.

And the way you create a customer is you have an innovation, some product or service or offering that you come up with, and then you market that innovation to get customers. That's it. That everything else is a cost, he says.

And so at day one, you may have an innovation, you may have a service, you may have a product, you have something that you want to give to others, but you have to go out and get clients. And a lot of companies struggle with getting clients that is forever their bane of existence.

They forever and ever and ever never get off the hamster wheel of solving the problem of getting clients. So if you can't find fix the problem of getting clients, you can never move up this hierarchy. And growth is really, really difficult.

And the reason that I end up working with companies between 1 and 10 million really is the sweet spot for me, is because the getting clients part is solved for the most part. To get to a million dollars in revenue, you have to Know where to get clients. That's inevitable. There's no way around it.

You can't guess and hope your way to a million dollars in revenue on getting clients. So I talk about that in the marketing section of the book traffic pillars.

Building a solid traffic pillar is a key component and it's something that a lot of small business owners either resent, they look at as a pain, they don't realize that they have an innovation and they're supposed to market that innovation. That's hand in hand. It has to work, has to be done. You have to have some way of communicating with what that innovation is, what that offering is.

And if you don't do it consistently and long going, you have roller coaster revenue, you have fits and spurts of revenue and it's unstable. So getting clients, number one priority, first bottleneck.

If you don't get beyond that, if you don't get that solved, all the rest of these bottlenecks are immaterial. They become what's called a false efficiency. If you're fixing things downstream behind that bottleneck.

If getting clients is the beginning of a funnel and you have all of these efficiencies behind it, you figure out how to serve clients and these other things we're going to talk about that are really well honed. Well, none of that efficiency matters if you don't have clients coming in. So getting clients, number one next. This is basic, right?

101 fulfilling clients. It's interesting to me in the marketing world how many gurus are out there helping people close. High ticket, right?

That's a common term I hear thrown about how to close better how to close high fee products, how to close high fee solutions and services. But they never talk or worry about what do you do to fulfill those clients.

Because I know so many people that can go close a client, but then they scramble like crap. I don't have the staff, I don't have the systems, I don't have the processes, I don't have any time.

I'm so focused on closing and getting clients, I don't know how to fulfill them. And that's where we run into the situations of like the contractor that scams people, right? They take a big deposit up front and then they disappear.

They ghost them. They're really good at getting clients, but they never fulfill them.

And that's the definition of a con artist or scam artist is that they're promising all these things and closing and never fulfilling on them. So being able to fulfill clients. Most businesses don't suffer from this.

But I find there's always room for improvement around fulfillment, whether it's communicating your onboarding process, having a kickoff meeting so that your team knows what to do for specific clients. There are a million things you can do to optimize fulfilling clients. But at the end of the day, you have to have the basics down to fulfill clients.

After that. Whoops, wrong way. Most business owners live here, and they're walking around putting out fires.

And to me, this is where a lot of business owners get stuck thinking that they have to get these fires sorted before they can get to solving bottlenecks. Well, the reality is that the fires are just another version of bottleneck. And the way I define a fire is that you're in reactive mode.

I say that most business owners are walking around with fire extinguishers in both hands, just putting out everybody else's fires all day. There's a lot of got a minute? Meetings.

There's a lot of staff that are capable when you're gone, but when you're around, they keep coming to you, and they can't make a decision, and they rely on you like a crutch. And so this issue of putting out fires is management and systems related.

Because if your staff isn't trained and you're not communicating clearly to equip them of how to make decisions, how to assess situations, and how to solve the fires that they think need your attention, you'll forever be held there, and you'll forever be a fireman walking around, a firewoman walking around putting out fires every day. And so to me, this is one that a lot of business owners, like I said, they think, oh, I have to get away from the fires.

Once I get those, then I can work on bottlenecks. Well, all of these are bottlenecks. They're all friction points preventing you from growing your company effectively.

And so when I come into a client and they are running around with their hair on fire, they have no time, they have no space, and they are constantly flustered and in reactive mode. The first thing I do is we start looking at, okay, what's the next fire? What's the next situation?

Why isn't this employee dealing with that on their own? Why haven't you delegated it and given them responsibility and authority to solve it? What's missing?

Okay, well, maybe they are poor at making decisions. Well, why are they in this role? Maybe you need to replace them. Maybe you need to train them. And again, it's all management 101, right?

Back to management and systems. But putting out those fires. And a great example was a client of mine, Ben Gorelick. He wrote the forward of my book.

