In the founder phase, an entrepreneur takes his vision and turns it into a company vision. Almost every task from backstage administration to onstage performance falls on his shoulders as a founder. It’s until the entrepreneur becomes a farmer that he starts building systems, policies and developing people. He reaches out to new customers, not just close relationships. He hires people to replace him in low-value tasks and perhaps high-value tasks when the time comes. In the third phase of entrepreneurship, the entrepreneur builds on something that already exists. He improves his processes, policies, people and direction that the company is heading. He looks for new opportunities. He looks at what the competitors are doing. Ultimately the tinker looks forward to the next big thing. Finally in the thief phase, with the hard work of cultivation and innovation completed, the entrepreneur shifts his focus on impacting the community at large and tries to leave his mark on the world.
In the founder phase, the company’s values were the values of the founder. Since he filled almost every role, the founder was able to deliver on his values while he baked the bread, while he served the customer, and while he swept the floors.
Know your ARM and LEG.
Your ARM (average revenue per client per month) is a measure of sales and marketing and LEG (length of engagement) is a measure of your operations. Your CLV is multiplication of your ARM and LEG. Customer Lifetime Value = ARM x LEG.
The simplest way to increase your ARM is to raise your prices. And the best way to keep your customer’s longer (increase your LEG) is to improve your customer service.
In the farmer phase, the entrepreneur builds robust systems, hires cultural fits and develops talents. This means his values now become the team’s values. The farmer also embraces the transition from ‘me’ to ‘we’, even if it means changing parts of his values.
Tell the customers your company’s story, not employee’s story.
If you’re doing your job well, that is constantly communicating your story to your employees, your story and values should reflect to that of your employees’. Just remember if your staff doesn’t know how to tell your story, they’ll tell their story. So, build a system and communicate it constantly.
Every farmer knows that a tree always try to feed a branch, even if it’s dead.
The tree needlessly pours energy, water and nutrients to its weakest branches just as much as its best ones. What happens next is the best branches are starved. They’re limited in their ability to bear fruit.
This is a great analogy. Entrepreneurs spend as much time and effort on the poor ones as they do on their best, if not more. Say if you have 5 part-time staff who’re doing a good work, you might be overlooking the hire of one superstar who would do excellence. Same way if you have one client who sucks up all your time and energy, you might be prevented from transforming your better clients to best clients.
Now the harsh truth is average people will bring average results. To do your best, you need the best people at your core team, and you can’t do that if you don’t bring the best client who allow the best work to be done.
Identify your apples – your most happy and lucrative customers.
- Make two lists.
- On the first list, record your top 10 clients by the money they pay you.
- On the second list, record your top 10 clients by the happiness they create for you.
- Now compare two lists side by side.
Which names appear on both? They are your apples, people who bear the most fruits for you.
Interview your apples and tell their stories.
Setup interviews to hear their own words. Ask them
- What do you like most about my haircuts?
- What frustrates you most about getting a haircut in general?
- What’s your biggest source of stress when you leave my salon?
The answers could be
- I like the informal attitude and the fact that I can get in on weekends.
- The worst part is maintaining my cut after I get home. I always seem to get frizzy in a couple of days.
- My biggest source of stress is my kids, especially on weekends when they have nothing to do.
Bingo! With that information in mind, you can now craft compelling marketing stories. For instance, you should be promoting the fact that you’re open on weekends. Second you should keep hair products on hand that maintain their cuts or allow them to order through your site. Third, you should consider partnering with a local kids’ activity.
Identify your weeds – people who suck your money and energy.
- Make two lists.
- On the first list, list people who pay you the least money (per visit).
- On the second list, list people who complain the most.
- Now compare two lists.
What names appear on both lists? They’re your weeds. Watch out for them.
Fire your weeds and prevent potential weeds.
- Where did they come from?
- What are their requests?
If all your worst clients come from a Zumba class, consider forgoing more Zumba classes. If they’re using coupon codes, consider eliminating them. Don’t worry about losing revenue from bad weeds because if you shift the focus on your good apples, chances are they’ll more than make up for it.
Branch off new services, but first deliver your core product.
No one will order Uber Eats food delivery if they had a poor Uber ride experience.
Plan to introduce new rates.
