It sounds nuts. How am I a hostage, and how does becoming a prisoner put me on the road to freedom?

Shrinks tell me that six months as a hostage has more lasting negative effect on someone that a number of years in prison. Why? A hostage has no idea when they will get out, the rules change every day, things that got them relief on one day get a whole different reaction the next day. It could all end badly tomorrow without notice. Everything is up in the air all the time, chaos reigns, and the lack of any knowledge about the future makes it all seem futile and endless.

Sound like your business? Most business owners are hostages to their business with rules that change daily, a reactionary way of doing business, and no end in sight.

A prisoner knows exactly how long they are in for, what the rules are and even how than can get out early for good behavior. It’s difficult for a hostage to be encouraged and have hope because the future is a big unknown. A prisoner always has hope and can be encouraged that every day is a step closer to freedom by just doing the right things.

You need to become a prisoner on the way to freedom in your business and here’s how:

He who makes the rules wins

Most of us let our business create the rules for us and we simply react to everything coming at us. To fix this we need to believe we can start setting the rules for our business and have it start reacting to our needs.

The only way I know to do this effectively is put in place the biggest thing that differentiates a hostage from a prisoner – an end date, or what I call a Business Maturity Date. Decide what your Ideal Lifestyle looks like and when you want to be there. This is the first step to moving from hostage to prisoner to business freedom (see other posts here on picking a Business Maturity Date).

Working toward a date at which your business will begin to be mature can change everything in business for you. Without it you’ll just be a hostage for decades to come.

But what if I “fail” to get my business to maturity (the business can make money and function without me while I’m on vacation) on that date? The only failure is to not try. If you decide you don’t want to take the risk to build a mature business by a specific date, you are ensuring a 100% failure rate for ever getting there.

A man still finds his destiny on the path he chose to avoid it

Pick a business maturity date, move from being a hostage to a prisoner, and that will ensure you will get to freedom.

Along the way I learned two valuable principles that transformed me and my businesses, and helped me build a business I could enjoy for decades:

1. You get what you intend, not what you hope for… and…
2. He who makes the rules wins.

Throughout a number of my businesses I intended to work extremely hard and make money, and I got exactly what I intended – hard work and some money. While growing those same businesses I “hoped” they would result in a great lifestyle and worked even harder to increase my chances. But we get what we intend, not what we hope for.

I learned that unless I very intentionally designed my work around building a great lifestyle, that all I was going to get was hard work and maybe some money. I decided I was going to turn the whole thing on its head, stop working for my business and make my business start working for me.

It dawned on me that “He who makes the rules wins”, and that I had been allowing my businesses to make the rules by just “hoping” they would give me a great lifestyle. I added “use my business to create a great lifestyle” to my intentionality, having grown into the belief now that business should not just give us money, but it should give us three things – money, time, and the opportunity for significance, or meaning.

This led me to develop simple tools that would keep me on track to create that lifestyle:

1. The Big Why – those with a great vision for what to do are more likely to be successful.
2. A Business Maturity Date – to give me a very clear, measure of the time, money, and significance I now intended for my business to bring me, and a specific date for when I intended to be there – Friday, February 18, 2001, at 10am.
3. A simple 2-page Strategic Plan – to help me stay above the daily Tyranny of the Urgent so I could focus on the things that would build a business that makes money while I’m on vacation.
4. Process Mapping – to get me off the treadmill, allow me to train others to do what I do, and create repeatable and consistent experiences for my clients.
5. Outside Eyes – I have others I meet with regularly who are helping me keep on track. I’m too subjective about my own business to make the kind of progress I regularly should.

February 18, 2011, we’ll be on our way to New Zealand celebrating the maturity of our business, and we fully intend for it to make money while we’re on vacation. Why don’t most businesses get here? Simple, the owner is doing what I used to do – intending to work hard and make money, and “hoping” it will all work out in a great lifestyle. We get what we intend, not what we hope for, And when I realized I could no longer let my businesses make the rules, I was on the road to freedom.

What are you doing to build a business that makes money while you’re on vacation?

UPDATE: The book is now out and available.

Where I sit – I’m a capitalist who believes that social entrepreneurship (it’s not a great use of the word entrepreneur, but I’ll go with it) is the surest route to making more money. If we focus on the needs of others first, we will, over time, do better than those who put their own interests ahead of others. Greed does work in the short run, but it is never sustainable in the long run. I believe a majority of capitalists would agree.

Where I stand – Every dollar earned by anyone in a legal way does some social good by creating a ripple effect behind it from the spending it also creates throughout the economy. This is a real, tangible social benefit that is at the root of my fellow capitalist’s argument that they don’t need someone to tell them they need to become a social entrepreneur. The term irritates them because it implies the economic impact of their business doesn’t already create massive social good. And it absolutely does.

But the difference between the social effect of traditional capitalism and the social effect of social entrepreneurship is the difference between passive and active.

