Clockwork: Design Your Business to Run Itself

by Mike Michalowicz

  The videos crush it on Facebook. Roberto is a massive hit; his charisma and charm are unmatched. Soon, Outlandish Dish has a rush of American tourists booking trips. Because everyone is in their right job, doing the right things, in the right portions, right, and because the entire team is serving the QBR, and because Roberto has enough time to focus on Designing his company, Outlandish Dish grows by leaps and bounds.

  Americans start talking about the company, and then the unexpected magic happens: a major US network contacts Roberto about doing a show on European culinary tours. His natural storytelling ability serves him well, and once the show airs, he becomes a celebrity. Demand for his business skyrockets—well past $10 million in annual revenue.

  You may think this is where the story ends, but Roberto is not done yet. His final step is to remove himself from the QBR. And wouldn’t you know it? Janet shares the same trait Roberto is known for. She becomes the lead storyteller, especially for tours for Americans. Roberto enjoys his new career in television, and his team runs Outlandish Dish like clockwork.

  The ending to this story may seem like a fairy tale, but any dream you have for your business, any goal you hope to achieve with your company, any contribution you hope to make to the world is possible when you are not hampered by work you shouldn’t be doing, and when your team is running like clockwork.

  * * *

  Change is hard. I’m sure you don’t need me to tell you that, but I’m bringing it up because, after implementing the first five Clockwork steps, you will surely be feeling it. Even when business is booming, and even when you have more time to focus on Designing your business, change can be stressful—especially when you’re changing the balance of your team. Your staff (or freelancers) will also feel that change, and they may feel insecure about their new positions, or worry that they may be eliminated entirely. For those people who will remain part of your team, give them reassurance. Listen to their concerns. Affirm their place on your team. Remember to take time to breathe during this process. Yes, change is hard. It is also going to get you what you want: a business that runs itself.

  CLOCKWORK IN ACTION

  Balancing your team is an ongoing process, and it can’t be accomplished in thirty minutes, or even a day. The exercises in this chapter will help you get there. Plan to focus on one exercise each week, and then evaluate the data to ensure the right people are in the right roles, doing the right things, in the right portions, right.

  Do an analysis to ensure your company is at approximately 80 percent Doing. Make a note that when your company’s resources expand or contract, it stays near that optimal 80 percent Doing.

  Run an evaluation of your team to identify their strongest talents and traits. Then run an evaluation of the ten most important daily tasks your business must complete. Now match up the best traits of your people with the tasks that need those traits most.

  CHAPTER SEVEN

  STEP SIX: KNOW WHO YOU’RE SERVING

  “We didn’t go into places that promised big wins. We went into places we felt called to go into.”

  When Lisé Kuecker, owner of five Anytime Fitness franchises, shared her story with me over the phone one day, she made a point to tell me she had never lived in the same state as any of her franchises. Considering her husband was active-duty military at the time, that was some feat; they had moved states several times.

  Growing up in New Orleans, where indulgent food is a major part of the culture, Lisé had seen obesity rates skyrocket. This influenced her interest in fitness, and soon, helping people lose weight and transform their health became her deep-seated passion, and then her company’s Big Beautiful Audacious Noble Goal. When she began opening gyms during her husband’s deployments, she didn’t look to the biggest cities or the areas with high-income residents. She didn’t even look to the communities in her own area, or within driving distance. She set up in towns that needed her the most—small towns that, on paper, didn’t seem to have the potential to support membership growth.

  “When we bought a failing franchise in Minnesota, the bankers and other people thought we’d lost our minds,” Lisé told me. “We bought it for $50,000, which was basically the cost of the equipment. The gym had been on the market for a year and a half, and it was in bad shape—treading water the entire time. It was a miracle they had 350 members; that was in part due to the fact that the owners were local and well-loved.”

  Despite the fact that no one thought she could make a go of it, or should even try, Lisé was drawn to the dying franchise in small-town Minnesota. The obesity rates were quite high in the area, and she knew she could make a difference. She also knew that people who were living with obesity and struggling to lose weight were the people she wanted to serve. First, she cared about them and wanted them to succeed. Second, if she could help them, she knew she would have a better chance of retaining them as members than she would the average customer who may not have the same challenges to overcome.

  “I rolled up to the gym in the bitter cold of February, me from the Deep South in my rental car with four-wheel drive,” Lisé said, laughing. “Right away we started renovation plans, and I started calling members.”

  Over the next month, Lisé called every single one of the 350 members herself. She sometimes stayed on the phone for an hour or more, talking to people, asking them their opinions about the gym and about the changes they’d like to see after it reopened. She listened to their stories, their health goals, and the intimate details about their lives they wanted to share. After each phone call, she wrote down the most significant snippets about their life and their aspirations on a spreadsheet so she wouldn’t forget.

