Cycle of Business

The Natural Cycle of Business & Why I Think it Wouldn’t Work...

Inside You’ll Learn How to Scale Ladders and Create Wealth...

of 20 David Bater Business Growth Expert

Contents

Foreword ............................................................................................................................................ 3

Why I’m Writing This... .................................................................................................................. 3

The Natural Cycle of Business ............................................................................................................ 4

Why it Wouldn’t Work ....................................................................................................................... 5

Ladder 1: “The 5 Steps From Employee to Entrepreneur” ............................................................ 6

Ladder 2: “The 6 Developmental Stages of a Business” ................................................................ 8

Ladder 3: “The 6 Steps to Raving Fans” ....................................................................................... 10

Ladder 4: “The 4 Sources of Money” ........................................................................................... 13

Common Examples of “Ladder Combinations” ............................................................................... 16

Bringing it all Together ..................................................................................................................... 17

Appendix 1: Worksheet Summary ............................................................................................... 18

Appendix 2: Book Summary ......................................................................................................... 20


Foreword

Why I’m Writing This...

So many seminars, books CD sets, emails from wealth gurus and endless info from countless websites. The more I looked, the more I found, the more I found the more complex it became. Complexity stalled decisions so I ended up with lots of “knowledge” but paralysed to use it because I didn’t know where to start.

So after 25 years as a Business Owner and 3 years of working as a Business Coach with over 75 business owners I believe I have worked out a way to make the complex, simple. Simple enough to start putting into a sequence so decisions were easier and more obvious to make.

Most people I have dealt with know they want success but need a huge amount of CLARITY to start making some of the big changes NOW. Once people start, they are away... until it’s “what”, “with who”, or “do I know enough” which all leads to inertia.

This system is about distilling this overload into “rungs on a ladder” so you can locate where you are now as a starting point, with the context to see the sequences that lead to ultimate success.


The Natural Cycle of Business

This cycle forms the basic paradigm of the ActionCOACH model ‐ whether you have a business or

not. It states the following premise “if Business Owners want to build themselves a successful business, they need to focus on just ONE aspect in their business to make it flow, rather than the other THREE parts of the model”. The diagram above demonstrates how it works:

The model states that if the Business Owner is flat out looking after the Business AND the Customers AND the Team, then they’ll hold sole responsibility for running every aspect of their business. Because of this, they’ll experience a feeling of being “over‐committed” and they’ll ALSO consider their Team as being very “under‐committed” because according to most Business Owners, “it’s hard to get good staff’. Actually, the team will NEVER take over responsibility for looking after Customers until the Business Owner trusts them, trains them and gives them the task of doing it... all of which is part of unravelling this model!

Likewise, when a business educates their Customers to understand why they receive great value from dealing with their business and they actually deliver on it! Customers will look after that Business by paying on time, finding referrals and not challenging prices etc. Without this assistance from Customers, the Business Owner will be run ragged looking after their Team, their Customers and their Business. And while having a “generalist” role like this is often necessary when a Business Owner starts out, most roles in business develop and evolve to become more “specialized” as the business develops and evolves too.

So, when the model is working as it should, the Business Owner looks after the Team, the Team looks after the Customers, the Customers look after the Business and the Business looks after the Owner... sounds great... but here’s why I found the model wouldn’t work...


Why it Wouldn’t Work

Many of the Business Owners I talked to had more like a glorified job than a business and most owners wouldn’t dream of giving their Customers to their Team to deal with.

Worse than that, many owners had no idea of what they wanted from their business except for the clichéd “more money, more time and less stress” and many Owners’ cycle was more like a perpetual “do the work, chase the work, do the work” and it just didn’t work.

So I looked for a way to put a sequence together that worked for ALL Business Owners and in doing so found the solution in other models (or “ladders” as I have presented them here). I found that when I superimposed some of these models onto the Natural Cycle, similar “rung labels” were showing up. The result is a blueprint for how to identify where ALL Business Owners are at EVERY stage in their development leading up to, and even beyond the original “Natural Cycle” of Owner> Team> Customer> Business. More importantly, it is able to predict and prescribe what will occur in each of the steps involved in scaling each ladder.

Giving each of the original 4 components their own ladder, we now have a context for the wealth “rungs” ranging from the bottom of each ladder to the top of each ladder. (In fact an EMPLOYEE with a JOB only operates on 2 ladders.) What we can see is the part‐time lawn‐mower man with a push‐mower, a car and a phone is operating pretty much at the bottom of all 4 ladders whereas someone like Richard Branson is operating at the top of all 4 ladders. The model has these guys at their extremes and therefore every stage in between... (BTW, if this is all a little hazy you can fast‐forward to Common Examples of “Ladder Combinations” on page 15 to give you an idea of how the sequences work).

Since developing this model, the many Business Owners I have coached have been able to break the inertia of where they are NOW, develop the CLARITY they need to chart where they are headed and to commit to the sequence of events and daily activities that will advance their journey towards

the ultimate business experience... WEALTH! (in every definition of wealth that works for you).

