The Evolution of Entrepreneurship: Ryan Deiss on Growing and Scaling Businesses Part 2

When you failed, know that this is something that you need to be considering. But until you get past that, half a million dollars in revenue as a really good benchmark, focus on selling and creating value to the marketplace.

If you are struggling, if your business is flat, if sales are declining, if you're burned out, you're not broken and your business isn't broken, the economy is likely not coming crashing down upon you. What you are experiencing are growing pains that that's what's happening right now in your business. It is a normal, natural part of the entrepreneurial journey. I read this book and I went and the basic of the book, basic aspect of the book is treat your business like a franchise document and systemize everything so that it can run without you. And that principle idea is great what I did because I took it to the extreme like most entrepreneurs do. I read the book over a weekend. I came back on Monday and I was like, hey, everybody, gather round, team meeting. Which by the way, anytime you're about to do that, just stop. You're about to do something super stupid. Okay? You're about to do something super stupid that you're going to regret. All right, everybody, team meeting, gather round. I have an announcement to make. Effective immediately. By the way, anytime you're about to say effective immediately, you're about to do something really stupid, don't do that. Effective immediately. I'm not going to. We're not going to prove any new hires, we're not going to green light any new projects. We're not going to do anything new until everyone in this organization has documented everything that they do. We want to build systems. We want to create this playbook library. So I want everybody to do, to just document what they do. Well, a couple things happened. Half of the room was totally freaked out because they thought they were getting fired. The other half was pissed because they're like, I know how to do my job. Why do I need to document this? But I explained to them all the importance of systems. We need to do it. And by God, we shut down the whole company for a month and. But by the end of the month, I had it. I had this like beautiful, like binders with like color coded tabs based on department, with checklists of all the. I remember looking at me like, we did it, we did it. And I put these things on a bookshelf and just sat back and looked at them like, done. And man, I'm not exaggerating. No one ever looked at those things once. Not once freaking once. So don't do Any of those things. Here's what you should do.

Okay, I gotta get ready for this one. Okay, let's go. What should we do?

So the first thing that you do, you do need to focus on systems first. So going back to, like, what is an operating system? It's a set of algorithms, right? Your source code. You've got to get this stuff out of your head. But you don't get stuff out of your head by saying, I'm going to document absolutely, positively every little task that I do. Because the reality is not all tasks and processes are created equal. And if you try to document everything and you succeed, you're going to have discovery issues. Nobody will find anything. They won't know what's going on. So don't do that. At the end of the day, all businesses do two things. We sell stuff and we fulfill the stuff we sold, right? Like, that's what every business does. You got to get a customer or a client, and then once you got them, you got to do the stuff you said you would do to keep the money. There's not a business on planet Earth that they don't do those two things. So I want you to start there, and I want you to start there, and I want you to start with the question of, okay, how do customers and clients happen? That is the first most fundamental question to ask. How do customers and clients happen? And what we do, we don't try to map this out in a checklist because the reality is that it's never linear.

Right?

We do a process. It's known as business process mapping. I didn't come up with it. If you go to business school, you're probably going to take a class on it. Some call them value chains, but it's simply a business process map. It's a flowchart that diagrams the process of getting a customer. And so we use, we get a whiteboard. I do this. Any new company that we acquire that we're doing integration, any company that we're about to start or look to optimize, this is always step one, big old honkin whiteboard and a stack of sticky notes. And what we do is we say, okay, how do people find out that we exist? Right? How does initial awareness happen? What do we do? Do we run ads? Do we get a strong referral? In any business, it's gonna be two or three main things. So all of those two or three main things, they get their own sticky note, right? And I'll put those in the upper right hand corner or upper left hand corner. Then I go, okay, when is it done? What's the end of the growth engine? Typically that happens when the sale is made, when the contract signed, great sales made gets put on a sticky note. Bottom right hand corner. Okay, we've got the beginning, we got the end. I go back to the beginning. I say, okay, so when somebody sees one of our ads, then what happens? Well, then they go to this landing page. Okay, they go to landing page, gets a sticky note. Okay, then what? Then what? And you then what? Your way, you keep asking that question, then what happens? Then what happens? So you connect the beginning to the end. Once you have done that for your client or customer acquisition process, what we call a growth engine, you do the same thing for the fulfillment process. What we call a fulfillment engine in most businesses. I mean, I'm talking companies doing many tens of millions of dollars a year. They're going to have anywhere from like two to five growth engines. Lots of them, by the way, have one. And that's great. They got one way that they get new customers and clients in terms of the fulfillment process. Same deal. It's a couple. And so you visualize and you map these, and what you've actually done is you visualize and how your company creates value. And that is the single most important step that literally everybody misses. And that's why when you create checklists and they're totally disconnected and nobody uses them, it's because they don't understand where it fits. And a lot of them are stupid. So that's first. First one, you got to map your value engines. I can go on to step two. Any. Anything on that you want to dig into?