  The turnaround at the gym came fast. In less than a year, that franchise transformed to rank in the top 5 percent of all Anytime Fitness franchises. Do you want to know the real kicker? After the initial first month on-site, Lisé works an average of five hours a week on her business. No, that’s not a typo. Not fifty hours. Five hours. Five hours total for all five locations. Just to be sure you’re getting this: She works five hours a week Designing her business, not Doing. In the next chapter, I’ll share more about Lisé and how she was able to pull this off. In this chapter, I want to talk to you about the next step in the Clockwork system: Make the Commitment.

  The Commitment refers to where you target that awesome QBR power. All the power in the world is useless if it is not focused. Set a piece of paper outside in the sun and it will sit there, unchanged. Take a magnifying glass and concentrate the sunlight onto the paper, and you’ll start a fire. That is the power of focused energy. The Commitment concentrates the awesome energy of the QBR in a way that will ignite your business efficiency (and growth) like never before.

  The Commitment is an extremely simple, yet powerful, declarative strategy that involves clarifying whom you serve and how you serve them. Notice I didn’t say “identifying” whom you serve and how you serve them. I figure you already have an idea of who your peeps are and how you serve them. This step in the Clockwork process is about homing in on that group within your customer base who are your best customers. I refer to them as “Top Clients.” You may call them “dream customers,” or “bestest friends,” or, you know, “just like Mikes.” Whatever you call them, you know who I’m talking about.

  Once you clarify who and how, you must commit to that group, which is why this crucial step is called Make the Commitment. If you skip this step, I’m sorry to say you’ll never fully realize what it means to have a Clockwork business—your business will be hampered trying to serve a group that is too broad to market to, sell to, and support effectively, and you personally will be far from free. You see, Clockwork is more than just creating the engine of your company (getting the internal stuff right); it is also consistently adding the right fuel for your engine—your Top Clients.

  I suggest you post a declaration right above your desk, and in front of each of your employ
ees’ and contractors’ desks. Just fill in the blanks:

  Our commitment is to serve [whom] by [how].

  Yes, it really is that simple. At my company, Profit First Professionals, our commitment is to serve accounting professionals by giving them an exclusive, powerful way to distinguish themselves from their competition. So what about Lisé? I’m pretty sure you can figure out whom she is committed to serving. But what about her “how”?

  At Lisé’s gyms, the QBR was customer support. “It was vital that we engaged the customer to help them achieve the fitness goals they wanted,” she explained to me. “If they felt supported, and if we provided them with the education they needed to stay the course, we could get customers to use the gym for at least ninety days. Most people use a gym for thirty days and then quit, so attrition rates are high. At our gyms, we were able to achieve 70 percent retention after ninety days, compared to the industry average of 40 percent.”

  I’ll take a stab at her commitment declaration: Lisé’s Anytime Fitness is committed to serving obese and overweight people who have struggled in their efforts to lose weight by providing them with specific education and customer support to reach their goals. Does that sound about right?

  The goal here is to craft a simple, effective statement. We are not writing poetry or fancy tag lines. We are simply getting clear on whom and how. In this chapter, I’ll help you craft your commitment and show you why this is such an important step in the Clockwork process.

  “EVERYONE” IS NOT YOUR MARKET

  Repeat after me.

  “Who?”

  “Who?”

  Let’s try that again. You want to sound more like an owl.

  “Whoooo?”

  “Whooooooo?”

  Ask “how” less and ask “who” more. Who do I serve? This is the most important of all questions a business owner who is looking to streamline their business can ask. Yet we rarely ask it.

  When I ask business owners what niche they serve, many respond by saying some variation of “my niche is everyone,” which, between me and you, is an oxymoron. That’s like saying there was a dry rain today. Or that guy sitting next to you is a skinny fat guy. Or that Thanksgiving is a day of fasting. None of those things make sense. They don’t exist and they don’t make sense.

  For a business to run like clockwork, you must have consistent delivery of your offering. You need to have a predictable process that yields a predictable output, and to do that you must reduce variability. Your predictability grows exponentially when you do fewer things for the narrowest set of expectations. What if Lisé decided to focus on multiple types of clientele? What if she marketed to and tried to serve bodybuilders? Or triathletes? Or skinny guys on the beach who get sand kicked in their faces by even skinnier guys? Would she be able to connect to all of her customers in the same way? Would they respond to her choices in the same way? Would they all want the same things from the facility? Would they all need the same type of education and support? Answer: That’s a solid “no” across the board.

  If you offer three products to five types of customers who each need their own variation of that product, you are delivering fifteen products. Better said, you are offering fifteen product variations, and for each one to be remarkable, you must get all fifteen right. That is fifteen areas of potential problems.

  Now, let’s say you have three products for one type of customer, where each customer has more or less identical needs. Now you only need to get three things perfectly right. It is far easier to get three things right than fifteen, and far easier to fix problems when they do arise.

  Fewer things for fewer people result in fewer variations, which means you can get really, really good at what you do. And with fewer variations, you need fewer resources to get the good results. Simply put: Do less and you achieve more. (Yeah, I would highlight that one on your Kindle.)