He had mountain guide training school and he was in inadvertently creating his own fires because his sales process was that he would take a call with any prospect that was interested in coming to his Mountain Gate school. So he was on the phone 20 to 25 hours a week.

Well, he had zero time to give to his staff, to manage, to tell them how to prep for an expedition, how to get all the students, travel arrangements, and just basic logistics. He had zero time for. Because he's on the phone 20 to 25 hours a week trying to get get clients and close clients.

Well, we looked at changing his application process. Long story short, I talk about it in the book, we ended up saving him about 20 hours a week and his close rate went up and his revenue went up.

And so we got rid of that big fire and freed up all of this extra time.

So really, when I say that getting putting out fires is look at where you're spending an inordinate amount of time reacting or not able to proactively pursue new initiatives, new systems, new growth, new opportunities. Because everybody's busy all day, every day maintaining the status quo in your company. And if you're not proactively growing it, nobody else is.

So next up the hierarchy is staffing. Again, putting out fires is typically a management thing.

And that which leads right into what are you doing to recruit, train, and retain staff that can help you expand your reach, expand your leverage, and grow your company. And a lot of business owners start out with, I just need an assistant, right? I just need a mini me version of me, of myself.

And the problem with that is, a, nobody thinks like you, because if they did, they'd be starting another business.

And B, there's no way for somebody to come in and know everything you know about your baby, because you grew it from the ground up and they're just stepping in from the outside. And so staffing becomes a big bottleneck because you go through assistants, you go through flaky.

You call them all flakes, you think all the millennials are flakes, but in reality, you're just not providing basic management structure. You're not providing job descriptions or roles and responsibilities. You're not helping them prioritize what they need to do every day.

And so you leave it up to them. And most employees will prioritize by whatever is easiest or whatever they're afraid of dropping the ball on.

And a lot of times that doesn't match up to your priorities or what revenue generating activities matter. So staffing becomes a big thing.

And this is where I spend most of my time for my clients is around management, around leadership, around communicating, making sure their staff are in the right spot, doing the right thing, that they're supported.

Because at the end of the day, as a business owner managing an organization, I think your number one role as a manager is to equip staff to be able to do their job and then support them and make sure that they can do their job.

So you're equipping and supporting, not driving as a taskmaster, as a lot of us equate management to, or being into the weeds and nitty gritty and all of that stuff and micromanaging them. That's not how you get the most out of your staff and not how you work through your staffing bottleneck.

So a lot of times people will complete the assessment on bottleneckbreakthrough.com and they'll say their biggest issue is employees. They're flaky, that they don't follow through, that they're not completing tasks.

And the solution to this is the weekly one on one meeting management meeting, and then systems and checklists on how to do their job and what matters. And you as the owner just need to communicate that, because if you don't state your expectations, you can't judge them for not fulfilling them.

Next up is systems. And again, there's a lot of books out there about systems and documentation and I think it's overkill most of the time.

Most of the companies that are in the training around systems overcomplicated intentionally to make them seem way more important or more significant. To me, it's just starting with a basic checklist. If there's automation you can put in place, great. Most of the time it's just having a checklist.

And I think the book, the Checklist Manifesto is a fantastic example of a really big problem in healthcare, of doctors not washing their hands or not keeping sanitary environments during surgeries.

And by having a checklist that anybody in the surgery room can follow and chime in on if somebody misses a step, reduced infectious disease rates and post surgical infections just by following a checklist.

And I think pilots are a great example when the risk of failure is so high everybody dies if a plane fails so often, there's very little tolerance on what can be seen if a failure happens. And every flight, everywhere, the pilots are always going through checklists.

And it's because our brains aren't really reliable at following checklists. So I think that's where systems are super useful to make sure that your company is running smoothly without you.

And there's again a ton of opportunity to work on them and optimize them as you go up this hierarchy. Next, I will get back here and click over bookkeeping. Now, this may seem basic for some of you others, it is the most overwhelming process.

And when I mean bookkeeping, I'm talking about ongoing accounts receivable, accounts payable, income statement management and cash flow statements so that you can see where your business is in any given time with reasonable time delay. So I suggest that you have your books review reviewable by the 10th of every month. So it's January 22nd right now.

You should have already had your books done for December, ideally for 2019. I know this seems like a pie in the sky fantasy if you're further down the food chain here on what bottlenecks you're actually tackling.

But being able to get to the financial reporting and be able to see where you're at huge. And this is where you get really sophisticated. You can get into accounts receivable aging.

And when you start cutting that aging down on where the bad clients are, where your terms are off, or where you're not confronting people paying you, you can speed up your turn cycles, which increases your cash flow, which increases your stability, which makes you much more profitable in the end by just reducing your accounts receivable aging. And there's a million other things to do around bookkeeping.