Ladder 1

Ladder 3Ladder 4

Ladder 2


Sidebar... please don’t take these models as absolutes, the Pareto Principle applies to all this (The 80/20 rule)... think of the routine rather than the exceptions when applying these models. Business is 80% routine and 20% exceptions... just like the teacher at school who spends 80% of their time looking after the 20% of difficult kids. With all this, rather than saying to yourself “that part DIDN’T apply to me”, just ask “how DOES this part apply to me”. Also, you’ll probably want to read this at least a couple of times to get the gist of how it all comes together...

The following section explains each ladder and in reading it you have two tasks: Your first task is to work out which rung you’re on by using the “rung” explanations that match the way of thinking as well as the activities that characterize what you are doing in YOUR business or job right now... Your next task is work out which of these attitudes and activities to MODIFY so you can start incorporating some of the new activities and attitudes that are found on the next rung. The best way to keep track of this is to note what rung you’re on at the end of each Ladder Summary. Then make a list of 3 things to STOP doing in your day‐to‐day activities that are holding you back from climbing or consolidating a rung. Then add 3 things to START doing that are new from your next rung that you’ll be replacing the 3 old “habits” with. There’s a Worksheet Summary in Appendix 1 for keeping track of this.

This process of replacing these activities and practicing these attitudes in your business every day involves a high level of self‐discipline to modify the behavioural patterns and habits that you have formed. As a Business Coach I help you speed up this process and keep you from regressing... so here’s the first ladder:

Ladder 1: “The 5 Steps From Employee to Entrepreneur”

1st Rung: Employee Make mistakes on other peoples’ businesses before starting your

own. Learn from what you are good at and what you enjoy on someone else’s company... i.e. you stuff up it affects them, you make a big play, they get the payout. The control of your financial well‐being is with someone else rather than with you.

Therefore at some stage, if you want more time and or money, the ability to deliver it rests with your ability to take charge of your version of risk and return... i.e. to stay in the job or go get a business or some transition in between. Read “Billionaire in Training”.., if you have a job, you’ll probably quit before finishing it.

2nd Rung: Self Employed Graduate into Self Employed when you realize that profits are better than wages... hard to

double wages, easy to double profits.

At Self Employed you are going up against other “waged” people and because you have more skin in the game you’ll generally win. Getting food on the table tends to make you more passionate. Eventually your company grows because you’re so much better than your “waged” opposition so you’re forced to expand. This generally means taking on staff that are just like the guys you’ve been up against and eventually you work out that being great at doing the work of the business is different than being great at running the business that does the work.

When you decide to master this, you’ll take another rung up the ladder. Most people stall at this stage and get done over with ego (control freaks), frustration (stress mongers) or inertia (vacant withdrawal). When they see there is more, they seek change... generally what I’ve seen as a catalyst for this is a health scare, family breakdown, moving premises to an expensive lease, bad debts, key


staff leaving or they meet a decent business coach who shakes their belief in what they are doing (i.e. flat out busy making stuff all money relative to their effort).

3rd Rung: Owner This is when you commit to trading in your ‘job” for a business. Another name for this stage is

“self‐less employed” when you work out that it’s your job to do yourself out of a job and to get your business working so you don’t have to. Self‐less employed means training others to do what you can easily do yourself but you know that’s not the point.., for as long as you’re the only person who can do a task it will be a bottle neck. This level requires you to develop systems for others to follow and to get satisfaction from seeing others do what you can do even if it’s only 80% as well as you’d do it... i.e. overcoming your ego, frustration and/or inertia and starting to understand your role as a leader.

4th Rung: Investor Playing at this level has 2 requirements... time and money. At this point you’re business is well

managed and you’re able to start looking at magnification (expansion) or multiplication (replication) of your activities. You trust the ability of your operation and your team to perform reliably enough to step away. This is when you GO OUT and look for opportunities to plug into your resources of team, systems, cash‐flow, capital or know how. Early stages are looking at heaps and trying to figure out which ones are best fit. Later stages are clarity as to the ones you like, verses the timewasters.

5th Rung: Entrepreneur At this point you are a rain‐maker. Opportunities FIND you rather than you going out to find

them. Generally you’ll have developed the expertise of both yourself as well as your team with a well honed approach meaning you have many more resources than just money available to you. Your projects get far longer term and deals are often for knowledge buy in as well as for capital contribution. The key understanding at this level is evaluating opportunities in terms of their ability to add exponential value rather than incremental.

Summary: Ladder 1 “The 5 Steps from Employee to Entrepreneur” This ladder asks you “at what level are you playing the game”. Think of your current level and

how you are predominantly playing the game... you may dabble in higher levels but you’ll spend most of your time on one rung (by the way, I am definitely advocating that you do these levels one at a time and in sequence... dabbling clouds the focus... how are your team going to feel if you’re trying to grow your business when they’re trying to cope with what you already have). Confidence is a great determinant as to your level.., if you have “fears” around money scarcity that play a big role in your decision making, you’re generally Owner or below. “Investor” levels and above will spend money to save time, whereas “Owner” and below will spend time to save money. A vital consideration in all of this is if you are playing the game as an individual or with your partner. If you both know that you’re destined for better things and you can play the game much harder, then get it together and go for it. If you believe you’re doing okay, then ask your partner whether you’re making the kind of money that fits with the lifestyle they had in mind when you got together or if you’re making good money, ask whether you have time to enjoy it and share it. Don’t worry, the answer is usually “no” so only be concerned if the answer is “hell no”.

