Building Your Business Machine: Outsmarting The Hustle
The Definition of Hustle:
Definition of Machine
Read more about the machine here:
Check out David Ricardo’s book here (if you feel compelled to buy it use this link so that we get the 50-cent commission, (or whatever it is…))
Hustle culture is everywhere for MSP owners, leading us to think working harder – not smarter – is the way to succeed. Today Joe and Jeff are talking about outsmarting the hustle by building a business machine with predictable, repeatable processes that increase efficiency and capability while delighting your clients and customers.
Jeff Loehr
We’re here to talk about building a business. And since this is the first episode, I thought we should talk about The Machine. Most people have an idea or actually, most people have no idea. What we’re talking about in terms of building a business machine.
Joe Rojas
Right. So what is it? What is the machine?
Jeff
Would you remember when we came up with the concept?
Joe
I do. We were on the phone. And and you were on that side of the world.
Jeff
I was on this side of the world. I was walking around the house, I was walking around the woods up here in the Sierra Nevada Mountains. And we’re talking about how stupid hustle culture. Where so many MSP owners get stuck with this idea of “I’ve got to hustle,” that MSP ownership, that building a business is about hustle. And we actually looked up hustle on in the dictionary, and we realized that it’s really about swindling and convincing people. Like, it’s all the stuff that we actually don’t want from a business and it’s a particularly bad way to live.
Joe
You ain’t kidding. Do you remember right around that time we were at that networking event, and there was this guy who was some kind of coach, he was like, “I teach people how to hustle and you’ll work sixteen hours a day! Work every weekend!”
Jeff
“Seven days a week, 16 hours a day. No more vacations were you!” People are signing up for this? That really goes against everything that we think MSP owners need. So we came up with The Machine. And it turns out that while solopreneurs are hustling, growing businesses, they actually build a machine. Right. And, and not only that Joe, but building a machine is actually supported by 200 years of economic thinking. There was this book written 200 years ago, that that actually talks about why we need a machine.
Joe
That brings me back to my original question. What is machine? We’ve got to tell these people because we’ve been teasing them with the machine for a while.
Jeff
So here’s the business machine. I love the Ray Kroc example, the McDonald’s example for exemplifying what a business machine is. He goes to sell a milkshake maker to to this burger restaurant in San Bernardino. And he can’t believe it because up until that point, he’d always seen chefs making hamburgers. And now all of a sudden there were these teenagers making hamburgers. What does a teenager know about making a hamburger? You can’t make a good hamburger that way. And he went in and he looked at their process. And he said this is amazing. It’s like, they’ve just created an assembly line for hamburgers. Everything was defined down to where the pickles are placed on the hamburgers so that they don’t slide out when you’re eating the burger. And as a result, you don’t need chefs anymore. You just need some kid who can follow instructions. Put patty here, put pickle here, right. Build the burger and get it out the door as quickly as possible. And people love this thing. They’re lining up out in front of the restaurant. So Ray Kroc says the hell with milkshake makers, I want to get into the burger business. And that was the beginning of McDonald’s. Because McDonald’s is a machine. It has repeatable processes, it has a way to work, it is clear about the problem it solves, and for whom. I don’t even care if you like McDonald’s, it solves the problems it’s supposed to solve. Most MSP owners don’t build machines. Most MSP owners come to work to grind to and to just do work.
Joe
And you know, the sad thing to me is that there’s so much hustle porn out there, like this is this is how you do it. You just work, you work harder, you work more hours do more stuff.
Jeff
Stop hustling! It’s so much work to hustling. When you’re hustling, you have to convince people, you have to force people to do the thing that you want them to do. Whereas when you define a machine, what you’re doing is you’re solving a valuable problem for a human being out there. Even B2B businesses, you’re always solving a problem for a person. And so you’re solving a problem for somebody. And you are doing this over and over again and you get so good at it that people seek you out for it. We all know what McDonald’s does. We all know what Disney does. We all know what Starbucks does. We all know what Netflix does. They have built machines to deliver their products to deliver their services. So we I have to mention a little bit Joe, the service and product thing. So there’s little segue here, because people are gonna say, well, but I don’t have a product. Yes, you do. Or you should. The problem is that calling your product a service – having a service is just an excuse to do an incredible amount of work with very little return. You’ve got to take that service and turn it into a repeatable product.
Joe
I like how you said that because you can, if you think it’s a service, and you think that it has to be custom and it has to be special, and it has to be every single time, then it’s not a product, right? It’s a product when it’s a repeatable process you can do over and over again. You can train other people to do it with their eyes closed. Right? That’s when the heavens part.
Jeff
Where you go from, I’m, I’m hustling, I’m grinding, to: I’ve got a business.
