Every Business Under $10M Has Key-Man Risk

0:00Hey, Alex. I'm David. I run an ERP consulting firm. I'm on track for 1.9 this year and I'm trying to get to 5 million and basically what's stopping me is that I'm the chief cook and bottle washer key man. >> Got it. Um is it that you don't you can't get more customers or that you were the one who's involved in the delivery of the customers? >> My customer acquisition is pretty easy right now. It's It's all affiliate and client referrals.

0:27>> So, you're delivery constrained functionally. Like you are the one who's required to do the stuff more. Okay, got it. Um question is uh shift one, can you shift from doer to architect? >> Uh it's it's in progress. I do have one other doer that's Well, I have I have eight people total. I have one other doer who is very self-sufficient and would be the other half of the key man equation here.

0:52Um but really I do everything else. So, he does over half of the delivery I would say, but then I'm the key man on the entire rest of the business as well. >> Yeah. So, I'll say two things that I think will be relevant. Um like we do this with everyone and it sounds boring, but it's super effective and it's not going to take you more time, which is to just do a time study and look at where you're spending your time. Now, it's going to fall in a couple buckets and the biggest one that I think people don't pay enough attention to is problems that aren't actually worth solving.

1:20So, Napoleon had this problem-solving method that I actually just recently read about um which varies was very confirming for how I like I like to solve problems, so I'll share it with you, which is that he would not open letters from his generals for 3 weeks because he didn't want He wanted to let some problems resolve themselves, so he wouldn't have to put any effort into it. Um and so, I'll bet you there are some problems that you're solving right now that are not the constraint of the business, but you were still solving them. So, that's thing one in terms of buckets of things that we can eliminate. Um the second thing is okay, of these other activities um what's the margin on the 1.9? Is it 1.9?

1:54>> Yeah, 1.9 50% gross, 30% net. >> Okay. So, you have the cash flow to be able to hire out, call it another person at $150,000 a year and it's not going to like sink the business. >> Right. >> Right. And so, I'll bet that if between elimination and delegation, you can probably get more than half of your time back just from those two things. But, I would encourage you to say that one, I wouldn't obsess too much about key man. You're not big enough for it to matter right now. Any any small business has key man risk, you know, below 10 million. It's just what it is. Um it's painful, but it is just reality. Um and so, don't like don't obsess over that. Um and then in the things that are coming up, it's like it feels as though the fires are sporadic, but it is just because we have not measured them over a long enough time horizon. And so, it feels like these problems pop up, but they really pop up once a month. We just don't know what day they pop up on, but on a monthly basis the thing has to happen. And so, basically the longer you do the time study on, the more you're going to codify the activities that you're doing, which will then allow you to delegate them or eliminate them.

2:54>> Which is a variation of what I'm already doing because my main my main product is actually spotting problems in my client systems >> Mhm. >> and raising them before they see them. >> Yeah. >> Um and so, it's it's kind of the same work. I just have to look inward and outward at the same time. >> Well then, I mean fundamentally if you if you feel like a a solution is in flight, is it just that you are upset that it is not happening as fast as you want?

3:21>> Not even upset. >> Okay. >> want to make sure >> [laughter] >> that I'm not being naive to the fact that like like I can't fix everything and there's plenty of people that are way smarter than me. >> Yeah. >> So, should I be getting those people on the bus sooner rather than later? >> Yeah, 100%. I mean, you're you're going to take risk in terms of cash flow that you're betting. Some of these people are not going to work out and that's just going to be a cost of doing business. Um the faster you get your pattern recognition, the faster you're going to be able to scale the company. If you think about um this isn't easy frame for it to to to consider. If you were to start over tomorrow from zero, um the bets that you'd be willing to make at zero to get to where you're at now, you'd probably make without thinking because you're not that worried about it, right?

4:02>> Right. >> And so there's a $10 million version of you as an entrepreneur who would considers the bets that you have to make right now the same way. You just haven't made them yet. >> Okay, that makes sense. >> So TLDR, time study, backfill, be willing to make the bets on the people that you have to, accept the fact that you're not going to get it right, overemphasize onboarding and training, and this is the nature of a service business is that you have to people are cogs in the machine, automate as much as you can which you probably already are, um and this is just the nature of the game and I don't think you're doing anything wrong. It's just like this is the part that sucks.

4:40>> So I I have an offer question as well. So um previously I was just selling general consulting. I've worked my butt off on the the last 18 months since I got here at Book. >> Yeah. >> And I've got an offer now that's kind of a three-part >> Right. >> onboarding, expansion, and ongoing continuity. What I what I tried to do, and it failed three times in a row, is go from what previously was working 90% of the time. So 90% of the time, if I did like a $30,000 assessment at the beginning of the project, I would always win a a larger multi-six-figure deal.

5:14>> Okay. >> I've tried to jump straight to the six-figure deal. >> Okay. >> And I've struck out three times in a row. And so I know this is not a lot of context, but does it just make sure make sense to kind of go back, put the assessment back in as a stepping stone knowing that most of the time I'm going to win the big money anyway? >> Yeah. I mean, it's just part of your sales motion. >> Yeah, I just tried to take out a step, basically. >> No, I hear you. But I mean, if if if you know that you're winning 90%, then you can just basically uh approximate the value of a 30K deal is 0.9 times the whatever 200K or whatever your average order value is.

5:50Um so it's 30 plus call it 180. So every one of these 30k's that you're selling is actually worth 210. And then you can just basically factor all your marketing knowing that math. >> Got it. >> Which feels worth it. Yeah. Appreciate you, man. Thanks for Thanks for calling in. >> Yes, sir. See you soon. >> All right, later, bud. If you like this video and you're a business owner who wants to break through your current revenue ceiling, I distilled every lesson from scaling 10 businesses past 10 million and three businesses past 100 million into a completely free scaling roadmap that I've used to go from zero to one, zero to 10, and zero to 100 plus. And so you can click here and you can check it out. Again, absolutely free. And since you're a business owner, I appreciate you and enjoy.