Shockingly, 80% of start-ups still end in miserable failure. This statistic has been completely understandable throughout the years because businesses are a tricky thing to get right; however, in this day and age with all the information you could ever want and need at your fingertips, why is this figure still so high?
The ‘E-Myth’ suggests that most failed businesses are entrepreneurs who are risking some capital in order to turn a profit but this simply isn’t the case. Most business start-ups are actually technicians who have found that they want to capitalise on a key skill that they earned through a previous job. However, these businesses are making a key mistake; they believe that just because they know the technical side of things they will be able to run a successful business.
There is one key difference between a successful business and a failed one and that is the processes that are put in place even before the businesses opens up. Technicians tend to start a business that is ‘people dependant’ instead of ‘systems dependant’ which relies upon a multitude of tasks being easily completed by anyone in the business. Of course, once someone spends some time on a particular section, they will get good at the job but the idea is that anyone can fill in for anyone.
The turn-key revolution is the term that describes setting up your business so that it is wholly systems dependant rather than people dependent; this then creates an efficient, consistent and effective business. The main way to do this is to sell the business rather than the products; currently, if a product fails in a new business, this is likely to have a huge impact on the future of the venture. However, if you build a business as a type of franchise, effectively anyone can come in or start a second ‘franchise’ and effectively ‘turn the key’ to start.
For this to happen, all steps of marketing, sales, book keeping, and more, has to be documented as this will take away the need for people thus removing the dependancy of employees. If you have documented every single process from start-up to trading successfully – including solutions to any problems that may arise – the business could effectively be copied and started again in a different location. Your values towards the employees, customers, suppliers, etc, also has to be consistent for documentation.
This process sounds rather cruel because you are removing the need for skilled labour but costs are magnified at the very beginning and if you can make everyone (including yourself) expendable, you have more chance of success.
The Role Of The Owner
One of the reasons why businesses fail so early on is that the owner doesn’t realise that they have to play a number of different roles; three to be precise. The ‘technician’ describes most business owners that have chosen to utilise a skill; for example, an electrician who has decided to go solo. The other two roles – the ‘entrepreneur’ and the ‘manager’ – often lay forgotten.
If you are alone in the business, you will only be using the technician role because you will spend all day completing jobs. If you decide to employ other electricians, you then have to manage them efficiently and decide upon the best ways of running the business. Plans will need to be put into place and your employees will need to be motivated to do their job correctly.
In order to be successful, all three roles have to come to the fore when running the business. At first, you may be alone so you have to do all the work. As you grow, you will employ more people who need to be trained and led. The reason why many businesses fail is that they don’t realise that they sometimes have to move away from the technician role and by the time they do, it is far too late and the business has been going in the wrong direction without a plan. A good owner realises where they need to be at the different stages of their businesses life and realises that it is ok to step back from the technician role as long as they are willing to take up another.
Business Life Cycle
As mentioned previously, there are different stages of a business life cycle and they can determine where the owner should be and how they should be utilised.
This often begins with one person alone and only ends when demand overcomes supply; the owner will notice that they have too much work or that their quality of work is slipping. This is arguably the most important stage of the process because it decides where the business will go in the future. The two options are; to employ someone else and split the workload whilst manoeuvring into a different role OR to pack up shop and give up.
This is often a tricky stage to maintain because everything becomes somewhat difficult to manage; the ‘technician’ feels as though there is too much work to be done, the ‘manager’ is trying to stay motivated with employees and the ‘entrepreneur’ isn’t comfortable managing a team. The easiest thing to do in this scenario is to back away from the ‘technician’ and assume a 100% managerial role but this won’t work because there will still be too much work for those you have employed.
If you are to be successful in this stage, you have to handle the expansion with efficiency and consistency whilst still assuming the three different roles. If you cannot expand your comfort zone, you face the possibility of reverting right back to the infancy stage.
This stage is achieved once a vision and plan has been clearly laid out; once demand allows it, the owner has to employ managers that accept and will follow the vision as well as efficiently managing the technicians. Once you have reached the maturity stage, you can start to work on your business rather than in it which means that you can start to project your brand. You can start to find out more about your customers and ways in which you can expand your customer base to impact the area you work in.
The owner of the business has to be the leader and has to demonstrate exactly what they want from their employees in order to become a successful business. If new employees come in and aren’t told exactly what they are expected to contribute and how, the business will start to pull in different directions instead of moving forward as a unit. A good owner should be able to split their time and efforts between the three main roles; technician, manager and entrepreneur.
Of course, at the very beginning the owner will be required to undertake every single task that encompasses the three roles but the key is knowing when to relieve themselves of these tasks. For example, sales, marketing, book keeping, the actual work, etc, will all have to be completed by the owner but as new employees come in, they will start to share the workload. Effectively, you will be firing yourself from these positions and bringing in someone who can do the job just as well.