By: EZ Texting
Josh Patrick is a serial entrepreneur who has been helping private business owners create personally and economically sustainable businesses for 40 years. We recently sat down with Josh to pick his brain about the traits of a sustainable business and how business owners can take steps to achieve this goal.
Tell us a bit about your background. Why did you decide to form your own financial planning firm?
I was working with a large life insurance company and realized that to service privately-held business owners properly, I had to have a full suite of financial services and products that this population would use. Working for a life insurance company didn't fulfill that need, so I opened my own firm.
In what areas are many 20+-year-old businesses the slowest to change or adapt to current best practices?
The typical twenty-year-old business is run by a business owner who is a technician. He or she has never understood or had the time to be strategic in how their business runs. Without focusing on strategy, these businesses will be stuck at small sizes and will never have a chance to scale.
When we look at businesses who have become economically sustainable, the following five areas are always present:
- The business has a strong focus on values and a mission that supports their values.
- The owner has become operationally irrelevant in the business, meaning they are not involved in the day-to-day operations at all.
- The firm has been systematized so everyone knows what they need to do for excellence in their work. The company, once it becomes systematized, has a predictable service delivery model that customers can come to depend on.
- The company has a recurring revenue stream and/or a sales system that predictably creates new customers in a predictable manner.
- The company has an adequate level of profit in four areas: The owner's lifestyle, enough cash to have an adequate emergency fund, adequate cash to fund the growth of the business, and adequate cash to fund a retirement plan that will provide 30% to 50% of the owner's retirement needs.
What are some of the signs which might indicate that a company's "system" is no longer adequate?
First, they have to have systems. Second, there would be breakdowns in the service, operations, and sales cycles in the business.
What types of people tend to be successful at passive business ownership?
Those who can delegate, tolerate mistakes, learn from those mistakes, and have a system for monitoring activities in the company (i.e., having a great dashboard for knowing the predictive metrics for the company).
At what point should a business owner start to think about succession planning?
The real question should be, "When should an owner think about creating a sustainable business?" The answer to that is when they first start the business. Once a business is truly sustainable, then it will also be sale ready. This doesn't mean the business will be sold, but it does mean that it could be sold. When this is done, the owner never really needs to think about succession planning because the business is always ready to be sold.
What trends will we see in the U.S. in the future regarding small businesses and what they will have to do in order to succeed?
There is more competition, and the competition is coming from all over the world. Blue-collar businesses like distribution and construction companies will remain local. Most will have no more than ten employees. Businesses that grow past this level will have taken many of the major steps to create a sustainable business.
There are 28 million businesses in the U.S., but only 6 million have any employees and only 150,000 do more than $10,000,000 in sales. This means the vast majority of the businesses in the country are not sustainable and will die when the owner stops working. This is not necessarily a bad thing, but it does mean there are strategies that smaller companies need to take.
Want to see how text messaging can help your business? Sign up for free today.