No, I like that. I. The last thing I was just going to say is the process isn't stupid. Not the people. Right. It's. Although they might. They might be challenged as well. But it's the process that's stupid in.

That we say all the time, good people don't fix broken systems. Broken systems break. Good people.

Yeah.

And that's why we always want to start with systems first. Because what we found is a lot of these people who you're like, oh, stupid idiots. And they're so lazy, they don't know what they're doing. Hopefully you're not saying that about your people, but come on. I think all of us get a little bit frustrated from time to time and say cynical things about our team. It's okay. It's a safe place. We can admit it. If we're being honest.

Yeah, if we're being honest, it's probably.

Almost certainly our fault. Right? You hired them for a reason. They likely impressed you at some point. You kept them around, they probably did some good work. If they're sucking now, it's likely not because they just started sucking all of the sudden. It happens, but it's rare. Usually it's a systems thing. So we're going to start with that. Okay? Okay, team, this is how new customers and clients happen. This is what we do with them once we have it. Does anybody have any questions? Does anybody feel like there's spots that we're missing? Then you go. Step two is you wanna audit those value engines. And you would say, what are the steps and stages that we absolutely, positively cannot, must not, should not screw up? We refer to those as power stages. Okay? These are high stakes, high chance for human error. Right? High stakes. So you're going, and you're literally looking at the sticky notes. What are the sticky notes here that we cannot screw up? Right. Well, when we get a client, we get them on the phone, we get a prospect on the phone. Like, we better not screw up that sales call. I agree. I'm going to put an asterisk on that sticky note. What about some of these other ones? What about this? A lot of them, you'll find they're just steps and stages. They just happen. You know, it's pretty rote. Low chance of human error, high automation. We don't need to build playbooks and documentation for that. But all those ones that you build that you put an asterisk next to, that's when you say, okay, this is clearly important. Team. Who do we feel like in the organization does this better than anybody else? Jan does. Jan, the next time you do this, will you document, just in, step by step what you do, please, so that we can all kind of learn? And then when you're done, who else is on your team? Is there somebody else on your team who could review that and maybe run a field test on it? Yeah, Fred can. Okay, Fred. Yeah. When you do that, then let's go ahead, put them together. If you will only document the essential power stages. What you wind up with is documentation that is valued and actually gets used. And people know that it's valued because they can see they've all agreed collectively that it's important. And you ask the person who is the best at it to document it. So, couple things. Number one, you didn't have to do it. And number two, it was an honor to create the documentation. Right. It's high status to build documentation, so that's the second step. Once you have that, believe it or not, like you're kind of systemized. Now some people will say, well, shouldn't we systemize other parts of the business? Yeah, fine, if you want to go nuts. But I don't think you have to. What you have to systemize is your company's core value creation process. All the other bits and pieces, yeah, they probably need to get done, but you know, if we botch a hiring thing, that sucks, but we'll fix it, you know. And so yeah, we should probably document our hiring process. We should. But if we don't get to that right away, that's it's more important that we make sure that we nail the customer acquisition and customer fulfillment process. That's step two. Step three, we go back and we audit it again. And now we say who is uniquely accountable to each one of these. And that's when we get assigning roles and responsibilities. This is super important, man. We, we don't start with each individual and say what do you do? And build job descriptions. That's what everybody else does. And what you do is you get a list of all the things that people think you want them to do or that they do and maybe they shouldn't be doing. When you go through your value engine and you audit that, you say who does this or which team members are responsible for this one. And you start creating what we call critical accountability bullets next to team members names based on the value creation process. Now you start building role descriptions and job descriptions based on the value creation process. You also find out who's actually overwhelmed with too much stuff. You need to get them some help. Who are some talented, valuable people who don't have enough on their plate where you can offload and who are the people who are high paid and just clearly aren't doing anything. And that happens a lot at fast growing companies when you're loyal. People who've been around for a really long time keep getting promoted but they, but they're not doing a damn thing anymore. When this starts to show up objectively now you can have those conversations and say, hey, love you, mean it. I appreciate all the work that you've done, but currently you're not adding much value to the company. I don't say that to be mean. I say that because there's literally no bullet points next to your name. What did I miss? Where do we go from here? So that's kind of those steps one through three that gets you your source code. Then we could get into. Okay, okay, how do we build scorecards and dashboards? Which that by the way is pretty easy too. You go back to your value engines and say, how do we know this is working? What metrics should we track? You got a scorecard and dashboard for your growth engine, you got one for your fulfillment engine. Like now we know what's working, what meetings do we need. All that kind of gets figured out. The last piece of the puzzle though is goal setting. And I think it's important we do that last, not first. Every other freaking book on creating operating system. It's the first thing you do every other. I think it's either stupid or arrogant. You do goal setting last because you have no idea what your actual capacity is until you've upgraded your operating system. So that's the basic kind of six step process that we go through.