From this “attitudinal” ladder, the next ladder is more “activity” based...


Ladder 2: “The 6 Developmental Stages of a Business”

This ladder matches the main focus of your current business activities to one of 6 developmental stages that every business goes through. Like all ladders, start at the bottom and climb one rung at a time... miss your footing on a rung and you’ll likely end up back where you started... at the bottom. Also remember that consolidating a rung can sometimes be more profitable than advancing.., just remember “accuracy IS speed” they are not opposites.

1st Rung: Mastery This is about cleaning up the basics in preparation to grow. No point

in growing a business with no value proposition that struggles to make money on many of its transactions... you’ll just go broke faster. It’s primarily about getting numbers out of your business so you can tell the customers, staff, machines, services, products, promotions, departments, contracts etc that make money and those that don’t. Until this, you’re flying blind. At this level, cash flow is managed by checking the bank account and by how many cheques you write, but don’t post till after the **th

month

Your team are punctuated by those you can’t do without and those you wish you could... but don’t want to because you’d end up doing it yourself again, or you’re worried about wrongful dismissals, or you know it’ll be a major task finding a replacement because it’s hard to get good staff and you barely have time to look (let alone interview) anyway. (Incidentally, the reason it’s “so difficult to get good staff’ is that you need amazing people to run non‐existent systems to produce something reliable enough for you not be embarrassed about selling as your own.)

Oftentimes business owners will sabotage wanting to grow their business because they’re paranoid about being able to handle it. This is where you see many businesses that will do whatever comes in the door rather than determining what they actually want and either going out and getting it or modifying what they already have. Generally speaking at lower levels of Mastery you’ll need to clean up debtors, review pricing, 80/20 your customers and activities (i.e. the 20% of your customers that make 80% of the profit, the 20% of your products/services that make the 80% of your profit, and the 20% of your time that produces the 80% of your revenues). End of Mastery is a business that is over breakeven, 80/20ed, and is consistently delivering what it promises to its customers.

2nd Rung: Niche Start of Niche is getting clear about your value proposition. This is what you do in addition to your

basic business activity that saves your customer TIME, saves them MONEY or MAKES them money. Your job in Niche is to specify this, quantify it (how much time, how much money) and compare it to others in your industry. Your ability to do this will mean you have a non price‐based pitch to get more business... this is your USP or Unique Selling Proposition. Examples are: faster turnaround times with quotes, longer lasting products where you can quantify the timing and cost of repairs, average percentage increases or decreases to customers in terms of money or time or having valuable expertise that customers would have to talk to endless people to get what they want etc. Once you are clear about this, you’ll want to tell everyone and you’ll start selling or work will start finding you. Get “Instant Promotions” for how to take your value proposition to the masses.

The tail end of Niche is thinking “it’s not more £’s I need, it’s more time!” This is where you’ll start looking to create capacity in your business to sell into because right at the moment you’re reliably profitable, but still in “do the work, chase the work” mode. Many businesses stay at this level because it feels busy and profitable... moving up to the next level is the result of another shift in thinking from Self Employed to Owner (on the first ladder).


3rd Rung: Leverage This is how to do more with less (a rough definition of leverage). Leverage as a developmental

stage means your key focus is on making it easier to handle the work that you now know very well how to get. These are the procedures that when followed, will systematically be able to deliver your business activity and USP to your customers. 80/20% rule applies here too... systemize the routine (80%) and humanize the exceptions (20%). This is the time to move premises, put new software in, train your team on the tips and tricks that are all in your head and generally make it easier for the team to deliver your business activity (heaps more about this in “Instant Systems”). Later stages of Leverage are “wow this business is easy to run, I think anyone could run or “this is about as efficient as I can make it without it starting to impact effectiveness”. This is also when professions like legal practices and the Broker sectors or businesses where the owner is the main “sales‐machine” need to think very seriously about dealing with the 20% of transactions that absolutely need them and having others handle the remaining 80% (of either a lower level transaction or the portion of the transaction process that can be done by someone else).

4th Rung: Team This doesn’t mean you have ignored them up till now... it just means that now it’s front and

centre the focus of what you’re doing. You’re role at this level is to grow leaders in your business. The key thought is “I can grow my business by growing my people”... This is an important principle that I have not seen many people master. Growing people not business is about egocide (killing your ego), patience, nurturing, motivating, and longer term rather than short term strategies. It also means that you now have the systems for your team to operate so they can “sharpen the saw” and add the distinctions that move your business from delivering the basics of your activities to innovating and initiating new ways to deliver magic to your customers. This level is about training, incentive management, new team induction, culture, vision, planning, communicating and empowering your team to be the best in the business... loads of HR stuff (read “Instant Team”). Latter stages of team are seeing hero’s emerge in your business that love what they do... you’re starting to be surprised at what your team is capable of This encourages you to start letting go and seeing others shine.

