Most people that enter the world of e-commerce are seduced by the ability to both profit from opportunities in the New Economy and also take advantage of the inherent scalability of technology. They plunge head first into affiliate marketing, or selling physical goods without really considering the end game. Without question this failure to consider their end game creates a difficult paradigm that may be tougher to solve than building a business from scratch.

I’ve watched countless entrepreneurs carefully select a niche to exploit only to fail miserably, usually due to poor margins. Likewise, these same folks may have picked wonderful niches but failed to secure good suppliers, leading to a great business idea but no ability to fulfill. Finally, the best products are never sold without solving for paid traffic profitably.

Where my own interest lies and where I add the most value is in the very final trap entrepreneurs fall into. These folks have mastered all the skills to run profitable businesses, but they are stuck working “in” the business and not “on” the business.  These are the folks who are entrepreneurs in name, but are just folks who created their own job.

I know more 30-something, successful entrepreneurs trapped by the success than I care to consider. They all have the notion they need to hire and run VAs, but they don’t really know what that means. They very predictably repeat the same mistakes with every new VA hire and generally conscript themselves to fixing every problem themselves.

In Robert Kiyosaki’s Rich Dad’s matrix these folks are forever relegated to the “E” and “S” quadrants. They’re Employees or Small Businesses. They may become quite well paid, but they will never generate passive income or income generated other than by their own means.  They have failed to learn to biggest lesson in achieving scale.

Systems Run the Business.

On a recent trip back from Portugal I was pleasantly surprised to have the opportunity to watch the controversial biography of billionaire Ray Kroc as portrayed by Michael Keaton. The movie is called The Founder. I admit a fascination for Kroc as he was a family friend of my maternal grandfather and used to stop by the house to play piano and sing with my mom’s family.

Kroc was selling machines that made multiple milk shakes simultaneously to the drive-up hamburger stand industry in the 1950’s. He’d tried many other products and didn’t lack for enthusiasm or work ethic. If you like hustlers, you’re going to love the Keaton character.  

Kroc’s big break was when he got an order from the McDonald brothers in California for multiple machines. He was so amazed he received an order of this magnitude, he drove from Chicago to California to check out his new clients.

What Kroc saw was an operation that broke most of the conventional rules of this era. Yes, the restaurants were spotlessly clean, attracted families not motorcycle gangs, and were ruthlessly efficient. But their food was consistently great and served incredibly fast in establishments where the bathrooms were spotless and the owners usually swept the parking lots after closing. McDonald’s in the 1950’s was a different animal than anything that ever existed before it.

People Run the Systems

The McDonald brothers were total control freaks. Two pickles to every hamburger, always. They set up countless prototypes of a kitchen to measure the steps between a customer and their order. The kitchen employees in a McDonald’s behaved more like players in a symphony orchestra than what was know as a burger joint kitchen in the 1950’s.

They grew their one store in San Bernardino, CA into the pinnacle of efficiency and prosperity. People were served their orders in under 5 minutes and every order was exactly as it was the last time, something McDonald’s is still known for today. This place drove volumes never seen before in the industry, hence the need for the Prince Castle Multi-Mixers Kroc sold.

As talented as the McDonald brothers were at creating an efficient operating mode, they lacked the vision and desire to expand. Simply put, they loved their baby so much they could not contemplate letting others make decisions. That was until Kroc wooed them into his deal, which happened to be half a country away from their prying eyes.

Ambiguity Ruins Business Efficiency

Think about the poor Filipino VA that is asked to answer a question not covered on the FAQs the owner has supplied.  No matter how nice the owner is, this represents a horrible opportunity to fail and a very limited upside to the VA.  The owners may be delighted not to take the calls or even sleep through the night—as in our case—but the VAs can only be second-guessed. 

Ambiguity halts all of the business progress in its tracks. The whole assembly line stops and freelancing begins. Crystal clear priorities become obfuscated because of a dense fog that now blinds the workers. Essentially, chaos has been introduced into an environment where perfect orchestral clarity existed before. This is not a good thing.

Why Is This Scalable

Now imagine a system where every conceivable customer and supplier situation is documented on video and archived for future reference. Imagine a VA starts a career watching these videos for a week before even interacting with a customer or supplier. Imagine a VA telling their friend at another Philippine BPO that these resources are available on demand and video, not PDFs that corporate America seems to favor. Now toss in signing bonuses for VA referrals from current staff and liberal work-from-home arrangements.

This is exactly how we run our small e-commerce business. We did this by starting with this goal at the beginning of the enterprise and worked to refine every detail on a daily basis.

Always remember that “People run the Systems” as Kroc often said. He was a master at hiring, albeit his methods were unconventional. He wanted a certain value-set and he had the luxury of loose labor laws and enormous success to execute on his ambitions.

If you want to scale, you can’t go through VAs every month. With the cost of a really great worker in the Philippines being $800 per month, you can afford to get the very best, retain them, and incentivize them to help you build your empire too. This is what we do.

What Are Your Ambitions

Finishing The Founder I became pumped up to emulate Kroc’s success. Then I realized he opened over 7500 stores in 31 countries after purchasing McDonalds at age 59. Since I just turned 60, I figure I should cut myself some slack and just emulate what I could using my own circumstances.

In any case, my post-script is always, “You’re just a deal away”.  

In this case, I’ll add that you need to make this deal count and employ proven strategies to scale your deal to its highest potential.  Technology tools like Asana, Dropbox, Slack, Skype, and Sweet Process enable enormous collaboration. These give you the ability to run virtual organizations on almost any set of terms you desire.

Start with the end state you desire firmly in mind and be deliberate in improving your processes and systems every day. Lose the employee shackles and join those of us whose business works for us—work “on” the business and not “in” it.

4 Comments. Leave new

  • Love it! I was also inspired by the movie in many ways and I need to really implement these ideas in my business. Thanks!!’

  • Thanks Luis! That’s high praise from a guy doing your numbers and with your reputation!

    We will have soon some material that can help you implement systems and processes, like Ray Kroc would want us to have! Also, loved that movie!

    Truly appreciate your comments and perspective. We can all learn a lot from you too 🙂

  • Great article! It’s never fun spending time building systems and processes, but there’s nothing worse than the classic “Operations hell…” when you spend all your time running the business, instead of growing it!

    • You have to work “On” the business and not “In” it. This is a huge step for most perfectionists.

      Freeing up time to be strategic is one of the great lessons from Henry Ford. Surround yourself with great people and have the business run on systems and people run the systems and processes.

      I know you have this down Brian!


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