Business Operators VS. Business Owners

[Kung Fu Steve]

Occasionally they send me in to turn around an organization. Everything from the Fortune 500s down to the local mom and pop.

But when it comes to small and medium sized businesses I get a little frustrated because I'm often there to give them a "quick fix" to their current performance issues (usually due to time or budget constraints).

Their sales team is under-performing, the leadership is toxic, the culture is awful, their marketing is off...

There's a lot of reasons why they want me to come "pump them up" (and I really hate it when they call me a motivational speaker )...

...but if I had just a few extra minutes to sit down with the boss man or boss lady (which they never have) I could explain what the real problem is and how they can fix it.

So since I don't have that time with them... I figured I'd air my frustrations here with you, pretend that you're interested, and give YOU the secret that I didn't learn until AFTER my 3rd business.

Here it is: no matter how much money your business earns... if you must be there, you're an operator... not an owner.

We all like the ego boost of saying "I own a business" or "I'm a business owner" -- and here's the truth:

No, you ain't​

Before you get all pissed off, upset, depressed, or sad -- I'm just as guilty so I'm not preaching here by any means...

But let me prove it.

There's only 1 correct answer to this question:

What is a business?

Think about it for a second.

There's a million potential responses but only one right one:

A system for delivering value.​

More specifically -- a system for effectively delivering value in a timely fashion.

There are a million books on the subject but for some reason it just isn't taught anymore.

The E-Myth was a big eye-opener for me... but I didn't realize it's importance until I woke up one day and noticed *I* was the business. If I got hurt, sick, died, the business would, too.

In Rich Dad, Poor Dad. Sharon Lechter teaches the "Cashflow Quadrant" and the difference between being Self-Employed or a Business Owner.

The 4 Hour Work-Week has a great section on eliminating and delegating work.

There's tons of other examples but so many of us were so desperate to get into business that we didn't strategically build out our systems for effectively delivering value in a timely manner which means many of us now just have a high-paying job.

And when I see people burnt out it's usually because they've become a slave to their business instead of their business working for them. You are the biggest bottleneck.

But things can change if you start to see your business as a machine that must deliver value with or without you.

How do you do that? By laying out your value chain.

The Value Chain​

What IS a value chain?

Well... in a word, it's your business.

But if you were to lay out a timeline and on one end you have your customer like this: and on the other side you have your customer like this:

What needs to happen in between? What is each step?

Customer places an order,
that order form is delivered to john,
john sends it to the susan at the warehouse,
susan at the warehouse packs and sends it to bob in shipping,
bob the shipper delivers it to the customer.

Sounds simple, right?

Here's the problem: there are 8 points of potential failure in this value chain.

If any one of the 8 things gets messed up -- the customer does not get the value in a timely manner. That means they go from to .

All Failure in Business is a BREAK in the Value Chain​

Just look at the simple interaction:

Customer Places order <----> John Receives Order Form

What could possibly go wrong there?

Let's say the customer orders and John just doesn't check his email. Or it gets lost in spam. Or he's out of the office for a day. Or they're out of the product that was ordered. Or he just simply doesn't send a confirmation. Value chain is broken. The customer is upset.

In every link in this chain there is value that needs to be provided both ways. John needs to review the order, confirm with the customer, get the order to Susan, confirm with Susan she received the order.

If I had all day, I'd teach this stuff in a very detailed manner but the thing we have to understand is that for you to become a business owner -- you need to CLEARLY define every link in your value chain and what needs to be done at each step.

Once you have a CLEAN and CLEAR value chain, you can then do the thing that everyone ultimately wants to do ...which is replacing yourself in the value chain

Ultimately when I see business owners stressed and burnt out -- it's because

1.) They don't understand there's a value chain
2.) It's not clearly defined
3.) They are trying to micromanage every link along the way.

That last one is a conversation for another day, but if the business is breaking down and there are fires constantly -- it's because there's a certain link in your chain that's broken, not well defined, or someone (or some robot) isn't doing their job.

Take a look at your business and see what needs to happen to fulfill in an effective and timely manner!

Let's all become business owners in 2019, ey?

 

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[MTEE1985]

Well damn.

It’s like I logged in and there was a present wrapped in gold sitting here that said:
To: The FLF
Love: @Kung Fu Steve

Incredible post.

 

[TonyStark]

Damn, very motivational and insightful.

 

[Kung Fu Steve]

Well damn.

It’s like I logged in and there was a present wrapped in gold sitting here that said:
To: The FLF
Love: @Kung Fu Steve

Incredible post.

D'awwww. Gawrsh.

 

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[MTF]

And when I see people burnt out it's usually because they've become a slave to their business instead of their business working for them. You are the biggest bottleneck.

But things can change if you start to see your business as a machine that must deliver value with or without you.

