David Finkel is the founder and CEO of Maui Mastermind®, one of the world’s premier business coaching companies who helps businesses in the $1-20 million range build their companies to sell, scale, or own passively. He’s the Wall Street Journal bestselling author of 11 books, including his most recent bestseller, SCALE, which he wrote with priceline.com cofounder Jeff Hoffman.
BusinessInterviews.com: Can you expand on the difference between building a business vs. building a job?
David: All businesses start at Level One (start-ups) feeling their way forward to launch their new venture. Those that survive reach Level Two (owner reliant businesses). It’s here that most companies get stuck. A Level Two business is a business that works, but only because the business owner is there every day to make it work.
The owner makes most of the key decisions and often is the one who generates most of the business.
When you try so hard to “stay in control” of your business, you actually weaken your business by growing it dependent on you. Sure, you have people to help, but they’re there to do just that—help—not to lead or take ownership of central parts of your business. The core knowledge of how to manage and direct the business is locked up in your head, and if something should happen to you, your business would crumble. Even if you manage to somehow escape for a short vacation, you probably sneak your iPad or smartphone with you on the trip and check e-mail when your family isn’t looking.
The painful reality is that most Level Two business owners get caught in the Self-Employment Trap. They’re so busy doing the “job” of their business that they can’t step back and focus on growing their business. What’s more, because of the way they are building their business, the more success they have, the more trapped they become inside their company.
So what’s the way out of the Self-Employment Trap? You’ve got to work less and get your business to produce more. Remember, the more you do, the more you have to keep doing. The more you get your business to do, the more time you have to grow and build your business. This means building your business with the end in mind, the end being the day when it is no longer reliant on you the owner. We call this type of business a Level Three business.
BusinessInterviews.com: Can you talk a bit about the art of scaling a business without it taking over your life?
David: In the early years of your business, you’re naturally the main engine driving your business forward. You’ll wear all the hats at various times, and you’ll have few formal structures and systems within your organization upon which you can truly rely. But as the business matures, and you are solidly settled at Level Two, you face a crucial decision point at which you can settle for owning a Level Two company or instead choose to raise your business to be a strong and independent entity that benefits from your involvement but is ultimately independent of it (and move to Level Three).
This isn’t something that “hard work” alone is going to solve. Blindly working hard is part of the problem. The more your growth is based on your personal production, the more dependent your business becomes on you for that production. You’ve got to make sure that even in the midst of meeting the daily demands of your business that you take some of your energy and invest in the systems, team, and internal controls that will allow you to scale your business beyond just you.
BusinessInterviews.com: How did you come up with the concept behind your Three Level Journey for Wealth Potential?
David: From my own personal experiences really. I found myself facing the same challenges we now help our clients solve. How do you build a business independent of you (a Level Three business)… and when you do this and have a big exit (e.g. a sale) how do you intelligently invest that money for ongoing passive, residual income.
I made so many financial mistakes the first time I had a big exit back in late 2005. I thought it just me, but the more I talked with my entrepreneurial peers who’d also sold companies the more I realized how common my mistakes were. I’ve always written and taught based on my experiences, good and bad, so it was just natural that I’d turn my mistakes into a more comprehensive framework of how to do it better the next time. The past several years have proven out that the framework works.
BusinessInterviews.com: What advice would you give to a business owner who is interested in hiring a business coach but is anxious about potential financial and time commitments?
David: I normally hear the excuses in one of two ways. First I hear, “I’m just too busy running my business to step back and get the help I need to build my business as a business. Maybe later when I have more time…” As if left to themselves they’ll ever have a magical moment of “more time”.
Think about this for a moment. These business owners are so busy doing the “job” of their business that they don’t make the time to step back and build their business as a business. That makes about as much sense as the person digging a hole who says, “If I just keep digging my hole eventually I can dig my way out.” Never realizing that the more they dig, the deeper they get and the more reliant their company gets on them the owner being there every day.
The second excuse I hear is, “I don’t have the money to bring in outside expertise to guide me…” These owners think only in terms of what it will “cost” them to invest in the outside help they need to grow and develop their company. What they ignore is the true cost of the status quo.
If you’re working with the right coaching organization you should expect to see a huge return on investment (ROI) quickly. We actually guarantee clients a 200% ROI within the first year of our working together.
What you should look for in a coaching program is simple: direct access to work with coaches who have built Level Three businesses (how can someone take to you to a place they’ve never been themselves); a structured program to grow the business and reduce its reliance on the owner (versus an ad hoc coach who will merely help you solve one off problems); and a payment structure that aligns interests (beware any coaching contract that requires a long term commitment, I think any coaching program worth its salt should be month by month.)
BusinessInterviews.com: Can you share a recent client success story?
David: Sure, here’s an example, Tom Santilli. Tom first started working with us back in 2007. He was a successful business owner earning with a “successful” company, but the 80 hour weeks he was putting in was taking a severe toll on his health, his family, and his marriage.
It was actually Tom’s wife Lee who pushed Tom to start with us. She was tired of Tom missing out on family dinners, not being more involved in family activities, and of watching Tom’s long hours impact his health.
A lot of business owners can relate. They’ve built a successful company but they’re afraid that if they stepped back their business could suffer or even fail. And because of how they had built it, likely it would.
Over the past seven years Tom’s followed our coaching and done a tremendous job growing it the right way. During this time he’s grown his business from $5 million in sales to over $20 million per year in sales. The best part is that he’s completely worked himself out of a job – his business needs him for less than 1 hour a day. He’s built a Level Three business which he now owns fairly passively.
BusinessInterviews.com: Congratulations on your most recent book, Scale: Seven Proven Principles to Grow Your Business and Get Your Life Back. I couldn‘t help but notice on Amazon you have received a great deal of praise and numerous 5 star reviews. Would you be willing to share a key point or tip with our readers for free?
David: One of the early themes of the book is the “Hit by a Bus Test.” Essentially what it asks is what would happen to your business if one of your key people (including yourself) got hurt?
Most companies make the mistake of trying to scale one the one legged stool of “Team”. Now if everything stays in balance and alignment you can sit on that one legged stool, but it is a wobbly place to sit. And how long does a one-legged stool balanced solely on team stay in perfect alignment? Not very long.
When you scale based solely on hiring “key” people, you just create a new problem for yourself. You move the critical dependency from your shoulders to those of your key hires. What happens if you have an employee issue? What happens if a critical team member’s spouse is relocated? Or someone gets hurt?
Instead, in SCALE we give readers the steps to build on the stable 3-legged base of team, systems, and internal controls. Sure, you’ll still want great talent on your team, but you’ll also create stability and scalability by empowering your team with the structure (i.e., systems and controls) they need to produce more, better, and faster for your company.
Scaling on the stable base of systems, team, and controls means that your business can handle the loss of a key team member. Plus, by having the other two legs of systems and controls, it’s much easier to find, hire, and onboard new team members because you have a structure into which to integrate them.
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