- Calculate how much each client should be paying to create your perfect day.
- Determine a date for the change.
- Spread the news.
- Overcome your fear of losing a few clients.
This last part is tough, so let’s imagine the worst-case scenario.
Project new gross revenue. Let’s say you raise your price to $150 and you have 100 clients now. $150 x 100 = $15,000. Subtract your current revenue from projection. Let’s say your current price is $125. That means your current revenue is $12,500. So, after subtraction it leaves $2,500 a month. Divide the difference by new membership rate. This tells you how many clients you can lose and still make the same income. $2500/$150 = 16 clients. Now walk through your client list. Can you identify 16 clients who will quit when the rates go up? If not, it makes sense to go ahead, and enjoy making the same money with fewer clients and fewer hours probably.
Do your affinity marketing right.
Affinity marketing starts with your apples and strong ties, your close relationships. Ask them if they’re completely satisfied with your product. If they say yes, it’s time to tell their story.
Say “I’m so pumped for you. I’d love to tell your story. I have a camera here on my phone, and I want you to say what you just said. Ready?” Chris has never had a single client in any industry turn down the opportunity to get featured. After all, it’s their favorite story.
Next look who else could benefit from your service. Ask for a referral but make it simple and specific.
Hire a general administrator to replace you.
This is probably the first role that warrants a salary and it’s better be a responsibility-specific than time-specific. Time creep happens to many entrepreneurs (you can be very busy without accomplishing anything of value), and it even happens more often to employees because we grow up being taught that attendance is more important than results. After all, an administrator hired to work 40 hours will always be busy and accomplish less than the one hired to complete these 40 tasks.
Delegate, but don’t abdicate.
Research says only 30% of the managers believe they’re good at delegation. Carrying it all on your shoulders blocks your path to the real liberty and freedom. Understand the 8 levels of delegation.
- Do it like this.
- Look into this and tell me the situation. I’ll decide.
- Look into this and tell me the situation. We’ll decide together.
- Tell me the situation and let me know if you need help. Then we’ll decide.
- Give me your analysis and pros and cons of your recommendation. I’ll let you know whether we can go ahead.
- Make your decision and inform me of it. Then go ahead unless I say not to.
- Decide and implement the solution and then let me know what happened.
- Decide and act. It’s all you.
The final level grants strategic responsibility and moves into the realm of mentorship. This is the highest level of delegation that works best for training a successor or co-owner. Your job is to work your way up to higher levels of delegation. When you’re delegating properly, you’re not only setting yourself free also giving your employees an opportunity to develop themselves.
Know the levels of ownership.
- Analog – I do this and this. Then I do this.
- Binary – I do this. If this happens, then I do this.
- Algebraic – Most good business owners sit here. I forecast, plan, manage and automate.
- Entrepreneurial – I understand big picture, how and why I’m doing. I build custom solutions to new problems. I enjoy taking educated risks.
Take your customer service rep for example. He will say something like this if a client is dissatisfied and wants their money back:
- Analog – Not my job. Ask my supervisor.
- Binary – Our policy says no refunds.
- Algebraic – If I give this person their money back, it may hurt the revenues and might open a gate for future claims.
- Entrepreneurial – Why do they way their money back? What are we doing wrong? What should we do instead to make things right in the first place?
Go autopilot and save cognitive load for important decisions.
Steve Jobs wore the same black turtleneck and jeans, ate the same breakfast and laced up the same shoes every day to avoid decision fatigue. Then if he had a signification decision to make, he wasn’t doing it with a tired brain. He was saving his brainpower for big decisions.
The burden of choice is heavy for the entrepreneurs. You must go on autopilot mode for trivial details such as your wardrobe, meals and predictable routines such as when to get paid, which ideas you’ll pursue and who you’ll talk to everyday.
Stop impulsive reaction. Give it 24 hours (or a few depending on the circumstance).
Once upon a time, there was an old farmer who had worked his crops for many years. One day his horse ran away. Upon hearing the news, his neighbors came to visit “Such bad luck” they said sympathetically, “you must be so sad.”, to which the farmer simply replied, “We’ll see.”
Next morning, the horse returned, bringing with it two other wild horses. “How wonderful!” the neighbors exclaimed. “Not only did your horse return, but you received two more. What great fortune you have!”. “We’ll see” answered the farmer.
