I want to create a place where my employees can earn above-market pay. A place where they can come and go on their own schedule, according to their own wants and needs. A place where they can escape the barbs and arrows from ignorant people that judge them by the crimes committed by their relatives, or judge them based on a last name that they share with someone infamous. A place where they won't live in constant fear for their livelihood.
I want to create a place of refuge; a place of solace; a place of safety. A place where they won't be judged by their beliefs, or the acts of their relatives.
That has always been my goal, and those who know me will vouch that it is what I have tried to create and have advocated for many years. All of my business rules, all of my principles, and all that I have tried to create centers around this goal.
The goal has always been stated to my family that we want to impact 200 people when you include the families of the employees. An enterprise that large requires that it generates $15M to $25M per year in revenue, and have about 50 employees.
How do you create such an enterprise? I have created a set of business rules that I have told my family must be followed if we are to ever hit that target. Here are a few of those rules that I will share with you.
This is a PRIVATE guide written to my family, that I am only now beginning to share publicly:
Time. Within your enterprise, you must divorce your time from the revenue stream. There is no way you will be able to hit the target just from your own efforts. You must automate and/or delegate, and delegating to others is actually the point of the goal. It’s what creates that place for them. It’s for them, and not for you. Leaders eat last. Let the employees eat first.
Scale. Your enterprise must be able to scale. As an example that does NOT scale, consider a Subway Sandwich franchise. How many potential customers does a single Subway Sandwich outlet have? And how many sandwiches will those customers buy per month? Do the math. A Subway Sandwich shop has an upper limit of maybe $500K revenue per year, and probably less.
Service businesses do not scale to the necessary size unless you turn it into a human resources business. That is very difficult to do. Consequently, a service business probably won't get you to the target. Your business probably needs to be product-focused rather than service-focused. It is possible to hit the target with a service business, but it is not likely.
Control. You must be in the driver's seat of your enterprise, and not a passenger or a hitchhiker. If you are not driving, you are not in control. Crashes often occur when whoever really *is* in the driver's seat changes the rules. It occurs whenever another entity has the power to instantaneously put you out of business. If an outside party can "flip a switch" and destroy your business, you have no control.
Need. Satisfy a need that generates value for society. If you are chasing money, and not needs, you will fail. If you instead chase needs, the money will follow. The need you are satisfying must generate value for society. Thus, you don't sell drugs, or cigarettes, or participate in houses of ill repute, or fraud, or anything even remotely like that. If you head down that direction, you will fail.
Face-to-face. Your enterprise must not be predicated on yourself (or anyone on your executive team) having 1-on-1, face-to-face meetings with the customer. Doing otherwise is a violation of the rule of disconnecting your time from the revenue stream. If your enterprise requires 1-on-1 like that, it must be possible to hire out (or franchise out) the 1-on-1 portion, which again is the point of the goal. Create a place for others.
Line Extension. What is a Chevy? It is a big, little, cheap, expensive, car, van or truck. Do not line extend like that. Line extension wears down the brand until the brand no longer stands for anything. In the long term, it accomplishes exactly the opposite of building your own brand. It instead destroys it. Stay focused. Do not line extend. Rather than line extend, you should instead start a new business or website that doesn't dilute the brand of the first business (and, the new business must also follow these rules).
Last Mile is Best. 100 years ago the manufacturer's had all the power. Then the power gradually shifted to the distributors, then the wholesales, then the resellers, and now the consumer. Thus, power has gradually shifted to the last mile of the chain. You want to own that part, but only up to the point of not violating the Face-to-Face rule. Once you get to the Face-to-Face portion, franchise or hire that portion out so that you still retain control, without having to spend the time that Face-to-Face otherwise requires. And again, hiring it out is the exact point and goal of trying to create a place for 200.
Vertical is Best. To grow horizontally is to violate the Line Extension rule. To grow vertically means to own the slice from the earth (manufacturing) to the consumer, and own everything in-between. Vertical growth is preferred. And as you grow vertically, follow the "Last Mile is Best" rule, and then grow to the earth.
Growth. Any business that is targeting an increasing marketshare of a decreasing market is a bad business. Get rid of such a business, and target growth industries only. Sell the business off while there is still a market to sell it to. That means sell it off even when it still might be profitable to operate.
Appetizers and Main Courses. Each business enterprise is either an appetizer or a main course. Do not attempt to develop an appetizer until you have established a main course, and then only work on appetizers that you feel have the future potential to eventually become their own main course. Once you have a main course, start creating the appetizers, but be careful about line extension.
Capital. The greater the capital (cash) requirements of the enterprise, the more strictly it must adhere to these rules. A high-capital enterprise must scale better, be needed more, and control more than a low-capital enterprise.
Foundation. Any successful business will rest on a foundation of four pillars, and executive management of that business each need to have a background in all four of the pillar areas. They are: (1) Accounting, (2) Legal, (3) Technology, and (4) Marketing. You don't have to be a CPA, nor an attorney, nor have a computer science degree, nor have an MBA, but you must know something about all four areas. This is why I recommend that anyone who wants to grow to make a place for 200 first get an Associate in Business degree as a minimum. Take a look at the class roster for that degree-- all of the required classes fall into one of those four buckets, and all four buckets are necessary to the goal.
Exceptions to the above rules:
1. Internal needs. From a direct economic perspective, our nation’s schools are a complete failure. And yet they are perhaps our most important type of “business”. How can that be? It is because the internal needs outweigh the rules. Sufficient internal need can trump any of the above rules.
2. Side-Lines. A side-line activity can potentially violate the above rules as long as the activity is not the prime focus of the enterprise, and as long as it supports the prime focus. Thus, it would be an auxiliary system to the prime focus.
Generally, you should be selling franchises; not buying them.
You should sell stock in your own business; not buy stock in someone else's (owning other stock usually puts somebody else in the driver's seat of your investment).
You sell licenses; you don't buy licenses.
You offer drop-shipping; you don't use somebody else's drop-shipping service (doing so puts them in the drivers seat of your business).
You offer affiliate programs; you don't join them.
You absolutely never want to join an MLM business (multi-level marketing, like Amway, et. al.). An MLM person is nothing but a commissioned salesperson of another company, building that company's sales organization and brand instead of your own.
3. Just Starting. Individuals who are just starting out on this journey must first prove themselves, via demonstrating the results of their own time effort, before these rules can be considered good guides for them. In other words, they absolutely will and must tie their time and their personal fortunes to the business at first. Prove you are capable, and then the doors will be opened for you to proceed. Success begats success.
4. Ceiling Recognition. People have operating ranges. This is universally true of all people. Some people are simply not going to be able to operate at the level required to make a place for 200. But they might be able to operate profitably on something smaller. Some people are difficult to employ, and yet they might do just fine operating their own small business. The opposite will also sometimes be true. It all depends on the individuals involved. This means that “Ceiling Recognition” might require one or more of the above business rules to be violated.
5. Training. Training enterprises (as exceptions) really need to fall into exception #1 (need), exception #2 (Side-Line) or #3 (Just Starting). Church and school organizations are examples of valid training enterprises.