So then this is where you start getting into the sweet spot of upgrading everything in your systems, everything in your list.

And so I find when I can work with clients at this stage, it's a lot of fun because we can cherry pick tweaking and optimizing the really significant levers because everything else is running well. And now we start. There's a term in the staffing world called top grading, where you're recruiting people and dropping your lowest performers.

And they may not even be bad employees, they just you want higher and better and you're able to replace that bottom performer with somebody much better that maybe sets the new standard in your company. I was talking with a client last week and they are using Toptal.

It's a design and development freelance agency and they have the best developers and designers available and it's contract based work.

And he said by bringing in a Toptal usability designer, somebody that's focused on making their software easier to use for end users through design, better graphics and better layout and better workflow, that the rest of his team improved because they saw what this superstar was able to do.

And to me, it's kind of like if you're playing basketball with LeBron James, even if he comes out for an afternoon in a pickup league, guys are going to pick something up, they're going to see, oh, he does something different.

And that's what in a contract base, bringing in somebody from the outside that can improve the talent level or improve the systems, upgrade what your staff's currently doing, but it's even better when you can bring somebody in full time and replace poor performers. So to me, that's where upgrading across the board. I've had a lot of clients say that.

I just had a client yesterday, he said that after a year and a half of working with me that his business has been joshified, which really is just everything's been upgraded across the board from project management to staffing, to his promotions and his copywriting to his business model. It's just all been upgraded because we were already working from strength and there weren't a lot of fires to put out for him.

And then finally the last step is strategy and this gets around business model and what are the ways in which you're charging for services and making money and driving your profit? This is where I think the real big innovation breakthroughs come through. So like Amazon's a great example.

They've been selling books online for 20 plus years, right? And they started with books because they're simple, they don't expire, they can be shipped with media mail.

The postal service gives a cheaper rate and they just needed to get that working, right? There wasn't much profit. Bezos ran that for a number of years without making a profit, but it was buying them time.

And the interesting thing now, 20 plus years later, is they have Amazon Web Services because as their business expanded, they built all these server farms and they have so much capacity that now they sell that excess capacity. It's like overflow. It's stuff that Amazon doesn't need and it's an asset sitting there. And now they sell it.

The fascinating thing is that it accounts. I don't remember the exact data, a report just came out.

But it accounts for about 10% of their gross revenue, but it accounts for 50% of their net profit.

So that's where Amazon, by being in the game, getting all these other things sorted out and making profit to keep the doors open, Bezos was able to let this higher level strategy come out so that Amazon Web Services became a reality. And now they have Massive, massive profit just from that one business line.

And to me, that's the highest level of solving bottlenecks is you can't get to that level of breakthrough until all of these other things are sorted and you're able to run your business more efficiently, have more space, more time, less headaches, and have more profit to be able to take opportunities and pursue other things. So to me, that's the bottleneck hierarchy.

As you guys go through looking at your business, there's a lot of new shinies, things out there that can be interesting, oh, I need a new funnel or I need to be at this workshop, or I need to buy this piece of software or whatever, put it in this hierarchy and figure out where you're at, the stability of each of these things. To know this is probably a false efficiency. If we go and we get a new landing page tool, well, we're not getting much traffic. That's not the problem.

And our traffic's converting fine. The new landing page tools just a new shiny. I'm kind of enamored by it.

It may be fun to play with, put your kid on it if you want, have them work with it or something, but don't take your staff's attention away and think that by getting a new landing page tool that it's going to make some material difference. It becomes a false efficiency.

It becomes something that you're putting the cart before the horse or you're wasting time on something that really isn't a bottleneck. So hopefully this is helpful.

I'm open for any Q and A, any questions you have, feel free to either throw it in the chat, unmute yourself, whatever, and I'm happy to answer questions now about your bottlenecks and how you go about tackling them. And yeah, hope this is useful. If you'd like any of the resources referenced in the podcast, you can get them in a number of places.

First, there's a Facebook group called Bottleneck Breakthrough Method that I referenced. There's a resource website for the book at BBG li, so short for bottleneckbreakthroughgroup link. So BBG LI resources.

And you can also get more content at our main site@bottleneckbreakthrough.com or just go to BBG Li as a short link. And thanks for any reviews you leave on any of the podcasting services you're listening to this through.

Reviews are just the best way for others to find it. This podcast theme music is an excerpt from Triptych of Snippets by Septahelix it's used under Creative Commons.