I pay a lot of attention to Brian Tracy because he always provides concise, insightful advice. In this 4-0minute video, he explains how you can develop an action mindset.
Articles & Book Reviews About The Business Owner’s Inner Game
Rich Schefren is one of my business heroes, and in this 10-minute video, he talks about how you can use the Theory of Constraints (TOC) to identify what’s holding you back from the success you want. The video is an extract from a much longer video.
I’m a big fan of the theory of constraints – and have been since I read the book called The Goal by Eliyahu Goldratt in about 1990.
More than ten years ago, Rich produced an expensive information product based on the Theory of Constraints called the Guided Profit System. In particular, this focused on the TOC Thinking Processes.
I’d better make it clear what I mean by small business design. It has little to do with website design or graphic design.
What I mean by small business design is carefully planning out:
- Who the business will serve.
- Why the business exists.
- What benefits the key stakeholders of the business will get – how customers will benefit, how employees will benefit, how suppliers will benefit (including finance providers) and how the owner will benefit.
- What the business will do.
- Where the business will operate.
And then building a business that turns the design into reality.
Perhaps less obviously business involves a similar group of negative answers:
- Who the business won’t serve.
- What pains and penalties you won’t allow the key stakeholders to suffer.
- What the business won’t do.
- Where the business won’t operate.
Business design is about focus and clarity and that’s particularly appropriate in a small business.
Nearly all small businesses have limited resources and like sunlight through a magnifying glass, great power comes from concentrating energy in one small area.
Quoted failure rates for small businesses are terrible and while I feel these are often exaggerated by business advisers and consultants to sell their services, the fact remains that many small businesses fail in one of two ways:
- A public failure when the business goes bankrupt and creditors and investors lose money.
- A private failure when the business is closed by the owner after an unprofitable struggle. Third parties don’t lose money but a business owner often loses his or her life’s savings, suffers a huge blow to their pride and is forced into a job they don’t want.
Why does this happen?
Often because the business is managed in a haphazard manner.
There’s no clear business design which focuses attention on the right things and avoids distractions that don’t fit.
Without a clear small business design, the owner is likely to jump from one nice sounding initiative to another, either at their own whim or that of marketers with a new shiny money-making button.
If you’re an email inbox victim and you find your agenda set by what you read first thing in the morning, you’ll know exactly what I mean.
It’s the difference between one housebuilder working to a clear set of architect plans and another who makes it up as he goes along, on a whim and influenced by what he saw each morning on his way to work.
The second is pretty scary if you’ve got a financial interest in that house. It may turn into a masterpiece but the odds are that it won’t and it will take much longer to finish since the builder keeps knocking down what he’s done and starting again.
It’s the same with a small business.
As the business owner, you have a huge financial stake in its success but if you don’t have a clear business design, you’ll keep undoing the progress that you made yesterday because you’ve changed your mind.
My advice is to get clear on the business design you want and what it takes to build it. Be intentional.
When should you start working on your small business design?
First choice, yesterday, second choice today.
Not tomorrow… because there’s a danger that tomorrow never comes and your business design is much too important to leave as one of those “nice to do when I can find the time” activities.
Business design is easiest when you’ve got a blank page to work with – when you’re thinking about starting a business and all the options are in front of you.
It’s harder – but still essential – when your business is up and running.
Yes change has to be managed and yes some people involved in the business may not like the change but many more will love it because their jobs are more secure and enjoyable if your business is well managed.
A business designed to fill the needs of a particular group of customers will be able to develop special expertise, skills, products and services which raise it out of the ordinary and into the extraordinary.
I asked at the start, “is small business design necessary?”
I believe it is critical if your business is going to be as successful as you want it to be.
I’m often approached by start-up entrepreneurs and asked to write their business plan.
I won’t do it.
I think it’s a rotten idea.
So does Dragons Den entrepreneur Duncan Bannatyne. I read his book Wake Up And Change Your Life – it’s very good for any aspiring entrepreneur.
In Chapter 4 he says “You’ll find several people offering to write your business plan for you – and charge you an arm and a leg for it.”