I love that. So one question I have in the middle. So we talked about identifying those two main systems and then you said, yeah, you probably should continue like human resources. You said, oh, you should probably document that out. But not as essential as those two core. Would you suggest that when there's more frequency in those other systems that. That is a time that you know, because I think of hr. HR is not a problem. If you're hiring two people a year. Right. And the system is likely changed from one time to the next because humans have changed and you know, the way that we attract people has changed. Would you say the frequency, the more frequent that certain situation happens, that's when we should get more focused on documenting it.

Yeah. And that's. Yeah. So the standard again is like high stakes, high chance for human error. High stakes. It's typically the high stakes if it happens a lot, you know. So yeah, like if you've got 10 people and you go to make a hire and that hire doesn't work out, I'm not saying it doesn't suck, but the reality is you can have the best systems in the world and you're still going to make hiring mistakes. Companies can survive those. That's not the same as we had a business that nearly went out of business because our fulfillment as an aspect of our fulfillment process as a physical products company, when we were doing, when we were placing orders because we were doing importing and stuff like that, our process for how invoices and wires were approved, we didn't have it like documented process, like what the checks and procedures were for sending a wire. And at one point one of our operations managers sent a 250 something thousand dollars wire to the wrong bank in China, man, you ain't getting that money back.

That's gone. Yeah, that's gone is gone.

And that nearly bankrupted the company because it was a high cash flow intensive business. And you just take $250,000 off the table, you're gonna be struggling. If you're a bootstrapped, product, inventory intensive business, that's gonna sting a lot. So that's what I mean about high stakes. So. But yeah, if you're only making a hire or two a year, you probably don't need to document that yet.

Yeah, and I would say from my experience too, in the hiring side, when we started hiring two, three, four people a month, we had to document it almost to essentially say, how do we constantly improve this? So like unless we're looking at a scenario and saying this is what we've applied, how do we make it better? You know, let's continue to improve upon it. But until we were hiring that many people, it didn't really matter. To your point right now that we're doing it more frequently, it's like, well, how do we optimize this? How do we make it more efficient? How do we ensure quality hires are happening more frequently? But that's because we don't want, you know, four people coming in, three people going out the door. So yeah, high, high stakes at that point, without question.

