The Three Phases of Entrepreneurship with Bryan Franklin and Jennifer Russell
This is an old but goodie from the I Love Marketing podcast episode 129.
If you want to Rapidly Scale: Work these phases in sequential order.
Do not skip around. Work in your phase before progressing. These phases are priority. The day to day stuff comes next. The greater good is the long-term goal.
PHASE I: Start-up.
Get through this phase quickly. You need urgency.
The start up refers to Silicone Valley; massive growth, global strategy, heavy capitalist backing, team of tech geniuses. This accounts for 10% of start-ups.
The other 90%, are self-funded businesses that are trying to grow quickly and safely, mostly by boot strapping. They are vulnerable (like an infant) and need special care and attention.
This phase is about one thing: Getting the value equation right. Make sure the value is greater than the cost. Ensure clients value your product or service much more than what you are charging. They must get the better end of the deal and give you two thumbs up.
Before doing anything else, are your customers willing to give you money without resistance. How? Four Ps.
- What is your offer? Product and Promise:
- What is your Process? What is the process you are giving your product away at. How do you fulfill it? You need a well formed offer. See how it goes. Have sales conversations with people to get your value equation right. Factor in the eight profit activators. Can you deliver the result, then, what is it worth?
Dimensions that will determine how rapidly you grow:
- Are you focused on the Value Equation as your primary income?
- With service, are you inventing a new company for each customer or opportunity?
- Are you chasing opportunities and not drawing conclusions about something you can repeat? You must be able to scale.
- Focus only on the value equation.
- For the value equation to have as wide a berth as possible; as big a distance from customer value to what it costs you. With this, you have flexibility on price.
- Consider the results first, then the product. This will give you less constraints. Pick your price last.
- Get your value nailed down first.
- Get cost structure nailed down second.
- Lastly, get the price strategy. Why; might be more margin, more profit.
Your goal is to you have clients say “I will take as much as you have” after learning your about your product and cost. For a huge advantage, can you drive the cost down so it is a no brainer – especially for the subscription model.
You hold the vision and leadership. The goals of most entrepreneurs is:
- Freedom
- Wealth
As you exit the Start-Up phase, you cannot let your email dictate your calendar. Your whole mind has to change about everything. You have to be slightly less responsive to customers. Look long-term. Running this through a series of gates and thresholds. Tweak things, what works and does not work? When you know you can slam dunk a particular profile, them move into phase two:
PHASE II: Sustainability
In this second phase, you want to optimize the growth of your start-up. The two vectors:
- Increase your client’s perception of the value of what you are offering, dramatically.
- Make your business
- Predictable
- Replicatable
- Replenishable
When you look at the major activities:
- Marketing (Getting people who do not know about you, to know about you).
- Sales (Getting people who do not buy from you, to buy from you).
- Fulfillment
- Profit and Overhead
Make each of the above predictable, replicatable and replenishable. Like a crank. For a known quantity of effort IN, it should yield a known quantity of work or result OUT. This is a well-oiled machine. Teleseminar works great. Partner with somoeone with a list. A good clue you have a crank, if you crand it harder, you get more out of it. Then, you can moderate your business by how hard you work.
The first step: Get your fulfillment crank ready. Not started, but ready.
Second step: Do your marketing crank. It is okay to leave a couple leads on the table while working on your sales crank.
Third step: Get your sales crank going. If you get too many leads, enter into a partnership with businesses that have extra fulfillment and capacity. Give away leads and business. People will love you. Partnerships are key. You cannot scale and grow rapidly without them.
Do this in the right sequence and everything is easy. Develop this on a small scale.
To set yourself up you need to understand important numbers. Mainly your cost structure of your business. Look at activites (Marketing, Sales, Fulfillment, Profit and Overhead) for a dollar of revenue. Allocate that revenue into an activity by percentage. Get these numbers right, according to your industry. Then you can go into partnerships (vendors, customers, etc.) with confidence. And discipline how to value your time, effort and energy within your business.