5th Rung: Synergy This stage is the tweaks stage... lots of tweaks that have subtle and effective results for all the

other stages... delivering slightly faster, more detail for induction training for new team members, common goals that permeate all parts of the business. Getting all 4 previous stages to operate in unison is the key here. Often in some of the previous stages there are parts that need to be completely cleaned up... synergy ties up all the loose ends and has a business that is “cranking the flywheel”.

6th Rung: Results Results level businesses have the ability to be best‐in‐the‐business at every level they play in. The

flywheel is now spinning with many breakthroughs happening across multi layers of your organization. The stakes are much higher as you foot it with companies much larger than yours and you can now see how to use your size and competitive advantage to take on anyone of your choosing. Your business now has the team with the ability to deliver as much time to you as you need, and the structure and capacity to supply as much money as you want.


Summary: Ladder 2 “The 6 Developmental Stages of a Business”

Can be ready to graduate stages when 80% done on the stage... doesn’t mean the 20% won’t need to be finished down the road, but you can still move on and have other team clear away the 20%.

Below Leverage is hard work and even Leverage is gritty, above Leverage is easier on your time because you’re not so tied time wise and money is much less of a consideration. Businesses stall when the Owner stalls... this is NOT a bad thing at all. A stalled business at Leverage level is still a great business.., there is NO judgment that says you must get to the top of the ladder. In fact some businesses are just not particularly suited to going all the way. I’ve recommended some people bail at Mastery because their business will never serve them with the kind of money that will make them financially secure within an acceptable timeframe. Assess what you have, compare it with what you want and then ask if you truly believe your business can deliver it for you... if not, sell, get it managed or start looking for other opportunities because to play at this game requires brightness of future... if you don’t have it, get it, because without it, you’re in denial.

Remember, your business is often your only vehicle that will bankroll your dreams... if you don’t have anything else that generates cash flow for doing fun stuff, then ask yourself if you trust all your dreams to be delivered by your business.., if yes, hang in there, if not, deal with it! Also think of these levels in terms of “cope” verses “grow” mode. Mastery is cope (with your decision to be in business), Niche is grow (the parts that make you money), Leverage is cope (with the growth),

Team is about growing (leaders), Synergy is coping (with the new roles, responsibilities and results) and Results is growing (exponentially rather than incrementally).

From this “activities” based ladder we move to the next ladder that looks at the “attitudes” of your customer base...

Ladder 3: “The 6 Steps to Raving Fans”

These are the steps that all customer bases go through before they get to a point where you integrate your customers into your personal sales force. At the bottom of the ladder they’ll make price based decisions because they are uneducated and don’t blame them, because it’s your job to educate them. They start to climb the ladder when they buy from you because you do a better job, run a promotion or respond to one of your lead generators. Until you test their loyalty with pricing strategies and benefit, you’ll never establish true value, which is the ultimate requisite to becoming a Raving Fan. Your indication of value is your Gross Profit (GP). The higher your GP relative to your industry or to your last year’s result the better you are at establishing value... i.e. value is what happens when cost meets benefit. How you build value into your customer base is a function of how well you communicate. Communication by definition is “the response you get”. If you have no money in your bank, your response is what you are communicating i.e. low value, with not enough benefit to those who pay you or not enough people paying you for what is a good benefit. This ladder shifts the focus from you and your relationship with your business to the mindset of your customers. Taking customers up this ladder, one rung at a time, is your Customer Relationship system.


1st Rung: Suspects This is anyone in your target market whether that is geographic, demographic etc. Therefore if

you haven’t defined your preferred target market, your best place to start is to narrow it down from “general public” or “pulse and a wallet”. Think of this as a pre‐customer level based on the fact that everyone who currently buys from you had to start here. How well you define Suspects will determine where you’ll find the guys from your 80/20 rule analysis. A great place to start is ask yourself “who do I deal with who pays on time, doesn’t haggle me on price, lets me get on with what I’m good at, doesn’t bug me with endless phone calls, accepts my recommendations even if it means paying more and refers business to me”. Then ask, “Where do I find more of these guys in their highest concentration”. Then you’ll employ any number of lead generation activities to get these guys to partake in your enterprise. Best ones are free or low cost offers that stimulate trial of either existing or new offerings (refer to “Instant Leads” for a great list of strategies).

Testing and measuring is the key here as your marketing is generally expensive given that you’re dealing with shotgun tactics like advertising, telemarketing or cold calling, a bit of grit required here because cost per lead is sometimes quite scary when testing headline and offer combinations as well as the medium.