And that's what we refer to, by the way, as an internal fulfillment engine. So your, your internal teams, your, your operations, administrative teams, they're essentially an internal services organization that they're, they're also providing almost like a client type fulfillment for and their client is the company. And so yes, I think at that point it's totally appropriate for them to do that. I've just found. Well, I'll give you a specific example. So going back to when we, when I shut down the company for a month. So everybody documented everything. Do you know what the very first playbook, the very first SOP that was turned into me was? Was a documentation, a step by step checklist on how to request paid time off. Now I want to be clear, I want my people to take paid time off. Like I want, I want them to have lead balanced and fulfilled lives. I want them to use their vacation. I'm not anti vacation. But was that really the most important one? Like, is that what's going to ensure that as a company we're adding value to the marketplace because we are not in business to provide vacations for our team? I think entrepreneurs forget this, okay? You're not in business to provide Vacations for your team. You're in business to add value to the marketplace. It's as simple as that. It's the only reason you stay in business. Now, you can decide that you want to be in business and that you want to have other aspects, but the thing that is going to keep you in business is if you continue to add value to the marketplace. So we're going to say, how do we add value to the marketplace? How do we create and capture marketplace value? You got to get customers and clients. You gotta fulfill them, fulfilling the promises you make. And if you take care of those two things, you're gonna find that you've documented the vast majority of the systems you'll likely ever need to document.

I love that too. And, you know, that is such a frustrating thing as an entrepreneur. You come in, you've got all your passion on the line. How do we continue to deliver this better and create more value for the marketplace? And the first question that comes back is a selfish one from an individual on your team that says, but what about me? You're like, come on, guys, let's. Let's solve this first. Let's figure out how we bring more value to the marketplace, and then how do we incorporate your experience, your journey in that so that you bring more value as a team member by enhancing, you know, your journey, your experience, so that we bring more value to the marketplace. It's. It's definitely very frustrating as an entrepreneur to have people lead with them first versus let's help fulfill the goal.

Incredibly frustrating. Yeah. I should have known then that. That my little experiment was going to be a failure.

You know what, though? I believe it happens all the time. And here's the other problem that I feel entrepreneurs that we have is that we do love to learn. And, you know, we will go take an insight and learn something from a book, a course, a conference. And without the right context or maybe even incorporating, you know, people that we should into that, we immediately come to a conclusion, because we're also very good at that. Making fast decisions out of necessity. Right. So immediately you learn this, which is an incredible book system. It's better to probably have it than not have it. But for you, at that moment was probably not a priority, right?

Yep. And certainly the execution of it was. Was flawed. Highly flawed. Yeah.

That's okay. Okay. So, Ryan, this has been extremely insightful, helping entrepreneurs understand how to essentially go from the million dollars with one operating system and then start to understand the necessity of them to evolve into a new operating system as a as an ability to scale, which I think is so important. Again, I've had those same challenges in. In between. It's always amazing that we get these insights after we've failed and struggled. I'd love to find a way to just teleport into my brain all of the insights I need before I know that I need them, because that would be helpful. But let's. Let's go back to the beginning. And I know that you talk a lot about some of the myths of starting a business and some of the challenges in starting a business. You know, we've talked about the grow and scale. What are some of the challenges that people get with even starting that?

So I think these challenges come in a lot of different forms. And the first form is the myth that I need to be passionate about what I'm doing about my business.

Were you not passionate about the online business that you were selling? The ebooks?

