The Next Global Shattering Term And How To Prepare Yourself
- Jun 17, 2024
- 7 min read
Written by Joseph Rockey, Elite Business Conversations
Joseph Rockey Jr is a serial business creator, world class consultant, international best-selling author, and hosts a TV Show that airs in 55 million households. Elite Business Conversations, Joe’s consulting firm, specializes in honoring the sacrifices of business owners by keeping the business running, even if it is no longer wanted.
Every five years or so, we get a new term that used to be innocuous, but has radically altered or affected the economy. Credit default swaps, shelter in place, quarantine. The next scary term on that list is going to be owner dependency.
Owner dependency simply means that your business is dependent upon you; if you depart from your business, whether that be by your choice or not, the business will die. 30% of the US economy is Gen X and Baby Boomers firms. Of which 80% are owner dependent companies.
America is standing on an economic cliff.
Unlike the 2008 recession when major banks and financial houses were collapsing, this recession will be a larger pain on America. While initially there won’t be many household names that collapse, it will be a twelve man restaurant in Dallas, a deli in New Jersey, a garage in Wisconsin and countless others. In combination with each other the sum of owner dependent firms dying would be greater than the largest pit of the Great Depression.
So, with that being said, let's solve owner dependency for your business in a couple of simple yet challenging steps followed by a client example.
Step One: You need to know everything that your client would reasonably and ideally expect from working with you. You need to write down every single expectation from them, starting from their first exposure with you, through your sale, through delivery of your product, and then your post sale process.
Every single step and expectation that a client would have from your company needs to be written down in linear order. Remember the old adage, if it is not written it does not exist.
Step Two: Write down in linear order every single thing that your employees do. What tasks are being done, and how are they being done? Do this for every position within your company. Then arrange all of these task in a linear order of client’s expectations.
Step Three: See where the two lists line up. Where are holes from your client’s expectations and what you are doing? Where is the firm using resources on actions that are outside of the client’s expectations? Then adjust your resources accordingly. The majority of time this is going to mean recreating and redefining your existing positions so that the company’s processes are completely in line with what your clients are hoping and expecting from you.
Step Four: Institute an incentive package to your employees that directly ties to completing the tasks that your prospects and clients desire. This compensation package must go deeper than just an hourly or salary rate because those do not line up your employees actual incentives with the client's desires. (There is more specifically on this point in the client example.)
Step Five: You need to reduce the amount of non-revenue positions in your company. Yes, there is a need for security, I.T., bookkeeping, etcetera. But unless that is the product in which you are selling, almost always you will be better off, both economically and personnel wise, to outsource that task and have your individual employee work somewhere within the realm of your revenue chain, whether that be marketing, sales or product.
Step Six: This might be the most challenging step for controlling business owners. You need to trust your new processes. Allow your employees to grow and establish solutions that will simultaneously be best for them and the company because of your economic structure and incentive package. When you step away, your employees become empowered and you will end up earning vastly better results than any one person could master. You create innovation inside your company, you create better sales results.
In six steps, you will create a revenue machine rather than a job to which you are a slave. Again, it's a simple list, but it's a very challenging list to implement into your business. And I hope that as a business owner, you do this whether it is independently or with a professional firm such as mine at Elite Business Conversations. You will be not just making a better life for yourself, but also for your employees, your clients and the world overall.
Client example
My client’s hotel was continually burning him out. He was forced to spend all of his time and energy “hiring and babysitting” rather than creating the ultimate lounging and dining environment, which made him want to buy a hotel in the first place. Just like every other hotel, his product is the cleanliness and the desirability of the rooms. He was facing a couple of problems that were causing him to lose his passion for the business and making it dependent upon him.
First, the housekeeping position was experiencing radical turnover. The owner was treating the housekeepers the same way as every other hotel does – pay minimum wage and yell at them when the rooms aren't clean enough. As a result of treating his employees this way they would commonly leave for the most minimal raise elsewhere or just disappear due to low morale.
Second, he also was having trouble with his sales. The predominant vehicle of selling his rooms was third party travel sites where his only real differentiation point was by selling through price. As a result profit margins were regularly diminishing.
As an owner, he was running around with his hair on fire while earning worse and worse results. The more he pushed on the housekeepers the lower their morale became and the higher the turnover rate was. Lower morale led to minimally cleaned rooms. Minimally cleaned rooms led to a reduction in the hotels reputation, which led to winning clients with substandard prices, which led to less net income.
When he hired Elite Business Conversations to help, we used the framework outlined above to solve the hotels owner dependency problem.
Step one, the ideal client wants to have their rooms clean and ready when they arrived, at worst case scenario by the stated check-in time, but ideally when they first show up.
Step two, the current policy was cleaning the rooms the morning of check in regardless of the last time that room was used.
Step three, we identified the gaps in the processes.
Step four, we changed the way the incentive package of the housekeeping position was done; changing it from the traditional hourly rate system to being a payment scale based upon the cleanliness of the room. An A+ room got paid the most a B a little less, a C a little less, so on and so forth. And any room that was not completed before check in, did not count and no compensation was granted for it.
We then allowed the employees to clean the rooms whenever they wanted and in whichever order or fashion that they chose to. A freedom and innovation that was completely foreign and unique to this staff arose. After the staff trusted that they would get compensated even if they weren't there for their full eight and a half hours. They started arriving later and spending less time in the hotel overall. But the rooms were cleaner. The employees became more motivated. The turnover virtually stopped after implementation and his rooms became more desirable. The hotel’s product got better. A genuine Win-Win was created between the hotel and the housekeepers.
The hotel owner’s housekeeper problem was solved, but we also had to solve the problem of the diminishing profit margin. Knowing that so much of his industry space was derived from these third-party partnerships to get people to check into the room, the challenge then became how to use the resources we have to increase the revenue coming in the door. The answer was found within the position of the check-in agent.
Prior to implementation, his check-in agents were basically just there to give out room keys and make sure that the right people were in the right rooms. However, with some simple modifications to the incentive plan (removing them from the hourly rate system) the check-in agent now had incentive to upgrade the clients from their original room to a more expensive room. As a result, the hotel's profit margins drastically improved.
Overall, the experience of the clients improved, and as the reputation took off, the need for playing price wars on the third party sites diminished and then gradually stopped. People were still coming to his hotel again and again and again. They were upgrading to better rooms as the quality of his product increased, both in terms of the cleanliness of the rooms and the agreeability and cordiality of his staff. Because now they were compensated to do so in a way that they bought into, the hotel took off, its profits skyrocketed.
Most of all, the owner wasn't running around herding his cats anymore. He trusted his employees, letting them take the reign, and now he only goes to his hotel as a guest.
Joseph Rockey, Elite Business Conversations
Joseph Rockey Jr is a serial business creator, world class consultant, international best-selling author, and hosts a TV Show that airs in 55 million households. Elite Business Conversations, Joe’s consulting firm, specializes in honoring the sacrifices of business owners by keeping the business running, even if it is no longer wanted. His international best-selling book "Casino Sales Master: Proven System to Beat the Odds in Sales and Life" and accompanying coaching course are teaching businesses worldwide to sell in the correct way. By bringing relationships as an integral portion of the sales system, Joe’s clients’ cut through the omnipresent residue of the 1960’s Sales Method to heal the world.