2nd Rung: Prospects You’ll graduate your Suspects when you get their details so you can personally contact them and

therefore keep in touch. Clearly to operate at this stage you’ll have a database so you can market to them. How you establish and use a database is the subject of many books. Suffice to say the easiest way is to ASK everyone you have contact with and convert every known record from invoice books to account forms to add to your Prospect list. Start a viral campaign that gets your customers handing out referral vouchers/texts/emails etc to do whatever it takes to get a great list.., read “Instant Referrals”. The OFFERS will be what you have established from chasing Suspects. You know you are generating Prospects when you are starting to get inquiries that you can tag to your marketing i.e. asking everyone who has contact with you “how’d you hear about us” when you start hearing “someone told me about you” or “I saw your offer” you’ll see the mindset of the Prospect starting to emerge. The key difference between Suspect and Prospect is first contact (either outgoing or incoming) i.e. they must reply to one of your offers. I was always told “you don’t get a second chance at a first impression” so your business needs to systematically make it count.

3rd Rung: Shoppers By definition this is someone who buys from you once... as a try before they buy any more goods

and services from you. The mindset is completely different once a punter has had a transaction with you for reasons obvious.., they have perceived value and have spent their hard earned cash with you. Here you have only 2 parts to get right... the PROCESS of the sale and the OUTCOME of the sale. How you rate on each of these scales will determine whether they will elevate you from “shopping you” (often based on price or low risk based marketing plugs) to buying other goods and services from you again.

If you don’t get this right you’ll continue to be “shopped” and therefore subject to other offers that the market place serves up. And not just in your industry.., anyone who is selling stuff is sometimes your opposition where wallet share is even more important than market share. I have seen many clients who stall their client base at Shopper and keep on trying to win loyalty by maintaining cheap pricing.


Another sidebar... pricing in my experience is one of the most psychological parts of business.., when YOU believe you’re worth it, funny how your customers will too. This starts happening with reliability when you have completed the Niche stage of your business when you are well practiced in helping your client base understand why you are in business.., to help save them time, make them money or save them money.

You’ll get much better at this when you commit to communicating with your punters although this often happens a little further up the ladder. As I’ve said before, when you can QUANTIFY this and COMPARE it, your Shoppers will shift their mindset thanks to you educating them on why you’re not like the other guys... now they’re ready for graduation to a new level of stability for you...

4th Rung: Customers These are the bread and butter punters who have tried you out to the point where they are

happy to regularly buy from you (however long your “buy cycle” is i.e. houses every few years, baked beans every week... so you’ll go back to the Real Estate agent because they got your price and did you no wrong... and Proper Brand Baked Beans have thicker tomato sauce than the watery Supermarket Brand). Mindset change from their point of view is from scepticism to trusting your value.., even if it is a little nonchalant. I’ve seen many business owners who really don’t believe they need to add another degree of respect to their customer base because they assume they’ll always be there. Only when opposition arrives does the absent mindedness start to bite and your Customers fall back to Shoppers.

The other way I’ve seen this level operated is when business owners don’t articulate for their Customers the great things they are doing for them. When this is the case, you become blasé about your product or service and simply don’t tell your customers what you’re doing for them behind the scenes. So they know they like dealing with you, but are not necessarily sure how you are going about having them “satisfied”. You got to tell them, you know you’re not doing this when you don’t see a “regular” for a while and then they show up again saying something like “you guys actually do quite a good job” meaning “I’ve just tried the other guys because of your indifference... and they suck!” Start telling them the little things you do to make them satisfied AND loyal (you want both... think of any partnership and you’ll agree!).

Latter stages of Customer is when you start noticing customers as personalities that tend to exemplify a “type” of customer... these are the ones who are starting to have more emotive connections to your business. When groupings of customers start feeling like a “member” of your business they’ll start developing an attachment to people and/or products in your business. Many strategies can advance this feeling of “membership” such as membership packs or “VIP” events that you put on for them. Emoting customers are the ones who will be up for promotion to the next rung...

5th Rung: Advocate The reason you want your customer base feeling (positively!) emotional about you is a simple

rule of sales... 80% emotion, 20% logical. People buy with their hearts and justify with their heads. So when your customers are emoting they will respond with your business name when asked, “I’m looking for a [whatever it is you do], do you know anyone decent?”

An Advocate will advocate your services when asked and should do a great job telling the interested party WHY you are good. They know why you are good because either you’ve told them and they believe you, or they’ve tried elsewhere and they know you’re not lying when you say why you’re good. This is when the mix of your client base starts to shift... much more referral or “word of mouth” (which is the #1 source of business everywhere.., your objective is to make it the ONLY source of leads generated — more about this at the next level). I’ve noticed that marketing starts to


shift focus here i.e. businesses just don’t seem to need it. Great indications here are when your local advertising doesn’t seem to affect the demand for what you have at all... if it stopped you’d probably not notice because most of your business is “word of mouth”. This is a really great indication that you have a reasonably loyal following so definitely start pulling back the conversion based marketing and stepping up the retention based newsletter styles. Loads written on this stuff, (like “Instant Repeat Business”). Just teach your client base to sell for you and they’ll say the right things when asked.