I was super passionate about selling ebooks. On how to make your own baby food? Yeah. Yeah. Totally passionate about it. No, man. I think it is far more important that you are passionate about who you serve. I think that can be really, really good. Like, you do need to genuinely care about the people that you're serving. And the mistake that I see is people get passionate about their product and they fall in love with their product. And that is one of the biggest mistakes that I see happen. Do not fall in love with your product. Do not base your business on the products you sell or the way that you sell them. Base your business on the people that you serve. As their needs change, as their taste change, as their desires change, you can change with them. Cause you're not defined by this one thing that you sell. It's also dangerous. It's especially dangerous in the early days because you're not open to killing your darlings and shooting sacred cows and all these things. And you've gotta be open to that in the early days. So I'd say it is far more important that you fall in love with your audience and with your market and who you're serving than it is that you, you know, fall in love with your. With your product unnecessarily. I think what you can also fall in love with is just the game as well, like that. So for me, I'm not necessarily. We're in a lot of different businesses, and I'm not uniquely passionate about every single one of them. And so because of that, I don't run those companies. I think it is absolutely essential that the person at the helm of the company genuinely and sincerely empathizes and cares about the end user that they're serving. I think it's essential. They've got to have other skills, but to merely be skilled and not give a damn about it. Maybe that can work when you're many hundreds of millions of dollars in revenue and you kind of have this machine that's there, but certainly when you're kind of in the startup scale up phase that you need missionaries, not mercenaries running that, you know, running that company. That's why I'm happy to run the scalable company because I'm deeply passionate about working with entrepreneurs. I think it's, I think it's super mega, ultra fun. Prior to this, the business that I ran was digital marketer.com. now digital marketer is still in our portfolio group. But I don't run Digital Marketer because I'm not doing marketing on a day to day basis anymore, you know, so I can't say that I'm, you know, passionately empathizing with, with marketers because I'm not doing the marketing. I kind of got out of the marketing game in 2016 when I realized just more marketing and more sales wasn't good enough. Right. That's when I got into the scale game and the operations game. I didn't tell a lot of people that, you know, I still, to this day I'm largely known as a marketer even though I've only played one on TV for the last 10 years. But I don't think you need to be passionate about your product. I do think you need to be passionate about who you serve. So oftentimes people say like, ah, follow your passion. I think that that advice is, is horribly misplaced. Also you don't need to have like the perfect branding and all the stuff figured out when you're first getting started. The most important thing, step number one is to just get 10 people to buy something. That is when you start to figure out the business that you're in. And I've seen people get very excited about their domain name, you know, or their logo and they spend all this time focusing on, you know, logos and domain names and you know, this other stuff that doesn't, that doesn't matter as much and they just need to go sell things. And the same is true by the way, with a lot of the systems that we talked about before. I think that is absolutely critically important to start thinking about about half a million dollars in revenue. I think if you don't have it in place and working at 2 million your growth is going to stall out. I've just seen it happen too much.

Yeah, but get to half a million, but exactly, yeah, get there first and then start adapting.

If you're listening to this and you're doing, you know, zero to half a million dollars, I want you to ignore virtually everything that I said because it doesn't apply to you at all. And, and I'm sorry, we maybe should have said that from the get go. The only thing you need to be working on and worried about is going out there and selling people stuff. And after you've sold it, make sure that they're not just excited and happy. Your job as a business is not to produce satisfied happy customers and clients. It's to produce successful customers and clients. Happy customers don't refer, successful ones do. Because people ask them how they got to be successful. And so they tell you don't have to have a referral strategy if what you do actually freaking works, okay? The people around them are going to notice the transformation and they're going to ask them and they're going to talk about you if you do a good job. So in the beginning, focus only on sales until you get a few, then focus only on making sure that those people are as happy as they can possibly be. And once you have sold and served 10, 20, 30 now you get a sense of what business you are actually in and be completely open to it being something totally different than what you thought it would be going into it. Then we can talk about systemizing. But usually you're zero to about a half a million dollars in revenue a year before you figure out what business you're in.

I agree. And likely depending on the business that you're in, you can likely do half a million dollars with relatively no one else being part of it either. For the most part.

Yeah. And you probably shouldn't invite too many people to the party. Cause it's a mess, man. It's a shit show, right? Don't invite people over to this. You don't know what you're doing. You know, if there's other people who are crazy like you and they want to join the fun, then cool. We love those people. But yeah, don't staff up too much during that period.

Yeah. And you know what really good advice on the sales side. You know, I have a lot of people, especially in challenging economic times. Interest rates are high, recessions are looming because they're trying to control inflation as governments do. And you know, people get upset and the first thing they do is, well, it's unfair because everyone's making my life difficult. Go sell something. Right? Like that is going to be. Yes, you have to still contribute. Nobody's handing this to you. So if you're having a difficult time, go sell. Right? Sell. And like Ryan talked about, this is an essential part of the process. In fact, I think if we had to prioritize your sales engine and your deployment engine, sales engine's priority number one because if you don't sell it, you can't deliver anything. So let's deal with that one first. And, and to Ryan's point saying, if you're not at this level, don't worry about this stuff. I 100% agree. But have it in the top of your mind because once you start having that level of success and you see yourself getting past, don't be like Ryan and I and have to figure it out on your own. And when you failed, know that this is something that you need to be considering. But until you get past that, half a million dollars in revenue as a really good benchmark, focus on selling and creating value to the marketplace like Ryan said as well. Super insightful. Love that Ryan, always a pleasure. Any last thoughts for business owners before I tell them how they can connect with you and Scalable? Because I think that is going to be a huge element once they've achieved that, you know, half a million dollar success level. Starting to learn from organizations like Scalable. But any thoughts before we introduce Scalable to everybody?