  Traditional teachings tell us to first determine whom we are serving and to modify our offering to meet their need. The popular term today is “pivot,” but that term will change. It used to be “inflection point.” Before that it was “paradigm shift.” And before that it was “Soooo, what the hell should we do now?” The point is, you need to sell what the customer wants, otherwise you won’t have anything to sell. On the surface, this theory seems to make sense, but it ignores the most important element of a successful business . . . you.

  I have seen wonderful businesses pivot into disdain and failure. The owners keep shifting their offering to match what the customer wants until the customer starts buying. But in the process, they neglect to consider what they, the owner themselves, want. They ignore what their heart calls out to do. And they ignore that crucial final yellow sticky note: that thing that fuels their business. They ignore their QBR. And while the business may be winning customers, it is losing the heart of the owner and the soul of the business. I have seen many businesses pivot into something that the owner loathes. Sure, it may make money, but at what cost?

  Dreading going to work is no way to experience life. This is why it is absolutely critical for you to first determine what you want. What you intend to be known for. What your soul sings out to do. That is why we must first discover your QBR, serve and protect it, and balance your team around it before we find the community that wants it. Don’t pivot to the customers’ desires. Instead, align your desires with the customers who want it. Don’t pivot; align. Always.

  WHO IS YOUR WHOM?

  Now that you know what the heart of your business is (the QBR) and have galvanized your team around protecting and serving the business (the optimal 4D Mix), you can determine who of your clients can benefit most from it.

  If you have a brand-new business with no clients yet, you can go through a variant of this process I am about to outline. If you have an established business that is serving a mix of clients right now, you have a leg up on finding the right customers who align with your QBR.

  In The Pumpkin Plan, I outlined a process for identifying and cloning the best customers. The main point is, once you know who your Top Clients/Customers are, the next step is to “clone” them by attracting other clients or customers who have the same qualities. I’ll take you through an abbreviated version of that process in a few, but first, I have one disclaimer: There is no guarantee that any of your existing customers represent the ideal community for you to serve. I have worked with my own clients on this process and a few of them did not have a single ideal client that we wanted to clone. That being said, the majority did have a client they wanted to clone, and if you too have one, it represents a significant shortcut to growing in that community.

  Since writing The Pumpkin Plan, I have discovered two more elements to the process that you must know. The first thing I found is that while a psychographic—your customers’ lifestyles, personalities, aspirations, values, and interests—does represent a niche community, those communities are very hard to access because they don’t typically have the ever-important congregation points. Congregation points are where a like-minded community meets on a recurring basis to network, and share knowledge. Congregation points exist for almost all commercial industries, a lot of vocation groups, many consumer groups, and some life transition groups, but very, very few mind-sets.

  For example, if you want to sell to vineyard owners (a commercial industry), there are countless vineyard associations. A quick Google search identified more than twenty-five, and there are surely far more than that. If you want to sell a product to airplane pilots (a vocation), there is a pilots association, shockingly named the ALPA, the Air Line Pilots Association. If you want to sell to wine lovers (a consumer group), there are wine aficionado groups. If you want to sell to first-time moms (life transition) there are groups for that. But if you want to sell to first-time mom airplane pilots who feel it is beneficial to drink wine while flying airplanes, good luck finding that group. It could be a mind-set that exists. I mean, Lord help us if
it does, but that mind-set may be out there. But they surely don’t congregate in any established and therefore predictable way, and therefore it is extremely hard to access this community. If your customers’ psychographic does not have a community, you’ll have to build one yourself, which is a herculean job—especially when you are flying planes drunk.

  The acid test for the whom of your commitment is whether they have established congregation points and you can achieve consistent access to them. For example, my client Gary said that his best client is a single mom running a bakery business who has achieved her first $1 million in revenue, is overwhelmed by the work volume, and is trying to raise a child by herself. And because she can’t stand her own mom, she has no help.

  Gary (who I call Big G) told me, “Give me a dozen of this client. My profit will skyrocket, and I only need to do one thing for them. I found my niche!”

  I said, “Let me ask you something, Big G. What I just heard is that you are looking to get more clients who are ‘single mom entrepreneurs who hate their moms.’ Right?”

  “Exactly. That is exactly it.”

  I then asked Gary to tell me where their congregation points are. “Where do these people consistently get together to learn from and share with one another, Gary? Where does the SMHMBC meet? You know, the Single Moms Hating Moms Business Club.”

  The answer: nowhere. There are no meetups. No conferences. No podcasts. No websites. No single congregation point. Yes, two single-mom mom-haters could meet at some office holiday party and become besties. But happenstance is not a congregation point. A congregation point is a consistent presence to learn and share, and it doesn’t exist for this group. This means Gary is impeded—there’s no group to access. He can and should ask his one Top Client where she hangs out with other like-minded people in similar circumstances, because maybe there is some underground group. But there is a low chance those groups actually exist, because Gary’s psychographics are too narrow to warrant a community.