I think that there's a risk attached to this. For example, if you're the face of the business (Richard Branson and Virgin, Elon Musk and Tesla), or if the business depends on your unique skills (for example, a self-published author), removing yourself from the business will make it less valuable and more like any other company.

If MJ stopped participating in this forum and instead hired five clones, the forum would be completely different, and IMO much worse. It would lack his personal touch. There are plenty of such impersonal business forums: that's why you won't find me there.

Plenty of people buy Teslas primarily because they like Elon Musk; it's their way of showing the middle finger to the faceless, big car manufacturers. They want to support the guy on a mission.

If I stopped writing my books and instead hired some ghostwriters, then even if they followed my writing process, my self-publishing business would be completely different - it would become another publishing house.

I used to read a blog on learning languages. It was very personal because almost every article was written by the owner, a person I recognized as the expert. I stopped reading his blog when he hired a guy who turned his blog into another information business (he added a funnel and to remove the blogger from the equation, almost every single new article was a guest post). Revenue-wise in the short term, maybe it wasn't that bad of a choice, but I'm pretty sure that if he continued to be personally involved, in the long term it would work better.

Good example: Tim Ferriss. He's your typical business operator, but he's absolutely killing it and I'm pretty sure he makes much, much, much more money than the average "business owner" obsessed about making his business run without him or her.

Are you a loyal patron of a great owner-operated restaurant where you can have a chat with the owner and the place has a soul or your local McDonald's? If the owner opened five more restaurants under a franchise where everything is written down as a procedure (and unfortunately you can't turn a warm, personal touch into a procedure), would it still feel the same for the loyal customers who have been with him or her for years? Highly unlikely.

Of course, the business would still deliver value, but it wouldn't be the same value, particularly for those who have been following you for a long time.

Just a thought to consider: maybe in some cases it's better to remain an excellent business operator than become another mediocre business owner with an automated, soulless company.

Can you retain at least some of the qualities of a small business when building an empire? Possibly - but there's a growing trend of customers not willing to support big, heartless brands and instead choosing more personal (which usually means smaller) businesses with an engaged owner constantly influencing the direction of his or her business.

 

[RazorCut]

What is a business?.....

A system for delivering value.​

Thank you @Kung Fu Steve For me that is the gold right there.

Just a thought to consider: maybe in some cases it's better to remain an excellent business operator than become another mediocre business owner with an automated, soulless company.

I think it depends on the business. Many businesses USP is not a cosy relationship with the founder. Although on the face of it it might seem logical but Richard Branson is not an ideal example as he has minimum input in most of his companies. He is a figure head, garnering media attention when needed and overseeing from a great height. Utilising the Virgin brand name to create most of the association. He puts in place a management team of trusted people and lets them get on with it. He pretty much fits @Kung Fu Steve model to a tee.

Can you retain at least some of the qualities of a small business when building an empire? Possibly - but there's a growing trend of customers not willing to support big, heartless brands and instead choosing more personal (which usually means smaller) businesses with an engaged owner constantly influencing the direction of his or her business.

I noticed years back in the food industry small scale manufactures springing up. One for example was a farm who had struggled making a profit selling their beef cattle and pigs so they converted an old outbuilding and started making sausages. Great sausages with a great story behind them. They grew and grew to the point where they got into the supermarket chains and did really well.

I remember seeing loads of these new small family businesses start to get shelf space. It made you want to support them just as you indicated. Then a little while later I did a bit of digging. A lot of those lovely little businesses had been sold to the corporate big boys on the QT and they kept marketing it to appeal to the original target audience that was prepared to pay more to support these small, family businesses.

What was even worse was many of those cute little brands with the rustic packaging and the story on the back of how they started up from an old cowshed and a mincer they bought second hand off eBay was complete and utter fabrication. No such little startup ever existed. It was all a marketing ploy by big business so they could sell a slightly different product to a less price adverse market segment for a much better margin plus gain some market share they had lost to those original farmers market type producers.

That might be slightly off target but it shows you don't have to be the "engaged owner constantly influencing the direction of his or her business" you just need to appear that way.

 

[Saavik]

Let's all become business owners in 2019, ey?​

​

This is not only a great post in its own right, but also a very useful summary of the E-Myth for all who can't bear to read more than 10 pages of Michael Gerber's rambling eso-style writing at a time.

 

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[Eisenstein]

I think that there's a risk attached to this. For example, if you're the face of the business (Richard Branson and Virgin, Elon Musk and Tesla), or if the business depends on your unique skills (for example, a self-published author), removing yourself from the business will make it less valuable and more like any other company.

If MJ stopped participating in this forum and instead hired five clones, the forum would be completely different, and IMO much worse. It would lack his personal touch. There are plenty of such impersonal business forums: that's why you won't find me there.

Plenty of people buy Teslas primarily because they like Elon Musk; it's their way of showing the middle finger to the faceless, big car manufacturers. They want to support the guy on a mission.

