April 14th, 2011

Have you ever thought about the most expensive mistake that most business owners make?

If you had to, what would you say that is?

I was thinking about that very thing today and wanted to share my answer with you.

I think the biggest mistake that most business owners make when they work to build a business, not a job is that they try to grow and scale their company built just on “Team” alone.

I call this the “Knight In Shining Armor Syndrome”.

They look for the perfect team member to come into their business to help them run the business.  Sometimes they find just the right person, although usually they don’t.

If they don’t find the right person, then 3-6-12 months later they are left with a business that is messier, struggling, and lots of clean up to do.  And they swear they’ll never do that again… and just settle for a smaller, less profitable business than they could have.

If they DO find the right knight, at some point in the ensuing 1-3 years usually something happens in that person’s life.  (E.g. their spouse gets transferred and they move… they have a personal challenge and they turn into a problem employee…)  Or what can sometimes be worse, the business becomes increasingly dependent on them and you the business owner feel more and more beholden to them and vulnerable to their whims.

Instead I want you to build your business based on the 3 essential ingredients of all scalable businesses:

Ingredient One:  Team.

“Wait a second David!  You just don’t build on team….”  Actually, I said don’t build SOLELY on team.  You NEED team. You need strong players.  You just can’t build a championship team SOLELY on a star.

Think about Michael Jordan and the Chicago Bulls.  The first few years Jordan played for the bulls they were a “one star” team.  It was only when they got more great players around them (Pippen, Rodman, etc.) and implemented a whole system of play (ala Phil Jackson) that they started winning championships.

Ingredient Two:  Systems.

Systems are the repeatable processes and procedures you need to capture the know how of the business in the business and not just in people’s brains.  Systems are the tools your team uses to get consistently strong results.

Systems can be checklists, scripts, samples, templates, or even software solutions.

But having a great team and strong systems isn’t enough to let you succeed in growing and scaling your business long term… you need one more ingredient.  This is the ingredient that most entrepreneurs never learn about…

Ingredient Three:  Controls.

Controls are the specialized systems that your team uses to make sure that things are being done the right way and that you’re running in the green.

There are three types of controls.

Visual Controls (think scorecards or checklists).   These controls help you SEE that you’re on target (or sound the alarm that you are off target.  E.g. A company dash board; a budget to compare expenditures against; a fulfillment checklist where people sign off on each step; etc.

Procedural Controls (think process rules to make sure things happen right way).  Procedural controls include things like financial controls like a formalized purchasing system; a process for sales people to get approval for concessions to customers; etc.

Embedded Controls (think those controls that you don’t even see, but still protect your business.)  Examples include:  standardized contracts; not accepting cash on an airline for snacks (nothing that can be stolen that way); etc.

A Powerful Analogy to Help You Successfully Scale Your Business

The analogy I’ll share is that of a stool.

If you build your business only based on Team, you’re foundation is a one-legged stool.

You need all THREE legs of the sound stool (Team, Systems, and Controls) to have a solid foundation to scale your business from.

I hope I sparked some deep thought on your part for the weekend.