Hey everyone, welcome back to the Inspired Method YouTube channel. I’m Trevor and I’m here with my lovely wife Karen and business partner in Inspired Method. Today we’re going to be talking about the subject of you’re not stuck, you’re bottlenecked. Karen, maybe start us off with some questions and stats.
Sure. So I’ve got a quote and it is that every system is perfectly designed to get the results it gets by W. Edwards Deming. Only about 9% of US small businesses exceed $1 million in annual revenue.
So there’s obviously something left to the design and that’s what we’re talking about today.
Absolutely.
What “Bottlenecked” Really Means for Edmonton Businesses
So you say most service businesses aren’t stuck, they’re bottlenecked. But what does that mean?
Well, to give you an example, I was speaking with an owner and they were doing okay. They were busy. They had a good calendar. They had a team with them but every decision had to go through them. So that’s what I mean by bottleneck. They’re not able to grow past the point of that leader.
So why do most service businesses stall between 500,000 and 1 million in revenue?
Well, for that reason alone, I mean there’s usually some systems that are not in place. They haven’t really constructed and built the business to grow beyond what their personal capacity was, right? So, they have to get it to a point where they have some systems and processes in place and also empower their people in order to make decisions. Now, could you imagine if Jeff Bezos had to make every decision for Amazon? How big could they get if everything had to go through him first? No. There’s a system. There’s structure. There’s different leaders above different divisions. And it’s all happened over time. Like he started by himself in an office selling books online. And now you can buy just about anything from Amazon. And that could only happen by letting go of things, having systems, and trusting good people to follow through on those.
How to Know If You’re the Bottleneck
So, how do I know if I’m the bottleneck in my business?
Well, it’s pretty simple. If everything has to go through you and you think that you’re the only one who can do it because you’ll get it done faster, better, cheaper, and whatever. That’s pretty clear that that’s the problem, right? You become the bottleneck if you think that you can’t train somebody else to do what you’re doing at least 80% as good as you, right? I think it’s Dan Martell who says 80% done by somebody else is 100% awesome. And that’s really what you need to get to. No, you’re not going to have somebody who is able to do it as well as you, at least in your own mind. But if you can get someone at least 80% there, that’ll take you miles beyond where you are now and take you closer to where you want to be.
Yeah. This actually reminds me of our conversation this week, and pretty much we’ve had one for a long time, about training our kids to do things in the house. If they do that, if I train them well, then they can take over the tasks and it alleviates me to do other things that I want to do or need to do in the house.
Yeah. It’s about freeing up your time and buying back your time. So, hiring somebody or paying a service or another person to do something that gives you back your time.
Why Growth Creates Stress in Service Businesses
All right. Why does growth increase stress in small service companies?
Well, case in point, I had a discussion with a client yesterday and he got to that point. He had worked himself so hard over this last Christmas season that he got really, really sick. He got hospitalized because he was doing everything and working very long hours. He was not only doing the calls, the quotations, the installations, the paperwork, all of these things. Like he was wearing all of the hats. Now on top of that, he’s trying to be a dad and trying to show up for his family and whatnot. And during the Christmas break, his body physically broke down and he was in the hospital. So that is a big problem.
Wow. That’s actually that’s crazy. But that’s what happens when you’re growing. He’s getting more jobs and he’s doing all the quotes and he’s probably doing the quality. Well, he’s doing the installation quality control. His stress level is going higher and higher and higher. More people are calling more quotes and it sounds like Christmas is a busy season.
Yeah.
And he became completely stressed out. His body showed it.
Yeah. He broke down. So that’s what happens when you have growth in a business. So you’re doing well, but it comes to a point where you stop growing because you’ve reached your personal physical limit and the limits if you have a team, you’ve reached the limits of your team. So you have to be able to develop, grow, and build the structure so that you can expand and get beyond that.
Sounds like you already answered this question, but maybe there’s something else you want to add. What happens when every approval has to go through the owner?
Well, what it does, a couple of things. So, number one, it clogs your mind with things that you don’t need to be thinking about. So, let’s say you’re working on a task. Let’s say you’re working on your job costing, right? you’re looking at the books and maybe you’re figuring out what your profit and loss, what your net profit was, any other task. Say you’re making content. If every few minutes you get a knock on the door and somebody’s asking you a question or you’re getting a text message or a phone call because a decision has to be made by you before your team can go forward, it stalls your growth and your ability to get stuff done and then you’re just overwhelmed. Your task list just gets longer and longer and longer and longer.
The other thing that it does is your team members, they feel like they can’t make any decisions without you or they will be in trouble or they’ll be reprimanded. They’re afraid of making a mistake so they don’t make a decision at all. I was actually working as an electrician and we had an interesting situation. So we had the main foreman, the head foreman went on a vacation and basically the sub foreman had to step up and take that place. Well, the entire time the foreman was away, the sub foreman was afraid to make any decisions. He was afraid to make any decisions because he was fearful that when the lead foreman got back, he would be reprimanded for it or he’d make the wrong decision. And it was just a disaster. And I was a sub of that crew. And I was just like, “Bro, you got to make a choice here. Like we got to move on with this thing. Make a decision. You might have to ask forgiveness, but we got to do it.” And it was just an unhealthy and toxic environment. Like people were afraid to actually make a decision. So, if that’s you, you are hamstringing your team and you’re not going to, you’re literally that bottleneck squeezing.