If I stopped writing my books and instead hired some ghostwriters, then even if they followed my writing process, my self-publishing business would be completely different - it would become another publishing house.

I used to read a blog on learning languages. It was very personal because almost every article was written by the owner, a person I recognized as the expert. I stopped reading his blog when he hired a guy who turned his blog into another information business (he added a funnel and to remove the blogger from the equation, almost every single new article was a guest post). Revenue-wise in the short term, maybe it wasn't that bad of a choice, but I'm pretty sure that if he continued to be personally involved, in the long term it would work better.

Good example: Tim Ferriss. He's your typical business operator, but he's absolutely killing it and I'm pretty sure he makes much, much, much more money than the average "business owner" obsessed about making his business run without him or her.

Are you a loyal patron of a great owner-operated restaurant where you can have a chat with the owner and the place has a soul or your local McDonald's? If the owner opened five more restaurants under a franchise where everything is written down as a procedure (and unfortunately you can't turn a warm, personal touch into a procedure), would it still feel the same for the loyal customers who have been with him or her for years? Highly unlikely.

Of course, the business would still deliver value, but it wouldn't be the same value, particularly for those who have been following you for a long time.

Just a thought to consider: maybe in some cases it's better to remain an excellent business operator than become another mediocre business owner with an automated, soulless company.

Can you retain at least some of the qualities of a small business when building an empire? Possibly - but there's a growing trend of customers not willing to support big, heartless brands and instead choosing more personal (which usually means smaller) businesses with an engaged owner constantly influencing the direction of his or her business.

What you said is the subject of the book "Start with Why". As soon as the entrepreneur is gone, the message of the company gets lost (well, not inevitably but more likely). Simon Sinek brings a lot of examples, e.g. Walmart. If the WHY is not clear enough, with time the message gets fuzzy and the company loses its "soul". It becomes just a business without a mission that excites people. This process seems to be avoidable if the message is and stays crystal clear.

Some examples: (I hope I'm remembering it correctly) The message of Sam Walton (Wal-Mart) was: Look after people and people will look after you. The company was/is for the average Joe. This was the WHY. The HOW was: low prices so everyone can afford it. After Walton was gone, the management focused on numbers and the HOW: lower prices, lower prices, lower prices. They treated their employees badly and so on. Michael Duke started to pay himself several million dollars per year while Sam Walton never took a salary of more than $350k. Who's more like the average Joe? Who's authentic, who's not?

So, the conclusion is: Never lose your WHY and choose people who are living this WHY. Then the company seems to be safe I don't think the company is inevitably attached to the entrepreneur. That's because we don't know this person! We don't know Elon Musk. But we love his WHY and his
authenticity. And that's why people love Tesla.

I can really recommend the book

@Kung Fu Steve Very good post! Thanks for sharing your insights and information

 

[Kung Fu Steve]

I think that there's a risk attached to this. For example, if you're the face of the business (Richard Branson and Virgin, Elon Musk and Tesla), or if the business depends on your unique skills (for example, a self-published author), removing yourself from the business will make it less valuable and more like any other company.

If MJ stopped participating in this forum and instead hired five clones, the forum would be completely different, and IMO much worse. It would lack his personal touch. There are plenty of such impersonal business forums: that's why you won't find me there.

Plenty of people buy Teslas primarily because they like Elon Musk; it's their way of showing the middle finger to the faceless, big car manufacturers. They want to support the guy on a mission.

If I stopped writing my books and instead hired some ghostwriters, then even if they followed my writing process, my self-publishing business would be completely different - it would become another publishing house.

I used to read a blog on learning languages. It was very personal because almost every article was written by the owner, a person I recognized as the expert. I stopped reading his blog when he hired a guy who turned his blog into another information business (he added a funnel and to remove the blogger from the equation, almost every single new article was a guest post). Revenue-wise in the short term, maybe it wasn't that bad of a choice, but I'm pretty sure that if he continued to be personally involved, in the long term it would work better.

Good example: Tim Ferriss. He's your typical business operator, but he's absolutely killing it and I'm pretty sure he makes much, much, much more money than the average "business owner" obsessed about making his business run without him or her.

Are you a loyal patron of a great owner-operated restaurant where you can have a chat with the owner and the place has a soul or your local McDonald's? If the owner opened five more restaurants under a franchise where everything is written down as a procedure (and unfortunately you can't turn a warm, personal touch into a procedure), would it still feel the same for the loyal customers who have been with him or her for years? Highly unlikely.

Of course, the business would still deliver value, but it wouldn't be the same value, particularly for those who have been following you for a long time.

Just a thought to consider: maybe in some cases it's better to remain an excellent business operator than become another mediocre business owner with an automated, soulless company.