I want to talk a little bit about this book that I promised. The the author is David Ricardo, he was an economist. But 200 years ago, he actually died 200 years ago It’s called the Principles of Political Economy and Taxation. This is why I think it’s so interesting to think about it in the context of The Machine, what he actually talks about is land, and he’s talking about profit from land. You have really good land, you have medium land, and you have well, crappy land. And what will happen is, if you’re farming really good land, the landlord is going to charge you more rent for that land. If you’re farming mediocre land, the landlord can only charge you medium rent, and if you’re farming crappy land, they really can’t charge you much at all, but they’re going to charge you at sort of a rate that allows you to sustain yourself. That’s just sort of the way it comes out. He has lots of economic theories around this. 200 years have shown us that this pretty much works, it’s supply and demand. So there’s this whole theory around, you know, the land A, B and C land. I think this same issue surfaces with businesses, we have A, B, and C businesses. Now, here’s what David Ricardo recognized is that when the economy is booming, A does well, B does well, and lots of C’s kind of come into into the mix, because they can make some money, the landlords can make some money and they’re hustling along and they’re great. And then something happens and the economy shifts and then all of the C producers kind of go out of business and the B producers are looking a little lean and thin and the A producers are still doing well because they’ve got the premium land. I think this is the same thing when you think about businesses. We all start off with C businesses.
Joe
With bad land!
Jeff
Yeah, we we haven’t defined the land yet. We don’t have a machine. We’re just doing the stuff that we do, solving problems for people, hustling away. And as the economy expands, there’s lots of opportunity for C businesses to get started. But the trick is, if you want to continue on, if you want to expand, if you want to achieve the goals that you want for yourself, what we call the prosperity plan, if you want the business to allow you to live the way you want to live, you need to get out of that C state and move into a B state. At least have a business that functions, that gives you some protection, some opportunity to grow, some ability to take advantage of some of these changes in the market. And then you get better and better at it. And you move into the A category.
Joe
And really at that point, you know, I love pushing analogies. The first one, you’re plowing the land yourself, you know, you’re pulling the whole thing. And in the second one, now you’ve got some help. And so then in the third one, somebody else is doing the whole thing. So it’s really thinking of it that way. It’s thinking about, okay, now I can go open up another farm.
Jeff
Yeah, I can negotiate with the landlord. I’ve got a bit of power. I’ve gotten this and the other thing. I think that’s exactly the idea, right? I just think it’s really interesting how when you when you read about pricing, and and how all of these mechanisms sort of work in our minds in our society, it hasn’t changed over those 200 years. And what’s changed is that we’re not building the machine. Either we’re building a machine or we’re doing it ourselves. You know how you hire somebody, and then it doesn’t work? You get on this roller coaster, we call it the spin cycle of coming and going and you’re grinding and you’re still hustling, all of that, right? Even if other people are working for you, if they’re not working for you effectively and efficiently. You might as well be working for yourself.
Joe
You actually have more work at that point.
Jeff
Yeah, that’s the problem. You do it the wrong way, you end up with more work you have to do. And then MSP owners do this: “I’m gonna pay my team.” And you know, we’re all about paying your team, we’re human- centric, we’re all about that. But you can’t earn nothing. While you’re ensuring that your team is earning a living wage,
Joe
And, you can’t buy your way out of having no processes.
Jeff
You can hire somebody to to make the processes for you, but you can’t buy your way out of it.
You can’t buy your way out of it, like, “oh, I’m gonna hire these three people, because they’re really smart. And they’ll figure it out.”
So go back to the McDonald’s example. It started as a C. And then when Ray found it, it was kind of a B, And then he pushed it up into the A, and went whole hog on this whole standardization thing. Right, and he could have hired great chefs to come in and create great burgers, but then you are relying on the great chef. And you have to have the great chef the whole. And that Chef then can control your profitability, that chef can control the rate of scaling your business, you always have to find great chefs.
Joe
Technical businesses often find themselves in this place. I speak as somebody who ran a typical business for a long time. Until I started building processes, I was always dependent on my on my staff. If one of them went away all the institutional knowledge went with them.
Jeff
That’s sort of why you need a machine and to know what a machine is. Now we’ve also identified seven parts of the machine and through the podcasts, we’re going to talk about them. If we break down the machine into what are all the component pieces, the elements that make it up, we think it’s the business defining the business, understanding what business you’re in, and the problem you solve and for whom. Really making sure that you have those standardized processes in place, and that you know what they are for every aspect of your business. The third is the factory, that place where those processes are going to take place, and a lot of the factory these days is software, which means anybody can really do it, but you do have to have the tools in place to make it work. The next one is you, the MSP owner, because it’s an MSP owners mindset that ends up limiting or empowering the organization. And then once you figured yourself out, then you have to think about your team and the people that you’re going to put in place. Next one is knowing the metrics and the finances and the money and how you’re going to measure your performance. And the final piece of it is invention. Because if you don’t have a way to invent solutions, if you don’t have a way to invent ways of working, then you’re going to come up against hurdles that are going to stop you every time. So you always have to look at: how can I overcome hurdles? How can I take advantage of opportunities? How can I move the business forward, which is going to involve change, it’s going to involve invention. And that’s really where you develop the intellectual property, the differentiation that’s going to allow you to expand into an a business.
Joe
That’s the name of the game. Those are the parts. Get your arms around that – now you know what the machine is.
Jeff
That’s the machine. Next time, we’ll we’ll break down each one of those has its own little secret sauce. We’re going to take one little sliver of one of the next parts of the machine. And good luck with making your machine.
Joe
And remember that you are loved.