I'll just reiterate something I said before, which is if you are struggling, if your business is flat, if sales are declining, if you're burned out, you're not broken and your business isn't broken, the economy is likely not coming crashing down upon you. What you are experiencing are growing pains. When you were a teenager, you got pimples and your voice was crackly. That's what's happening right now in your business. It is a normal, natural part of the, of the entrepreneurial journey. And to realize that you're not broken, to realize that you're not alone, to realize that your experience is not unique, I think it's just so incredibly important. It is a different playbook, it is a different game, but man, it's a fun one and it's worth playing. So don't let anybody tell you that you're not good enough to run your company at scale. Don't let anybody tell you that your business can't scale and don't let anybody tell you that it's not worth trying to scale your business. That you're better off just having, you know, this little laptop lifestyle business. In my experience. I don't want to take. I don't want to have the freedom to take my laptop to the beach. I want to have the freedom to go to the freaking beach, not bring any laptop or any other device and know that my team has got it. And that is what scale can offer you, that a smaller, you know, laptop lifestyle business, which I'm not knocking. If that's what you want, build it. That's what it means to be an entrepreneur. Right. You get to eat your dessert first and have whatever the heck you want. Just don't decide that. Don't choose that path because you think you can't, because you can. I've never met an entrepreneur who wished they made less impact, who wished they had less freedom, who wish they had, let's be honest, less money and all of those things you're gonna get more of if you learn to scale and you learn to scale the right way. So that'd be my, my last message.

Love that. And you know, again, very heartfelt to thinking of the entrepreneurs and not letting other people tell us the way that things should be or how we should feel or what we should be doing with it. You know, that's why we're entrepreneurs here. We are excited about creating that value for the marketplace. Let's decide how we want to take that initiative ourselves. Ryan, Love this. How do people reach out to you and connect with you and maybe be part of the scalable community?

Sure. I mean, so I did write a book on this, on the process that I described before. So if you like business books and you like reading or you like listening, if you go to get scalable.com free, you can actually get the book for free. Just literally cover the shipping. I'm covering the cost of the book. You can also get it on Amazon. It's like 20 something bucks. But I think that's a good starting point because, you know, it's the book that I wish I somebody had given me when, you know, back in 2015, 2014, 2015, to the run up of 2016. I think it would have saved me a lot of heartache. It's not a business card book. It's not a chatgpt wrote this book for me. It really was, you know, it really is a, you know, passion, labor of love. It's got all of the, you know, links to all the resources and tools that we use. Yeah, I mean, I literally took what previously we were selling for in a $3,000 course. I pulled that course off the market and I said screw it. I'm going to give all away in a $20 book. I want to help some people. We do have groups, entrepreneurship groups. We have services where we work with clients to help build out their operating systems. If you want more help, individualized help, you can learn more about that at Scalable Echo. And on that page I also recorded a YouTube video where I break down all this stuff and that's just totally free, no opt in required or anything. So if you go to Scalable Co, you can, there's a, there's a link to that YouTube video you can watch.

Amazing. Ryan Deiss everybody, thank you for being here. Appreciate you so much. And for everybody else, if you like this episode, give us a like, give us a follow. This is actually we're now well past the first year of posting every single week and we continue to bring extraordinary people in like Ryan to share his journey, his experience so that, hey, we can all learn from each other and which is pretty incredible. If you have someone that you feel needs this advice, this guidance, make sure that you share this episode with them. Ryan and I united in wanting to help entrepreneurs in any way we can to create a greater outcome and create more impact. So if you know anyone who can is would value this advice and insight, make sure you share it with them. Otherwise, I look forward to seeing everybody again next week. Ryan, thank you again my friend. So much value in this episode and for everyone else, thanks again for joining us. This is Bob Govreau, the host of the Wealthy Entrepreneur. We'll see you again next week.