Can you retain at least some of the qualities of a small business when building an empire? Possibly - but there's a growing trend of customers not willing to support big, heartless brands and instead choosing more personal (which usually means smaller) businesses with an engaged owner constantly influencing the direction of his or her business.

Richard Branson owns over 400 companies. He would never survive being an operator -- he MUST be an owner. Branson knows the value chain better than anyone.

Elon Musk is the same. Definitely an owner. Now, of course, both of them seemingly take very active roles in their companies. The companies are large enough that they can strictly build PR for their projects. But let's separate television appearances and interviews with day-to-day operations.

I've done a lot of training for Musk's companies. He isn't ever there

But you're also right in many ways -- this forum is a perfect example. And I'm sure MJ is gonna kill me for saying it -- but this is a passion business for him. The forum side especially is very time and energy consuming. I don't know how he runs the back end of the publishing company but I DO know he's damn smart.

Most of the books are on licensing deals so he's letting someone else handle the day-to-day operations (I assume).

Big buddy is up to 52 companies. But in the seminar business -- he's still an operator. There's nothing really wrong with it, writers, authors, singers -- they're always going to be operators if the business is about them.

I did the same thing at the dojo. I didn't do it on purpose but it quickly became clear *I* was the reason people trained there.

The conversation could go on for days I guess the simple question is "what do you want?"

 

[becks22]

Holy Sh*t Steve. Thanks for the wake up call. I've been having trouble growing this year as @StompingAcorns can attest to. I'm in operator. Yes I make good money, and I delegate some things but as I very recently found out that if something happens and I was unable to work, things would shut down. I think first thing is that I need to develop a value chain and a system for everything. I've been hesitant to bring more people in because a simple mistake can really ruin my whole business and I can't seem to lose the control to let anyone else do it. I need to create a system where mistakes won't happen and then I bring people on without needing to micromanage everything.

 

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[Owner2Millions]

Thanks for the info. This thread should for sure become gold. Operator vs owner. Or some people can be both, transiting more into either one.


Sent from my iPhone using Tapatalk

 

[Thomas Baptiste]

Woah, I read this at the right time. Merci beaucoup for the insights here. I know some people that could use a good dose of the medicine here. It's a mindset/value thing really! It seems that many business people have a tough time letting go and delegating responsibility. I'm not sure if they aren't aware of the benefits or if they deem it a risk not worth taking.

 

[Hai]

Steve, we have a bottleneck in the restaurant, where orders don´t get finished in a timely manner(we have delivery, tables and takeaway). When we spread it out, orders can take up to 2 hours to arrive, or 80min for takeaway for very busy days on holidays or on rainy days. This can be very troublesome for customers.

In the value chain, is there some way to mitigate this? Been breaking my head about this, maybe you have seen this case often!

Thanks for the post!

 

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[RazorCut]

Surely the sensible thing is to up your staff and trim/optimise your menus when you suspect a problem day?

I owed a pizzeria for a decade and we could predict fairly well when we were going to have a flat out evening and plan accordingly.

 

[TLO]

When I read the original post and then an opposite view, it makes you think of how each point fits into YOUR business. In some of ours we need more e-myth principles and in some businesses we need more operator. You must decide which fits YOUR business. I definitely need more systems and continual elimination of myself with day to day operations.

 

[Rabby]

Steve, we have a bottleneck in the restaurant, where orders don´t get finished in a timely manner(we have delivery, tables and takeaway). When we spread it out, orders can take up to 2 hours to arrive, or 80min for takeaway for very busy days on holidays or on rainy days. This can be very troublesome for customers.

In the value chain, is there some way to mitigate this? Been breaking my head about this, maybe you have seen this case often!

Thanks for the post!

@Mainstream7 have you measured/observed the steps in the process when this happens? Eg: Do you have a sense of whether it is:
an employee who can only move so fast,
or a piece of equipment that can only process so many materials at a time,
or a material that can only be cooked so fast (and it's not being par cooked during prep time),
or something like orders skipping the queue (and delaying downline orders) because the take-out or table staff are responding to the more immediate presence of their customer?

"Gathering data" is good for these kinds of optimization problems. You can either watch, or pay someone to watch during busy times, and try to see what's happening.

Reason I noticed this. I was talking with my friend yesterday who has a holding company for several hundred franchise restaurant locations. We were talking about these same optimization problems, plus inefficient labor allocation (eg: thinking you need more labor because you have people at the site at the wrong times).

 

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[Rabby]

@Kung Fu Steve great message for the beginning of the year I've started thinking of this in terms of modular repeatable processes. Each process is something that needs to be done in the business, and it usually has dependencies on other processes. Some might follow an "observer" pattern rather than having direct inputs, or work on a timer like specific times or calendar days. Point is, when you start documenting these little processes that need to get done, it sure does get easier to actually assign them to specific people, and design rewards and accountability.