6th Rung: Raving Fan These guys will sing your praises from any vantage point.., they love you and whether their

unsuspecting friends and acquaintances want to hear it or not... they’re going to hear it anyway.

Summary: Ladder 3 “The 6 Steps to Raving Fans” To really grow your business I have found the mindset to focus on is

seeing all Shoppers as Raving Fans in the making... my personal view is that I never want to do business with ANYONE who I don’t believe will become a Raving Fan. I certainly don’t get it right every time, but that’s my intention whenever I start with a client. Just think what your business will be like when everyone pays on time, never complains about the price, trusts you to get in and do your job and refers other great clients to you... that are what moving A grade clients up the ladder is about. Also think of the opposite... what’s it like to have a business when no one pays on time, they all haggle your price, they’re on the phone every 10 minutes and the worst part is they refer their mates... who are just like them!

The other feature of where your customer base is can be from how much time you’re spending in sales (include quoting here if quotes and tenders etc are how you get business) and how much money you’re spending on marketing. My theory on this is sales cost time and marketing costs money. So the great thing about advancing your punters up the ladder is to understand that from above Customer you’re spending practically no time of sales (because they’re all party endorsed) and no £ on marketing (because it’s all word of mouth). In fact the most profitable businesses in the world have to be the ones that do very little overt marketing and have products and services that sell themselves. So the point of the Ladder is your sales team ARE your customer base which means you have generated and articulated genuine value and are growing your lot with guys that aren’t even on your payroll. That’s the feature of all these ladders, harder down the bottom, easier up the top.

The last ladder puts into perspective the Business portion of your wealth platform...

Ladder 4: “The 4 Sources of Money”

Only 4... Cash Flow from either a Job or a Business, and assets from Property or Share Market. Here’s one of my biggest reality checks... Businesses will not make you wealthy; it’s not their function. Their sole focus is to provide you with the level of cash flow necessary to start channelling it to creating wealth i.e. assets that appreciate to increase your wealth and depreciate to decrease your tax. There is much written about “middle class capture”... the gist of it is lower income levels are gross tax users... the wealthy pay very little tax by moving their money around and depreciating their big asset bases. So the bulk of the tax


burden falls on the guys in the middle, many of them business owners.

Business owners I have spoken to regarding this fall into two camps... they are either confused and resentful of the fact that even though they have much bigger businesses than ever before, their cash flow gets gobbled by tax and VAT payments that blindsides them; or, the other camp is made up of those who say “don’t want to grow my business because I’ll just pay more tax”. I can’t count how many times I’ve heard that line...

Businesses are clearly designed to pay tax, VAT, PAYE, CGT, Income and Corporation Tax and we even do all the paperwork to make it easy to collect for the Inland Revenue as well. So accepting that businesses are designed to pay tax, I went looking for clients with the lowest tax bills and found those with the highest asset bases were paying the least i.e. they had high depreciation. Hence why the point of a business is not to make you rich, it’s to generate cash flow to invest into assets that will make you wealthy. The cash flow is not what makes you wealthy... it’s what you do with it that counts.

I have seen some very modest small businesses kicking out just enough cash flow to buy their building, then a couple of rentals, then a couple of commercials. Over a 5—10 year period they have clicked through the mortgage payments and once they get their equity high enough, they are looking at a very comfortable picture... They are in effect using their tax savings to subsidise their portfolio.., and all from an unglamorous business that consistently kicks out cash.

There’s a very crude example I use to demonstrate this point. Go buy a £500K building... in Bristol, property doubles on average every 7 years. So in 7 years your building’s now worth £lm. This means you have make just over £70K per annum from the initial purchase. Now go back to your humble business and say you’re making between 10‐15% profit after tax... you would need to find sales of around £500K per annum for 7 years to have the same return to your net worth as your property purchase. How much time to make THIS happen (that’s finding just under £4m in accumulated sales over 7 years)... compared this to the part time project of purchasing your £500K building. THIS IS THE WEALTH I’m talking about. The principle of The ActionCOACH System is to make these ladders work in the right order i.e. one rung at a time.

The KEY point about Wealth is to understand that it just takes way too long to SAVE your way to wealth from your EARNINGS; you must INVEST your way to wealth through your CASH FLOW. It’s cash flow first, assets second... i.e. business first to make cash flow, before asset accumulation.

1st Rung: Job Stage 1 cash flow is from your job. By job I mean either you’re on someone else’s wages or your

business is more like a job than a business. Many business owners realize that rather than buying a business they have effectively bought a job. It’s a job when you have to show up and work or you don’t get paid. If you have a business where this is your reality, then it’s unrealistic to expect a different result from doing the same tasks. However, if it produces great cash flow then it may be all you want which is great. As I’ve said previously, if you get to understand that profits are better than wages because they can be doubled, then you may wish to switch to a business.., if you’re in business but it’s more like a job, then you’ll probably want to start leveraging some of your time back so you can start building a cash flow machine that breaks your hourly rate. A great exercise here is to add up all the hours you’re spending in your “Job” and divide in how much you pay yourself... this is your hourly rate. You’ll see a number that will either inspire you or depress you. This is often the reality check that business owners need to work out that they want to graduate from a Job to a Business.


