14 Small businesses often sell new and untested products, and they frequently are undercapitalized. Large businesses, on the other hand, are able to take profits from other areas of their business to support a new venture during its infancy.
Entrepreneurial SeizureWhat am I doing this for?Why am I working for this guy?I know a lot about this business and if it weren't for me, he won't have one.Idea of being your own boss and doing your own thing become irresistibleFatal AssumptionIf you understand the technical work of a business, you understand the business.Barbers -> barbershop, electrician -> repair shop, musician -> music storeTech work becomes liability as he will not be forced to make the business work but instead do the work himself
3 Personalities existsEntrepreneurVisionary, dreamera need to control people to pursue his visionmost people are a problem that get in the way of the dreamManagerPragmaticthe OrganizerTechnicianDoerEntrep thinks new features that ruins Time TableManager wants to put you into a system that makes you lose your IndividualityEntrepreneur vs ManagerFuture vs PastControl vs orderchange vs status quoopportunities vs problemswithout manager -> no business, without entrep -> no innovationDoer vs World Entrepreneur ruins his plan when new features or idea are created Manager imposes a system which is Dehumanizing, cold and impersonalTypically, 10% Entrep + 20% Manager + 70% Tech
InfancyOwner wants as opposed to Business needs...And what The Technician who runs the company wants is not growth or change but exactly the opposite. He wants a place to go to work, free to do what he wants, when he wants, free from the constraints of working for The Boss.Owner and Business are one and the same.At first, everything is working out fine. You love your work and so you do it. Then, demand rises due to your great work. You need to exert greater effort than when you started it.Infancy ends when owner realize that the business cannot run in the same way when it was started.Adolescencetechnical helpsomeone with experience in this kind of businesssales-oriented finds production-oriented and vice versasomeone to do the books or financialManagement by Abdication rather than Delegationall work is done by the new personthen quality suffersowner begins to work again as a technicianyou don't own a business, you own a job3 Courses of ActionGetting Small - back to infancyGo For Broke - risk everything. demands exceeds productionSurvive - you've got to be there all the time. business consumes you
A Mature business knows how it got to be where it is, and what it must do to get where it wants to go.Therefore, Maturity is not an inevitable result of the first two phases. It is not the end product of a serial process, beginning with Infancy and moving through AdolescenceMature companies was started as a Mature company. They also go into Infancy and Adolescence in a different way.EntrepPrespective: commodity or work is not important, the business isEntrepvs Technician PerspectiveHow must the business work vs What work must be done?outside results in profit vs Inside results as incomefuture to present vs Present to uncertain futureEntrepreneur ModelBusiness as a productCommodity is not as important as how it was delivered.Does not start with a picture of the business to be created but of the customer to whome the business is created.Business Model that satisfies the 3 personalitiesTurn-Key Revolution
Franchise Phenomenon- McDonald's Ray Kroc- The Most Successful Small Business in the World Today- Business Format Franchise that has revolutionized American Business- 5% has been terminated annuallyBusiness Format Franchise- not "trade name" franchise- provides entire system- previous belief that "success of the business depends on the success of the product it sells"- true product of the business is the business itselfSell the Business Instead of the Product- systems-dependent business not a people-dependent- work on the business not work in the business- perfectly predictable components that could be tested in a prototypeFranchise PrototypeRulesValue Beyond ExpectationOperated with the Lowest Possible Skill- business are not built by extraordinary people but by ordinary people doing extraordinary things- typical owners prefers highly skilled people, work now depends on their mmoodA place of impeccable orderWork is documented in Operations ManualsPredictable Service to the CustomerUtilize a Uniform Color, Dress and Facilities Code
Primary AimA picture of how you want your life to be.Strategic ObjectiveA clear statement of what your business has to ultimately do for you to achieve your Primary Aim.Vision of the Finished ProductStandards that need to be Included in you StratObj.MoneyOpportunity Worth Pursuing.What kind of Business Am I In?commodity - what customer walks in handproduct - what customer feelsNobody's interested in the commodity, people buy feelings..Who is my Customer?demographicPsychographicOrg Strategy"We're just a Small Company. We don't need an org chart."An orgchart has a more profound impact than any other Step.Steps.Create an Org Chart based on AccountabilitiesReplace yourself with a system.Start from the bottomMgmtStratA system designed into your prototype to produce a marketing resultsPeopleStrat"Doing it is more important than not doing it" - make sure they understand the idea behind the work they are doingCustomer is not always right but it is our job to make him feel that wayEveryone who works here is expected to work toward being the best.Everything we know how to do is tested by what we don't know how to do. The conflict creates growth.People do not simply want to work for exciting people. They want to work for people who have created a clearly defined structure for acting in the world. Such a structure is called a game.In a small business, you are better off without professional managers.if the owner doesn't know how to manage, how is he going to manage them. If the owner can't, they will manage by the standards that has been taught in somebody else's business.MarketingStratForget about everything but your customer.What you want is unimportant. It's what your customer wants that matters.Demographics - whoPsychographics - why he buysUnderstanding them, you can construct your prototype to satisfy his unconscious needs.These includes logos, colors, uniforms.Systems Strat3 kinds of systemsHard Systems - inanimate, unliving thingsSoft Systems- animate or ideasInformation Systems - information about the reaction between the two. -this will track the updates
Why Most Small Businesses Don’t Work And What To Do About It
Philippine Small Business By Asset Size (15M below) By Number of Employees (99 Employees) 40% out in Year 1 80% out within 5 Years 80% out within the next 5 years Starting with100 Business End in 3 Business in10 years Effects: Loss of Personal Assets and Self-Esteem
Questions??? How do we explain the failure rate? Why do so many people go into business, only to fail? What lessons aren’t they learning? With all the information available today, why only few people are successful? Why Most Small Business Don’t Work?
Entrepreneur Myth (E-Myth) “Small businesses are started by Entrepreneurs” Entrepreneurial Seizure Fatal Assumption If you understand the technical work of a business, you understand the business!!!
3 Personalities Entrepreneur – visionary, dreamer, future Manager – pragmatic, organizer, past Technician – doer, present Conflict Entrepreneur vs Manager Doer vs the World! 10% Ent + 20% Mgr + 70% Tec = 100% Failure!!!
3 Phases1. Infancy Owner and Business are one and the same2. Adolescence Getting Some Help “Management by Abdication” You don’t own a business, you own a job3. Maturity
Maturity Knows how it got to be where it is and what it must do to get where it wants to go Entrepreneur Perspective Commodity or work is not important, the business is Entrepreneur vs Technician Perspective Entrepreneur Model Business as a Product Commodity is not as important as delivery Starts with the customer in mind
Turn-Key Revolution Franchise Phenomenon Business Format Franchise Sell the Business Instead of the Product Your business is not your life The purpose of your life is not to serve your business, but your business to serve your life. Rules
Franchise Prototype Pretend like it is a Franchise Satisfies 3 personalities Entrepreneur – vision takes form Manager – order and predictability Technician – technical work
Business Development Process Innovation – business not commodity Quantification - feedback Orchestration – Standardization, Predictability
Business Development Program1. Primary Aim2. Strategic Objective3. Organizational Strategy4. Management Strategy5. People Strategy6. Marketing Strategy7. Systems Strategy