Meet your competitors. Get to know your industry. Reach out to people in your industry. Non-linear growth is available if you collaborate.
For service related industries such as coaching or consulting, typical cost are:
- Marketing = 5 – 10%
- Sales = 10 – 15%
- Fulfillment = 50%
- Overhead = 10% or less
- Profit = 20
For the auto industry, fulfillment is 80 – 90%.
For information products and internet marketing:
- Marketing = 40%
- Sales = 20%
- Fulfillment = 30%
- Overhead and profit = 10%
If you wear many hats in the sustainability phase, separate the activities in your mind. How much time and energy are you spending in each area. Keep track. Make sure it makes sense in your model. For most entrepreneurs not growing, once they evaluate this, it becomes super clear.
You need cranks and cost structure figured out before you can move out of sustainability phase. Can you create a narrative like on the show “How it Works” to describe your system. Imagine it working without you.
PHASE III: Scalability
Most people never figure this phase out. You are dodging the wealth bullet if you stop here. This is where the wealth occurs, when you are all about:
- Automating
- Delegating
- Outsourcing
Work yourself out of a job. Take every area of your business and ask how do I Automate, Delegate and Outsource so that everybody who comes in gets to add to and add their own crank and expand it from there?
The pitfall is thinking you are the only one who can do the job. This arrogance and belief is usually becuase they do not fully understand the magic fairy dust that they are using that is creating the success in their business and becuase they do not understand it fully. It seems to happen becuase of their unconscious competence. They do not know how to outsource these steps. As a result, they are perpetually stuck becuase they are the limiter of their own business. The very thing that got you to sustainability is the thing in your way to creating wealth. Work yourself out of the job, so that a monkey can run your business. If only geniuses can run your bsuiness, how big can you really get?
Find and hire competent people to do their best work. Then, get out of their way. If you recognize you know the value that you provide, every time you think you are the only one, you think no one is as good. This thought is a trick. I am doint someting. I just do not know what it is. Examine it. Find the people to hire. If you do not, you scale the one piece of =your business that does not generate any revenue – the overhead (an assistant, bookkeeper, lawyer, etc), but you still hold all the overhead and four activities (Marketing, Sales, Fulfillment, Profit and Overhead) yourself.
Businesses that scale are lead by people who are continually investigating where and how value is being producted in the organization. Then, innovating ways of communicating, educating and rewarding those capapbilities. If you can do it 100% but you find someone who can do 80% 100% of the time, and you can get five people – this is huge!
If your business rides on this 80%/ 100% difference, you have to go back to the drawing board. Your value creation is screwed up. You are relying too much on yourself to provide value. How can you make it easier to provide value to a larger population? You will never have a team and only one man year per year to work your business.
Income to assets : phase 1 & 2 to phase 3
If everyone you hire created at least twice what you pay them, wouldn’t you take as many as you could? You can create impact on a much greater scale. That is the purpose of this phase. Automated profit is the only way to create wealth. Create jobs and job descriptions.
Summary:
When in the startup phase, focus all your attention on getting the value equation right. Having the widest distance possible between the value you actually provide the client and the value they actually receive. And the cost it costs you to deliver this.
In the sustainability phase it is about creating a crank for your business so that your marketing, sales and fulfillment are predictable, repeatable, and replenishable. You want to be positioned to where a known amount of energy in, yields a known amount of revenue and opportunity out. You also want to understand the cost structure of your business.
In the scalable phase, your first job changes from creating value for customers to creating valuable jobs. You have to be creative in thinking about job descriptions so that if someone fits the description, they generate 2, 3, 4 times the value for the company that the cost of their salary and benefits. Create and fill these job descriptions. In doing so, you are automating, delegating and outsourcing first marketing, then sales, then fulfillment.
This creates a fully scalable business where your job is holding the vision and leadership. This is where the wealth is generated.
To achieve Freedom and Wealth: Get through these gates as quickly as possible. Developing the next phase of your business is your highest priority. Prioritize this first. Handle the day to day second.