The following day, his son tried to ride one of the untamed horses and broke his leg. His neighbors came to offer sympathy “What terrible luck you have.”. The farmer replied, “We’ll see.”
The following week, military officials came to the village to conscript young men into the army. Seeing the son’s leg broken, they passed him by. Neighbors again turned and congratulated “Such great news. You must be so happy!”. The man smiled to himself and said once again, “We’ll see.”
The lesson here is to stop reacting to things you can’t control. If you see a negative comment on Facebook, ask yourself “Can I wait another 24 hours?” before reacting. Read it out loud to your friend. Laugh about it. Then ask again “Will I even remember this in a year?”
Will that poor review really hurt your business? Will that Facebook video really turn people away from your brand?
The crops are growing. The storms are weathered. The dust is settling. With the tinker comes the revelation that “What got me here might not get me there.”
Build a brand independent of you or your people.
Don’t get this wrong. People are your most important assets. But if you don’t want your business to follow members of your team down the street or your customers approaching your people instead of your brand, you must build an identity independent of the people behind it. Here are a few ways to do so:
- Change your lexicon. Avoid saying ‘my client, ‘your client’. Say ‘the team’, ‘our client’.
- Regularly switch staff around for your clients.
- Use vacations and day offs to introduce new staff to your clients.
- Put the best person in each role.
- Sign correspondence with “Your Friends at Company” instead of “Chris”.
- Educate staff not to give out personal phone or email address.
- Expose every client to at least 3 different staff.
The thief stage differs immensely from the first three stages of entrepreneurship. The thief is more inspirational and less tactical. Now is the time you ask yourself:
- What’s next for you?
- How will people remember you?
There’s a classic story about a businessman and a fisherman in which the vacationing businessman hires to take him out on the water for the day. They have a lot of fun, catch a few fish, share some stories and at the end of the day, the businessman hands the fisherman some money and asks, “So what are you going to do next?”
The fisherman replies “I’ll go and take a nap. Then I’ll eat my friends at a little bar. We’ll drink wine, and I’ll play the guitar, and we’ll sing songs. I’ll go home, make love to my wife, and sleep in tomorrow. Then I might get a late breakfast and go fishing awhile.”
“You know you could charge a lot more than you do,” the businessman replies. “Guys like me could pay twice as much.”
The fisherman shrugs and asks, “What would I do with the money?”
The businessman says, “Well, you could buy a nicer bigger boat.”
“And then what?”
“Well you could take twice as many people at a time. You could double your income.”
“That sounds pretty good. Then what?”
“Well, eventually you could buy your second boat and may be a whole fleet one day. You’d hire captains to run your boats.”
“That sounds great! Then what?”
“Well, you could sell off the big company or open franchises. You’d be rich.”
“Wow, what would I do then?”
To which the businessman acknowledges “Well, you could retire to a little beach somewhere, drink wine and play your guitar all night, sleep late, and maybe do a little fishing.”
Think of the fisherman story every time you catch yourself putting money first
Most of us have more important things to care about, our family and our prefect day for example. Material ownership sounds fun but it’s only part of the freedom. Though cash poor, the fisherman had the freedom of time, health and energy. And he spent his days doing what most of us would consider a vacation. So why didn’t the businessman consider him wealthy?
The answer, of course, is capital. Money is great enabler. Money creates time, funds a business’s growth and buys you a Ferrari. But money alone isn’t wealth. It’s just one shape wealth takes. Real wealth is our aim in the thief phase.
Key message of the four phases
Founder – builds a foundation of service
Farmer – cultivates processes, people and products
Tinker – builds on invention and new opportunities
Thief – enjoys real wealth and spread the wealth
10 words on mission: Missions survive when plans fail and plans almost always fail.
9 words on values: Without your values, it’s turtles all the way down.
8 words on gratitude: Find it. Feel it. Share it. Every day.
7 words on creativity: There’s no such thing as writer’s block.
6 words on health: Monist problems clear up by morning.
5 words on motivation: Your time is running out.
4 words on balance: This too, shall pass.
3 words on marketing: Come with me.
2 words on leadership: Follow me.
1 word on life and business: Open.