How to Build Systems (So Your Business Runs Without You)

The Entrepreneurial Bottleneck [00:00]

• Entrepreneurs often hit a revenue wall around $7-10 million, where they become the primary bottleneck.
• A core principle is that "the more valuable you are at your company, the less valuable your company" is.
• This stems from an ego-driven desire to be the one creating all value and making decisions, which hinders scalability and exit potential.

"The more valuable you are, the less valuable the company is."

Player vs. Owner Mentality [01:28]

• Entrepreneurs must choose between being the "most valuable player" on the court or owning the team.
• Many prefer being indispensable, enjoying the feeling of importance, but this limits growth and exit opportunities.
• The ideal outcome is a business that operates and optimizes without constant founder intervention, allowing for vacations and exit readiness.

Establishing Defaults and Constraints [03:43]

• To break the bottleneck, establish default constraints, like set work hours (e.g., leaving at 5:30 PM).
• This forces prioritization and stacking of tasks, recognizing that not all ideas can be acted upon.
• Entrepreneurs are adept at identifying problems but must learn to focus on the single, most pressing constraint.

"And that's the only question I'm ever asking. What is my right next thing? What is the thing that I'm going to do next?"

Supply vs. Demand Constraints [05:11]

• Business problems can be categorized as either supply or demand constraints.
• A demand constraint means needing more leads or sales.
• A supply constraint means the business cannot fulfill existing demand.

Visualizing Value Drivers Through Process Mapping [05:54]

• The first step is to visualize the core value drivers of the business: make, sell, and fulfill.
• This is done through business process mapping, using visual tools like whiteboards and sticky notes.
• The goal is to create a visual map of how value is created, akin to assembly lines or a pipeline.

"And so if you will create a visual map of how that happens. And so we do this with visual process mapping like we literally will get go to a whiteboard and get sticky notes and we'll say okay h how do we get customers? Let's sticky note this out in flowchart form."

Identifying Critical Accountability and Roles [09:00]

• Document only the most important processes to avoid overwhelming the systemization effort.
• Create a "High Output Team Canvas" to assign unique responsibility for each step or stage in the process maps.
• This shifts the focus from assigning tasks to people to assigning people to processes, revealing who is overburdened or underutilized.

"So, every single one of the sticky notes, every single step or stage on here, we're going to say, okay, this one right here, Facebook and Instagram ads, who is uniquely responsible for this one."

Scorecards and Metrics Alignment [10:49]

• Metrics on scorecards must directly correspond to steps or stages on the business process maps.
• Tracking metrics that don't link back to a process can lead to tracking irrelevant activities.
• If an activity, like an email newsletter, doesn't directly feed into a mapped value driver, it shouldn't have a metric.

"We're not tracking the metrics. So I had to say to the person like look if you can show us where this actually has an impact on one of our uh you know on on our growth engine then then you'll get some metrics to track and until then you won't."

Common Hiring Mistakes [12:21]

• Entrepreneurs often make two big hiring mistakes: hiring "helpers" or trying to hire someone exactly like themselves.
• Hiring helpers creates a new job of management, which is often harder.
• The idea of a single "integrator" or "visionary snowflake" hiring one magical person to do all the grunt work is a fallacy.

"And they they either try to hire a bunch of helpers to just do the stuff that that they don't want to do. Um or they're like ah if if I could hire somebody just like me."

Shifting from Ideas to Constraints [13:54]

• The critical shift for scaling is moving from idea generation to constraint identification.
• Businesses at higher revenue levels need to solve bottlenecks, not implement new ideas.
• The solution to a constraint is almost always system and people-related, typically requiring a functional leader.

"So the the first shift that needs to happen is shifting from I got an idea to shifting from cons to constraint identification."

The Importance of Functional Leaders [14:42]

• Entrepreneurs need to become excellent at hiring and building teams of talented functional leaders (e.g., Head of Sales, Marketing, Product).
• These leaders have the capacity to build teams under them and execute ideas effectively.
• The test for a good hire is fearing they might leave because they are so transformative.

"You've got to get really really really talented people and really talented people are expensive and the only way you're going to be able to create that margin is through systems."

Mapping Reality, Not Ideals [17:22]

• A common mistake is mapping what "should be" true instead of what "actually is" happening.
• Mapping the current reality is crucial for identifying actual performance, people's roles, and necessary metrics.

"The biggest mistake that people make when they when they map their their business process maps is they will map what they wish were true instead of mapping what actually is."

The Swamp of Scale and Systems [20:11]

• The "swamp of scale" often occurs between $4-6 million in revenue, where companies struggle without the right systems and key hires.
• Bridging the gap to $20 million and beyond requires systems to create the margin and cash flow needed for expensive, talented hires.
• Talented people want to work for good companies, which are built on better systems.

"And the only way that you can bridge that gap is through systems. You're not going to be able to bridge it through through just brute force through just chewing rocks."

The Generative Entrepreneur [23:33]

• Longevity in business, with 20+ years of experience, often leads to a more "generative" or "prolific" approach.
• Patience and consistent execution are key, starting humbly with small sales.
• A humble beginning, like selling a $14 ebook, is more common than overnight billion-dollar success.

"So much of this is is is is patience and and just allowing you know just getting in the stuff and doing it."

Money, Fear, and Lifestyle [25:05]

• Despite financial success, the primary driver remains money, fueled by a perpetual fear of losing it all.
• This fear leads to living below means and not drastically expanding lifestyle, even with significant wealth.
• The guest admits to being "completely coin operated" and wishes he didn't have this brokenness.

"I am completely coin operated. I I'm in this for the money. Um I I wish you know and and I and I acknowledge the brokenness of it too by the way."