The traditional way to build a business is to build an owner reliant, Level Two business. In a Level Two business, you as the business owner gather up the reins of power. All decisions are run past you. You create the plan, you lead the execution of that plan, you do all the hiring. You meet with all the key clients and perform most of the important work of the business. Sure, you have people to help, but they’re there to do just that-help-not to lead or take ownership of central parts of your business.
The core knowledge of how to manage and direct it is locked up in the gray matter of your brain. If something should happen to you, your business would crumble. If you manage to somehow escape for a short vacation, you probably sneak your laptop or iPhone with you on the trip and check email when your spouse and kids aren’t looking.
What’s the real reason typical Level Two business owners want all the control? It’s the fear that if they don’t stay in control, things will go wrong. They’re afraid that their staff will screw up and they’ll lose a customer or face a lawsuit, or even that the company will fail. So they clutch at the security blanket of control, never seeing that it binds them in a trap that holds them in their businesses forever.
Remember the scene in Godfather III in which Michael Corleone (played by Al Pacino) wants to get out of the family business? He turns to his sister Connie and says, “Just when I thought I was out, they pull me back in!” Well, that’s exactly how many Level Two business owners feel over time.
While there is nothing wrong with the traditional model, and it works to build a successful Level Two business, it has three serious pitfalls to it.
The 3 Pitfalls of Building Your Business the Level Two Way
Pitfall 1: It caps your income and your success.
If your business revolves around you and your personal production, as you become more successful, you’ll smack up against the ceiling of how much you personally are able to produce for your business. You can personally only do so much and run so fast before you just can’t do any more.
Pitfall 2: It puts everyone at greater risk. If you stop working or get injured, your business dies-quickly. This is risky for you, your family, your employees, your customers, and your investors.
Pitfall 3: It eventually corners you in the Self-Employment Trap -the more success you have, the more trapped you become inside your business. You’re so busy doing the “job” of your business that you can’t step back and focus on growing your business. As you grow your sales by personally producing more, you take on increasingly more overhead. That means each month, your starting point requires you to run even faster just to cover your fixed costs. It traps you firmly inside the suffocating blanket of your Level Two business.
So what’s the way out of the Self-Employment Trap?
In the traditional Level Two approach, you try to escape by personally working harder. But that’s like stepping on a treadmill and saying that the way to get off is to simply run faster. Not so. The faster you run, the faster the speed of the treadmill. You take on more overhead and hire more employees, but you put them into a Level Two model that merely increases your personal pressure to produce. And what happens if you ever stop running? You come crashing off the treadmill and your business dies.
Escaping the Self Employment Trap
A job is something that you do yourself; a business you build does your job for you! Getting your business to do more means building the infrastructure that profitably produces value in the market in a scalable way.
This means building your business with the end in mind, the end being the day when it no longer needs your time and attention on a daily basis. In fact, building a Level Three business is a lot like raising kids. Immediately after birth and for the first few years, you put in a tremendous amount of care and feeding, not to mention changing a few diapers! This requires lots of your time.
In the early years of your business, you’re naturally the main engine driving your business forward. You’ll wear all the hats at various times, and you’ll have few formal structures and systems within your organization upon which you can truly rely. But as it matures-like when your kids start school-you create some breathing space. You’re confident you’ll generate enough consistent sales that your business stays profitable.
As you enter Level Two, you’ll face a crucial decision point at which you can settle for owning a Level Two job or instead choosing to raise your business to be a strong and independent entity that benefits from your involvement but is ultimately independent of it. Just like your goal as a parent is raising kids who can eventually stand on their own-independent and self-supporting-so your goal is to create an organization with the systems, team, controls, and scalable