Build A System-dependent business not People-dependent
Ever wonder why a company like Coca-Cola, McDonald, Ford are still thriving long after their founder passed away or have you seen certain businesses or shop owned by certain people thrived while the owner was alive but collapsed once such owner became absent or died. The difference is that the former was system dependent while the latter is people dependent. Upon reading this from the book Why We Want You To be Rich, it is a good mind opener, no wonder there a few companies that can’t thrive once the owner is absent for a few months, and also this is the reason why a job and university degree aren’t sufficient, what do I mean, no matter how well paying a job is and good your university degree, once the job is taking away or your certificate no longer count, everything else stop working, families shattered especially if is a result of death of a bread winner with the job or degree becuase it is dependent on person, not system which could be sustained even if the original owner passed on.
Too many businesses are people-dependent. McDonald’s is system-dependent. it has well-designed systems, regardless of where you go in the world, the McDonald’s business is pretty uniform. Most importantly, their business systems are often run primarily by people with just a high school education. That is how good, how sound, their systems are. I have looked at so many businesses that are top-heavy, staffed by highly educated and highly paid people who are working hard and accomplishing little. In most cases, these types of businesses focus primarily on people and not on developing great systems. A great team of highly paid people will fail without great systems.
Now, lets look at another popular system we can identify with, from the illustration made by Robert the McDonald’s franchise as a teaching example. Ray Kroc bought McDonald’s from the McDonald brothers, he leveraged himself When he franchised McDonald’s, he expanded his leverage. When Ray Kroc purchased the hamburger stand, he leveraged himself because the burger business could make money with or without him. And this is where most S(Small Business) quadrant business owners stop, keeping their businesses small. When Ray Kroc developed a franchise system for the small business, he expanded the hamburger business into the B(Big Business) quadrant. You may notice I used the words “franchise system;’ the key word being the system. In Before you Quit your Job, written for entrepreneurs, I write Eight Parts that makes a business
Statistics show that 9 out of 10 startup business fail in the first five years. And of the one that survives, again 9 out of 10 of the survivors fail by the tenth year. ( Again, notice the 90/10 rule.)
Many entrepreneurs fail simply because one or more of the eight pieces of the B-I triangle is weal or nonexistent. Whenever I look at a struggling business, I use the B-I Triangle as an analytical reference.
Notice that the world product is used to label the smallest section and the word mission is one of the largest sections and the foundation of the Triangle. This is because the product is the least important item of the B-I Triangle and the mission is the most important. Too many times, I meet a wanna-be entrepreneur who says to me, “I have an idea for a great new product.”
I often respond by asking, “So, what is your mission?”
More often than not, the reply is, “well, to make money.” In most instances, the business has little chance of survival.
The mission is the most important part of the business. It is the spirit of the business. it is the heart of the business. Without spirit and heart, most entrepreneurs will not make it, simply because the road ahead is a hard one. The world is filled with great products that fail. The products fail simply because they do not have the power of the B-I Triangle behind them.
When you study most successful businesses, you will most likely find a complete and vibrant B(big business)-I(Investor) Triangle in action. A great business will have a strong mission, great leadership, a competent team of managers who work well together, excellent cash flow and financing, clear and effective sales and marketing communications, systems that work efficiently, clear and tight legal documents and agreements, and, of course, a great product.
Most of us can cook a better hamburger than McDonald’s. But few of us can build a better business system than McDonald’s. Which brings us to the word systems again. One of the biggest differences between an S(Small Business) quadrant business owner and a B(Big Business) quadrant business owner is systems. Typically, the S(Small Business) quadrant business owner is the system, which is why he or she cannot expand.