2nd Rung: Business The sole purpose of Business is to provide a leveraged way of spinning cash flow. Whereas the

Job is relatively unleveraged due to the hourly rate mentality, the point of a business is to get it working so that you don’t have to. This is requirement because money leverage (other people making money for you) and time leverage (other people spending their time to give you more) will give you time and money to go out and learn new skills as to how to invest both. The two ladders of Raving Fans and Massive Results relate to what you DO when you’re in your business.., this ladder relates to what you HAVE as a result of what you are

Doing which means if you are an EMPLOYEE then your wheel will skip these two ladders and go straight to JOB on this ladder.

Remember, the #1 rule of Wealth... it just takes too long to SAVE your way to wealth from your EARNINGS, you got to INVEST your way to wealth through your CASH FLOW.

3rd Rung: Property Investing in physical assets is the goal here. This rung is not to be confused with trading property

or many of the wealth tactics where property is being utilized as a “buy, renovate, sell” tool. These tactics are cash flow providers and therefore are more about the bottom two rungs both of which are cash flow sources. By property I mean “buy and hold” where there is an expectation that your property will accumulate value over time and provide a place to park your money where you can enjoy the benefits of depreciation and deductible expenses that relate to owning and maintaining your property. Once your portfolio has developed to the point where you have the ability to keep it growing you are easily able to consider the next source of money where you graduate from physical assets to paper assets... “Real Estate Coach” is required reading here!

4th Rung: Shares Paper assets are the ultimate asset because when you’re the one selling them, they cost you

nothing. I have never taken anyone down an IPO process so am not qualified to even discuss it... so when I am, I’ll write some more on this topic!

Summary: Ladder 4 “The 4 Sources of Money” Very simple ladder this one... key point is that the bottom two rungs are

about creating cash flow, the top two are creating wealth... the bottom two rungs are more active ways of making MONEY, the top two are more passive ways of making WEALTH. The Sources of Money ladder will determine how much you need to serve you wherever you are on the Entrepreneurs ladder... Self Employed need less money than the Investor etc


Common Examples of “Ladder Combinations”

Here are a few really common examples from the experiences I’ve had with Business Owners... First thing to note is that 80% of Business Owners probably fall into the first two examples:

Self Employed > Mastery> Shoppers > Job Depressing I know, but this is the reality I’ve seen. The Self Employed owner typically has a team

of less than half a dozen, has an overhead in paying wages to them as well as the vehicles and/or premises that they work from; this has almost never been allowed for in pricing the goods or services and they would typically be paranoid about putting up their prices to cover this because their customer base is loaded with Shoppers and will therefore leave with no other reason to stay apart from price.

Learn how to sell, put your rates up, work on your value proposition and talk to your Shoppers about it. Ask yourself constantly, “what is an acceptable return for the skills I have, the hours I’m working and the risk I’m taking”. Think “Double it”, this principle applies to so many things and is SO important when you’re not making decent money. Double the number of times you put your prices up, double your margins on the lowest pound items, double the amount of time you spend selling, double the amount of work your team can get through in a week... just double it!

Self Employed > Niche > Customers > Job

Making money, but too busy to enjoy it... if you stopped working, your business would too so you’re too paranoid to slow down because you’ve got more money that you’ve ever had. Burn‐out threatens, but never arrives because you’ve got just enough people around to sneak in an occasional long weekend. I have seen many Tradesmen, Brokers, Agents and Professional Services guys stalled in this sequence.

Concentrate on the systems and the training to get your team to accept new responsibilities. 80/20 your transactions to bits, you may find out your bottom 20% of transactions can be done by your team. Get really clear about what your value proposition has been that has allowed you to grow (read “Instant Sales” for more on USP). Define your uniqueness as described and start writing down a few “Top 10” checklists of how you do things. You’ll find routine in the random once you get going and you’ll also be surprised how much of your “job” could probably be done by someone else... the key to this sequence is to keep SELLING and keep TRAINING!


Owner > Leverage > Customers > Business

A great place to camp out: staff starting to run the place, customers coming back and the place STILL makes money! Keep going though... remember 90% of people give up (or rest up) when they’re 90% of the way there. The next levels are so much easier when you start growing leaders at Team stage and when Customers turn into Advocates and start becoming the main breadwinner for growing your business. Profit goes up and you start thinking about throwing some money around. Just be careful of the “nice‐to‐haves” and focus on the “will‐make‐me‐money” stuff the Worksheet Summary in Appendix 1 has a few examples to think about like buying your premises etc.

Bringing it all Together

Revisit your list of attitudes and activities every day to make sure you’re scaling the ladders... there is a one‐to‐one relationship between attitudes and activities “as you think, you are, as you are, you do”... meaning that thinking precedes doing... so don’t try to be convinced about your own “rightness”, challenge yourself to think BIGGER thoughts and you’ll be amazed how your TO‐DO lists start to change with more important calls to make on bigger deals with greater frequency... think about the best day you’ve ever had... probably when you pulled off a big deal or banked a big cheque or were introduced to someone who was going to be VITALLY important to your business...