Duncan then gives two exceptionally important reasons why you should never get someone else to write your business plan for you:
- The first is about the money. He argues that it is poor judgement paying someone else to do something that you can easily do for yourself.
. - The second is that you’ll understand your business much better if you write your business plan yourself.
I’d add a third reason.
You’ll be much more committed to putting the plan into action if you’ve done it yourself. You’ll have thought through your actions and whether you really intend to do the things you need to do to succeed.
Let’s dig deeper into each.
Spending Money You Don’t Need To On Having A Business Plan Written For You
Very few business start-ups are done with a big pot of cash which lets the entrepreneur splurge and even if there is plenty of money, I recommend you are very careful.
It’s much easier spending money than it is earning it.
Researching and writing a business plan takes a significant amount of time and professional time is expensive. It’s also an area where price and quality are closely related so if you penny pinch and find the cheapest source, you can expect the quality to be poor.
Paying to have your business plan critically reviewed and to get feedback on it is different. You’ll find that family and friends are either very encouraging (you can do anything you want) or very discouraging (you’ll never make it work, it’s much better to stay in your safe job). A professional will tell you what you need to hear and challenge your thoughts and assumptions. You may not like it but it will help you to develop a stronger, more robust plan.
You’ll Understand Your Business Better If You Write The Business Plan Yourself
As a general rule, the more you think, the better prepared you will be for action. You can go too far, and spend all your time thinking and planning but often people leap into action with little thought and hit major problems which were all too predictable.
This thinking and planning is invaluable and it can be very useful to work through a structured thinking process.
If you’ve picked a market that ignites your passion, you should find the research interesting and if you don’t, it may be a warning that the business isn’t right for you.
You’ll Be More Committed To A Business Plan You’ve Written Yourself
Do you work better when you’re told what to do or when you are clear on your objectives and decide what you need to do yourself?
If you want to be told, you may not be cut out for life as an entrepreneur.
If you decide on your own actions, then you’re not going to stick to a plan written by someone else. It’s just words on paper with no meaning.
But if you decide you need to do A, B and C and you commit to it in writing and promise other people (like a bank or investor) then you’re likely to follow through unless you get a better idea. If you don’t, you lose credibility with your financial backers and even more importantly, with yourself.
If you can’t trust yourself to deliver on promises, then who can you trust and why should anyone trust you?
Writing A Business Plan Is Easy
Perhaps easy is the wrong word. It does take time and effort but it’s not complicated. This isn’t brain surgery.
You can do it, words and numbers.
There is business planning software to help you that you can get for a low cost or even free.
What Help Should You Get With Your Business Plan?
I don’t believe you should pay anyone to write your business plan for you but I do think there are services which will help you to get a better business plan. Generally I think it’s a good idea to have a mentor or coach for your business start-up.
- Helping you to think better – start-up entrepreneurs can feel overwhelmed by how much could be done so it can be useful to get advice and help on how to focus your thinking on the critical issues. There will be plenty of distractions and people selling bright shiny buttons which promise a lot.
. - Reviewing your business plan – you’ll be very lucky if you get constructive criticism of your ideas from family and friends unless they own their own small businesses. Even then, they may struggle to take what they know and apply it to your business idea.
. - Help with the numbers – the profit and cash flow forecasts are particularly important if you need to raise finance and you don’t want to make errors which show your inexperience. The business planning software certainly helps because trying to model your business in a spreadsheet is complicated.
. - Polishing up your plan – if your plan is going to third parties to raise finance, it needs to sell your business idea realistically. If your plan is poor quality because you struggle to express your ideas in writing, then it is useful to get someone to tighten up your language and make your business case more persuasive.
Each of these are likely to cost money, but they should be working from a business plan you’ve drafted. You’ve done your thinking and tried to produce a business plan and you recognise that it could be better.
That’s very different from saying to a professional business plan writer, “Can you write my business plan for me please?”
As an entrepreneur, you probably suffer from what Michael Gerber calls “busy, busy, busy”.
There’s always much more you which you could do…, should do.
