How to start a SMALL business that doesn't FAIL and makes you financially free

Summary

This video script explores the challenges of starting a small business, highlighting the common pitfalls that lead to failure within the first few years. It delves into the 'fatal assumption' made by many entrepreneurs, who often excel in technical work but struggle with the managerial and visionary aspects of running a business. The script introduces the concepts of the entrepreneur, manager, and technician within each business owner, and outlines the growth phases of a business: infancy, adolescence, and maturity. It emphasizes the importance of adopting a franchise prototype model to build a system-dependent business, and concludes with the business development process involving innovation, quantification, and orchestration to ensure a scalable and successful venture.

Takeaways

• 😨 High Failure Rates: 50% of small businesses fail within the first year, and 75% fail within the first five years.
• 🛠️ Technical Expertise Misconception: Being skilled in a trade doesn't equate to understanding how to run a business that specializes in that trade.
• 🔮 Entrepreneurial Vision: Entrepreneurs are visionaries who see opportunities and innovate, but they often struggle with the day-to-day operations of a business.
• 👨‍💼 Managerial Organization: Managers are practical, keeping the business running smoothly and organized, often cleaning up after the entrepreneur's chaos.
• 👷‍♂️ Technician's Execution: Technicians are the doers who focus on the immediate tasks at hand and may struggle with the broader vision of the business.
• 👶 Business Growth Phases: Businesses typically go through infancy, adolescence, and maturity phases, each with its own challenges and requirements.
• 🤹‍♂️ Overwhelmed Owner: In the infancy phase, the business owner often juggles multiple roles, leading to exhaustion and potential failure.
• 📉 Delegation Challenges: During adolescence, poor delegation and management can lead to business chaos and the owner feeling the need to retract control.
• 🚀 Maturity as a Starting Point: A business can be designed to operate as a mature entity from the outset, with clear systems and processes in place.
• 🔄 System Dependent, Not People Dependent: To achieve a mature business, create systems that ensure operation and success are not reliant on specific individuals.
• 📊 Business Development Process: The process involves innovation, quantification, and orchestration to refine and standardize business operations.

Q & A

What is the common misconception among people who start a small business based on their technical skills?

The common misconception is that understanding the technical work of a business is the same as understanding how to run a business that performs that technical work. Many fail to see that being skilled in a trade does not necessarily mean one knows how to manage or grow a business in that field.

Why do many small businesses fail within their first few years according to the transcript?

Many small businesses fail because the owners, often technicians by trade, do not realize the difference between doing the technical work and running a business. They often become overwhelmed with tasks they are not skilled in, leading to poor management, exhaustion, and ultimately, business failure.

What are the three roles that every business owner embodies, as described in the script?

Every business owner embodies the roles of an entrepreneur, a manager, and a technician. The entrepreneur is the visionary and innovator, the manager is concerned with smooth operation and order, and the technician focuses on immediate tasks and getting things done.

What is the 'fatal assumption' that the script refers to, and how can it lead to business failure?

The 'fatal assumption' is the belief that being good at a job within a company means one can successfully start and run a business in the same field. This can lead to failure because the skills required to be an employee are different from those needed to manage and grow a business.

What phase of business growth is characterized by the owner handling all tasks, often leading to exhaustion and failure?

The 'infancy' phase of business growth is characterized by the owner handling all tasks, which often leads to exhaustion and failure due to the overwhelming workload and lack of delegation.

What is the key difference between a business that is people-dependent and one that is system-dependent?

A people-dependent business relies heavily on the expertise and specific skills of its employees, making it hard to scale. In contrast, a system-dependent business is built on established processes and procedures that can be followed by anyone, regardless of their experience, allowing for easier replication and scalability.

How can a business owner avoid becoming the 'idiot boss' they once despised?

A business owner can avoid becoming the 'idiot boss' by understanding the importance of systems and delegation, and by not allowing their personal biases or lack of knowledge in certain areas to interfere with the efficient running of the business.

What is the 'franchise prototype model' and how does it help in creating a successful business?

The 'franchise prototype model' is a business model that focuses on creating a systematized business that can operate without the owner's constant involvement. It helps in creating a successful business by ensuring consistency, scalability, and the ability to replicate the business model across multiple locations.

What are the three steps of the business development process mentioned in the script?

The three steps of the business development process are innovation, quantification, and orchestration. Innovation involves seeking ways to improve business operations, quantification measures the effects of changes, and orchestration involves implementing successful innovations as standard operations.

Why is it important for a business owner to view their business as a product on the shelf?

Viewing the business as a product on the shelf helps the owner to focus on creating a system that can operate independently, ensuring consistency and quality regardless of who is working within the business. This perspective is crucial for scalability and creating a business that can be easily replicated or franchised.

What is the significance of the 'business development process' in building a mature business?

The 'business development process' is significant in building a mature business because it provides a structured approach to continuous improvement. It allows the business to adapt to changes, measure the success of new strategies, and solidify effective practices into standard operations, leading to a sustainable and successful business model.