Yes. And nothing can barely get through. Is inconsistent revenue usually a systems problem?
In a nutshell, there’s a lot of things that can go wrong. So, inconsistent revenue, you’ve stopped the ability for yourself to grow. So, if you’re having the ups and downs of revenue, there is a system somewhere that isn’t functioning properly. Maybe it’s the retention system. So, being able to have repeat and referral customers coming in because that’s usually what smooths out those highs and lows. Now, we live in Canada and there’s a particular season here where it’s tough. It is really tough between January and the end of March for anyone in the construction trades unless you’ve had work lined up from November, December and it’s carrying through. So, some of that you can’t really overtake. But there’s definitely some systems that are broken if your revenue from month to month is always a guessing game. Like, you know, maybe you have a conversion problem. Maybe you’re getting some leads in, but you have no idea how to sell them, how to close them, follow up on them, and make it happen. So, there’s a lot of different things that could possibly be the problem.
Systems, Hiring, and Scaling in Edmonton
How do undocumented processes limit scalability?
Well, it’s pretty simple. Think about it in terms of a recipe. Let’s say we’re, you know, grandma knows how to make the cake. She makes the cake perfectly every single time. She knows the right amount of flour, baking soda, sugar, milk, all that. And they come out fluffy, beautiful every single time. And then she passes away.
And then she never wrote down the recipe. So every time somebody else tries to make grandma’s pancakes, they never turn out.
Same thing with a business owner who has all the processes in their mind, they know what they’re doing, but they’re not writing down what they’re doing. They’re not documented. Taking a video like this of what they do to get that particular task done so that they could train somebody else to do that task, right? Having it stuck in your brain is not the way you’re going to teach someone else and get that off your plate. There’s probably 80% of things that you’re doing on a daily basis that you don’t need to be doing and you need to download that into a document into a Google document or something so that you have that documented process you can show somebody, teach them and have them take it over from you.
Why does hiring not fix growth plateaus?
Well, you can hire people. But if you don’t have a system in place to train them on how your system works and how they should deliver that product or service, you’re just going to have turnover, right? you’re going to have unhappy customers, you’re going to have unhappy staff. and if you’re the bottleneck where every decision has to be going through you, they’re going to be demotivated. And just like we talked about earlier, they’re going to be afraid to make a choice. So hiring isn’t always the right thing to do and it’s not always going to stop the bottleneck in your growth. Having systems and training protocols in place to ensure that your product or service is delivered consistently no matter what the job or who’s doing it is the important part.
think about it in terms of a restaurant, right? You go to a restaurant, there’s some that we frequent often simply because they’re consistent. We go there and we know it’s going to be good. We know if something isn’t good, they make it right. And that is consistency. The flavor, the textures, the sight, sound, smell, service, all of that makes a difference.
Yep. So, how do you identify the main bottleneck in a growing business?
Well, it really depends on what you’re going through at the moment. There’s a number of different constraints right there’s economics so the money if the money ain’t right nothing’s going to grow. I think before we used to say there’s three reasons why businesses fail customers, cash, and team. Those three things really determine whether a business is going to succeed or fail
I think it always starts with the owner that’s always going to be the top and then from there you see like if you’re the only one in your business you literally are the bottleneck. You can’t be doing everything. Like even when you were talking about the revenue being inconsistent and it’s because I think the owners kind of go putting out fires, putting out where they need to put their attention because they’re the only ones. So they are the bottleneck. But let’s say you have a bigger team. I think the main bottleneck at that point is definitely from the owner as the culture setter in the one teaching the next generation of workers and just like in a family with a parent once you’ve taught them then it’s having the systems and going back to those systems and that culture all the time. So that can kind of seem like that would be one of the top bottlenecks in a growing business.
Identifying the bottleneck isn’t rocket science. It’s not too difficult. And we have a system that we use basically a set of questions where you rate yourself on a scale of 1 to 10. and based on those questions, you can identify fairly easily which one it is.
So if you want to do that, you can go to our website and we have a whole constraint map questionnaire there. You can give that a try. And we do that on a monthly basis with our clients as well. So we can identify what that constraint is and start working on that so we can fix it.
And last question, what changes first when you remove the owner as the constraint?
Well, what I would say changes first when the owner is no longer the bottleneck, their time is freed up. They’re able to work on the conversion side of things. They can focus on selling. They can focus on customer satisfaction. They can get more of their quotes done because not every decision has to be made by them. And another thing that would improve is your delivery. So if all the answers don’t have to be made by the owner, then the staff, your people in the field, they’re able to make decisions and serve the customers and do what they need to do.
Yeah. They’re empowered and I think that’s when you can start scaling.
Yeah, absolutely. So that’s what we got. Thanks Karen for spending time with me today and grilling me on the questions. If you guys are business owners anywhere really, we can help you out with identifying what constraints are holding you back and help you to grow your business. So, come to inspiredmethod.com, fill out the form, and we’ll see you in the next video. Don’t forget to like, subscribe, hit the notification bell. Every time we have content coming out, you can be the first to see it. Thanks.