But what really matters?
What is the main thing that is stopping your business from making more money?It’s an interesting question and it explains why I’m attracted to using the theory of constraints in my strategy coaching.
There are two techniques in particular from the Theory of Constraints Thinking Processes that we should talk about.
The first is the Prerequisite Tree.
This focuses your attention on the necessary conditions to meet your goal.
It’s particularly important for start-up businesses or those that have never performed well.
The idea is to focus on the individual things necessary for your success which together become sufficient.
It’s a bit like a jigsaw puzzle – you don’t get to see the full effect until every piece is in place.
But the jigsaw has been mixed in with other sets of pieces.
There are many things competing for your attention, but they don’t fit.
They don’t complete the picture.
The 1,001 other things you could do in your business take your time, attention and money but because they are nice to haves rather than must haves, they move you forward.
The Prerequisite Tree identifies the most important things to focus on and turns them into intermediate objectives.
We can find the items by asking “What’s stopping you from achieving your goal? Why haven’t you already done it?
The second important aspect of the Theory of Constraints Thinking Processes I want to focus on in this blog is the Current Reality Tree.
This works from the symptoms of your problems – perhaps not making enough money – and working back helps us to identify the core problem which will have maximum impact.
This is identifying the constraint.
And when you can see it, you can follow the Theory of Constraints principles and do something about it.
The constraint may be inside the business.
It may genuinely be a physical constraint – you could sell much more if only you could make it.
Or it could be a policy constraint. Unfortunately it is easy to get trapped by conventional thinking and do things because “that’s the way we’ve always done them” without appreciating the consequences.
Or the constraint could be out there in the market.
You could make more money if only you could sell more.
The Theory of Constraints has an answer for that too by developing what’s called an unrefusable offer or even a Mafia offer (think Marlon Brando saying “I’m going to make you an offer you called refuse” in The Godfather”).
This is the purpose of differentiating your business and explains my interest in the Theory of Constraints and the work of Eli Goldratt.
I recommend you take a look at this excellent book
Many businesses have famous stories of how they began on their way to creating something significant – it’s called an origin story.
Think of one of the hottest brands in the world, Apple and you’ve probably heard a story of how Steve Jobs and Steve Wozniak created the first personal computers in their parent’s garage.
Or what about Fedex?
That started as a school project to create a business plan – and founder Fred Smith reputedly even got a low grade for his efforts. That teacher must feel as foolish as the A&R men who rejected The Beatles.
We like to hear and read stories. It’s why we read novels, watch films and follow the soaps on TV.
And to understand the “now”, we like to know the past and that’s why origin stories are gripping.
The Core Myth
Internet guru Rich Schefren has extended the origin story into a concept he calls “The Core Myth” (not to be confused with the Core Concept for positioning products.)
I call it differentiation by who and why.
Basically your Core Myth is your business story – from the beginning all the way through to the present day. It gives your stakeholders – and especially your customers and employees – a stronger more powerful reason to believe in and commit to your business.
Your Core Myth is inspiring because it covers your big reason for existence – your differentiation by why.
And it’s not just about making you rich.
Neither your customers nor employees care about putting an extra nought or two on your bank balance. Or about you having a fancy car and living in a posh house.
They want to believe that you have a bigger cause which inspires you. Which gives you passion to do what you do.
Your Core Myth goes further than that.
It tells about the struggles you had to achieve what you’ve done.
How you’ve overcome obstacles – sometimes things that would have stopped a lesser man or woman in their tracks.
The Core Myth creates an emotional bond between you and your customers, prospective customers and employees.
It tells the story of who you really are.
It builds understanding and empathy.
And admiration for your achievements.
Most importantly it makes you stand out.
Different from your competitors who either don’t have a Core Myth or haven’t shared it.
It tells of your values.
What’s important to you and what people can rely on from your business.
Learning More About The Core Myth
Rich Schefren goes into great detail on the Core Myth in one of the reports available from the Founders Club. It’s 96 pages long and billed as…
“The Single Story That Sets Your Business Apart: How to leverage a core myth to rally your team, attract and retain more customers, build a powerful brand and grow free”.