Now project yourself up a couple of rungs on each ladder from where you are now and think about who’s on your speed‐dial list.., and what the calibre of your diary appointments are when ALL your phone calls are for BIG deals and ALL the people you’re meeting are JUST who you’ve been looking for... what does life look like for you when you’re doing in ONE week what you used to do in a month, and your biggest client now has 10 bigger ones and you’re banking cheques that have you smirking at the Bank Teller... this is brightness of future...

GO HARD, GET AMONGST IT...THERE’S LADDERS TO SCALE!


Appendix 1: Worksheet Summary

Ladder 1 “The 5 Steps from Employee to Entrepreneur” This is an ATTITUDINAL Ladder meaning the modifications needed to

scale the next rung or to consolidate my current rung are coming from how I THINK i.e. my approach to the way I am running my business or job... Right now I’m running my business or job like I’m a(n) _____________

3 Attitudes that I need to START practicing to move up a rung are:

1. .......................................................................................................

2. .......................................................................................................

3. .......................................................................................................

3 Attitudes that I need to CHANGE are:

1. .......................................................................................................

2. .......................................................................................................

3. .......................................................................................................

Ladder 2: “The 6 Developmental Stages of a Business” This is an ACTIVITY based Ladder meaning the modifications needed to

scale the next rung are coming from the tasks that are being done every day i.e. what is on your TO‐DO list most days... Right now my daily TO‐DO list is keeping me on the __________________rung

3 ACTIVITIES on my daily TO‐DO list that I need to START doing to move up or consolidate a rung are:

1. _________________________________________________________

2. _________________________________________________________

3. _________________________________________________________

3 ACTIVITIES that I need to STOP doing on my daily TO‐DO list are:

1. _________________________________________________________

2. _________________________________________________________

3. _________________________________________________________


Ladder 3: “The 6 Steps to Raving Fans” Again this is an ACTIVITY based Ladder meaning the modifications

needed to scale the next rung (or consolidate where I am now) are coming from what I am doing to support my customer base towards helping them become part of my “sales team”...Overall, my customer base is currently on the __________________ rung

3 ACTIVITIES that I need to START doing to move them up a rung are:

1. _________________________________________________________

2. _________________________________________________________

3. _________________________________________________________

3 ACTIVITIES that I need to STOP doing are:

1. _________________________________________________________

2. _________________________________________________________

3. _________________________________________________________

Ladder 4: “The 4 Sources of Money” This ladder is a RESULTS based ladder meaning it’s the outcome of how

you have been RUNNING your business or job (Ladder 1) and what you have been DOING in your business (Ladders 2 and 3)... Therefore the main consideration is how much cash flow you REQUIRE from your ACTIVE based income to start funding your PASSIVE based income... Right now I’m on the _________________ rung where my main focus is either on CASH FLOW i.e. Job or Business, or CAPITAL GROWTH i.e. Investments that support my WEALTH from Property or Shares (or even Business acquisition that is focused on generating more cash flow to fund higher level Property transactions e.g. the expansion or multiplication of your premises). The CASH FLOW requirements of my ACTIVE based income need to be a stable... £ ___________ per month going into my PROFIT bank account for a minimum of _________months before I go out and start looking for my next investment that will either be:

1. Residential property

2. Commercial property

3. Investigate buying my own premises (if currently leasing)

4. Investigate buying my own house (if currently renting)

5. Expansion of my current business to boost capacity and therefore my midterm cash flow


So, having read my Worksheet Summary, my “brightness of future” index is at

……..……………. (Out of 10)

My “level of clarity” index to get after the next rung or consolidate a current rung is

…………………. (Out of 10)

When I MULTIPLY these two numbers together my actions score is a massive.....

……………………%

This score should be 72% minimum.... If you’d like to get your clarity and brightness of future scores looking even better, email me on [email protected]

Appendix 2: Book Summary

Here’s the list of books that I’ve been referring to during the commentary on the various levels. There all have downloadable extracts that you can have a look through to get an idea of how they will help in the development of the strategies necessary to work through the rungs on each of your ladders.

They have all been written by a guy who is at the top of each ladder: Entrepreneur > Results > Raving Fans > Shares (his Paper Assets are more from Licenses than Shares although no doubt he has plenty of them too)... his name is Brad Sugars... here are his books, all 14 of them... as well as the site to find his downloadable extracts:

Instant Cashflow by Brad Sugars

Instant Systems by Brad Sugars

Instant Referrals by Brad Sugars

Instant Team Building by Brad Sugars

Instant Sales by Brad Sugars

Instant Leads by Brad Sugars

Instant Promotions by Brad Sugars

Instant Advertising by Brad Sugars

Instant Repeat Business by Brad Sugars

Instant Profit by Brad Sugars

The Business Coach by Brad Sugars

The Property Coach by Brad Sugars

Successful Franchising by Brad Sugars

Billionaire in Training by Brad Sugars

Cycle of Business

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