It does take some reading because Rich goes into so much detail on how to build your Core Myth and how to tell the story.
My Overall Thoughts On The Core Myth
The Core Myth is a concept I like very much.
Done well, it will differentiate your business along the who and why dimensions.
We may differ on how long it should be.
The impression I get from Rich is that your Core Myth is long and detailed.
That may be where you start but I think you should have different versions of your story.
The same fundamental truths but in different lengths as you vary the level of detail and descriptive passages. I have to admit to being one of those readers who skip over the boring stuff to get to the action when I read novels and even giving up part way through if I don’t get gripped.
I’ve also read enough business books that were 200 plus pages long with a powerful concept that would have made a great 15 page white paper.
People are different and the more you cater for their preferences the better.
The Core Myth is a very interesting way of communicating your business in a way that it’s seen as different – dramatic, exciting and with a compelling purpose.
It builds on the idea that your business can be different and special because you are unique. No one else has the exact same experiences, values and motivations as you do.
My Core Myth goes back to my times as a trainee accountant when I saw nice people with their own businesses earning much less profit than you’d expect. You see much of what you see if is a front – an illusion – created to impress. But doing their accounts meant that the business owners couldn’t hide the reality from me.
I also saw nice people with great little businesses which were making excellent profits.
I became fascinated by what made the difference.
Often it wasn’t down to hard work.
Most small business owners work incredibly long, hard hours that would make unionised employees walk out on strike… and especially when the rate of pay is so low.
My purpose is to make a difference for the nice people who own businesses. Not the ones who are out to scam or con naive customers but those who take pride in what they do and want to do right by their customers.
What do you want from your business?
That’s a fundamental question to ask when thinking about your business strategy.
But how often do you stop to think about it?
The answer probably has two categories:
1) what you want for your customers;
2) what you want for yourself as business owner.
Much of this blog looks at what the business can give its customers in terms of unique customer value.
What should you get for your time, energy, ideas and money invested?
I think it comes down to more money, more fun and less effort.
The job of strategy is to make sure you get what you want while giving customers what they want.
A common problem with running a small business is that you lose sight of a powerful vision as managing the day-to-day issues becomes the priority.
If you started your business rather than inheriting it, I bet you had a very good idea about what you wanted to achieve for yourself and your customers.
Questions About Your Vision
How does that starting vision compare with what you now think?
Are you still on track, found something better or have you lost your idealism?
A Business Vision Isn’t Just For Big Companies
Thinking about a vision (or a mission) may seem to be very “big company” and therefore not something that you should rush into.
You’ve probably seen the vanilla statements that are churned out and are completely meaningless. Take away the name and it could be anyone.
That’s not what I want for you at all.
I want you to return to the strong purpose and direction you had when you started or bought your business.
It will help to guide your decisions, act as a filter to stop you following inappropriate opportunities that look profitable but don’t fit in with your passions.
It will also help motivate your employees and guide their decision-making. You can’t have rules and procedures for everything.
How Vision Fits With Strategy
The easiest way to think about it is that strategy helps you get from where you are to where you want to be
Your vision is where you want to be.
Today I want to talk about business owners who suffer from the busy fool’s syndrome.
I’m not trying to be rude but I do mean to be blunt.
Too Many Small Businesses Fail
I don’t know what the exact statistics are but I’ve heard things like:
- 50% of new businesses fail in the first year
- 90% of businesses don’t survive the first five years
The cynic in me says that business advisors will exaggerate these failure statistics to scare people into buying advice and training.
The realist in me looks at: [continue reading…]
2020 has been a brutal year for the world economies and small businesses in particular. The Covid-19 pandemic appeared without warning and caused many businesses to plunge into a crisis.
Things aren’t getting easier and that means more business owners and entrepreneurs are suffering from financial stress.
No Wonder Small Business Owners Suffer From Financial Stress
The leisure industry is being decimated and the high street retailers are suffering too. Many service businesses involve close personal contact and these have been badly affected as well.
[continue reading…]