As a capitalist, I understand very well that I don’t have to do a thing beyond sell something, hire someone, make a profit and begin spending to create a significant wake of passive social good with my business. But how much more powerful could my impact be if I was actively and intentionally using my business to do good beyond the passive revenue effect?

The fact is that a large minority of business owners has always been intentional about both making money and making an impact in the world around them. A good segment of businesses have always been actively involved in non-profits, building businesses in disadvantaged neighborhoods, hiring people others wouldn’t, giving better benefits to their employees and looking for ways to use their businesses to do intentional acts of sustainable kindness.

But these are not the capitalists I know who have problems with the term “social entrepreneurship”. It’s largely those who are passively social via revenue production who have trouble with it.

I think the term has real positive value in recognizing those business owners who go beyond the clear and undeniable passive social benefits of just creating a healthy business. Those companies that are much more intentional and active in creating significance in the world around them should be recognized for going the extra mile. It might be clearer to call all business owners social entrepreneurs and just put the word passive or active in front of each as it fits, but that would introduce even more political correctness to an already overly corrected world.

All businesses are socially beneficial. I believe those that are socially intentional and active beyond the generation of revenue are much more likely to make a bigger impact and also more money. Even if a capitalist doesn’t have altruistic motivations, they should practice social entrepreneurship just so they can make more money. We’ll all be better off.

You either live in a world of abundance or a world of scarcity. Whichever one you choose affects every decision you make.

Live well by doing good.

Every capitalist business owner would make more money if they did.

So how do we shift more of our spend from advertising, direct marketing, and public relations to relationship marketing? The good news is that it just doesn’t cost that much money – it costs time. The bad news is that we think we can buy customers and would much rather spend money than time. Good luck with that.

It actually works if you have enough money to make a very big and sustained splash. But most business owners don’t have the kind of marketing budget that allows them the luxury of spending wads of cash and sitting back to wait for the phones to ring. Like it or not, we have more time than money, but again, the good news is that an investment of your time in building relationships will be much more effective than a quick, short-term spend of money.

The key is moving people from being “advocates” to “raving fans”. There are a lot of past and present customers along with friends and business associates who really like us a lot. But they have lives and we are not at the center of their lives. I describe an advocate as someone who likes me enough to give me a referral when I ask, but I have to ask. A Raving Fan however, is at a whole new level – this is someone who sends me customers without me asking.

The difference is one degree.

At 211 degrees we get hot water to make tea. At 212 degrees we get steam to power a civilization. We have a lot of 211 degree relationships who are really warmed up to us (Advocates), but what do we do move them that one extra degree to turn them into Raving Fans?

Here are some simple things that can turn Advocates into Raving Fans. By the way, the profound things are always the most simple.

1. Serve people – meet them where they are at, not where you want them to be. You want to sell them something, but they need a babysitter or a new supplier. Find them that and forget selling them your wares.
2. Set aside a few minutes a week to ask yourself what else you can do to move them forward? Do you want a client from them? Can you send them one instead? Or just call and say hi and ask them what you can do to push them forward.
3. Relate/recreate with them – when was the last time you actually took time to build a relationship with an Advocate? Go to dinner, have a cup of coffee, invite them to golf, go to a workshop together. People buy from people, and they buy more from people they like. Become likeable.

Discover what your Advocates want and deliver that. If you do, they could become Raving Fans who will become gate openers for your business. What have you done for them besides deliver something they’ve paid for? Answer that question positively and you are on the way to turning your 211-degree relationships into 212 Raving Fans.

Make a list of five to ten people who love you and aren’t helping you grow your business. Then create a three month action plan help them grow theirs and watch what happens.

One degree – does it really matter? It just might take one of your 211-degree relationships and turn it into steam that can power your business for years going forward.

Most of the better definitions still only define or describe ONE PART of the purpose of a business, but not the whole enchilada. Examples of the most common definitions I’ve heard over the years:

The purpose of a business is:

• to make money.
• to fulfill a human need
• to serve the stakeholders
• to provide goods and services to the population.
• to maximize shareholder profit.
• The Purpose of a Business must create sustainability or it’s not inclusive enough. If you focused solely on any of the above, you would go out of business. Peter Drucker has the most famous definition. But the quote from him I see most often is only 1/3rd of the purpose of a business: Drucker – “There is only one valid definition of business purpose: to create a customer.” Follow this slavishly and you will go out of business.
• I’ve also occasionally seen an expanded version of that which is closer and captures 2/3rds of the purpose of a business. I don’t know if this is truly Drucker’s statement or someone has added to it: Drucker – “The purpose of business is to create and keep a customer.” I have also heard this with the words “acquire a customer”, or “retain a customer”. But a focus on these two things will send you out of business, too.
• Here’s mine and what I believe to be the most inclusive purpose of a business:
• The purpose of a business is to acquire and retain customers profitably.
• The reason this is the best definition of a business is that it is inclusive of all the three things that will keep you in business for the long haul. 1) acquire, 2) retain and 3) be profitable. The others all leave at least one of these three out.

Acquire

If you focus only on the Drucker definitiion of creating customers but you don’t work hard to retain them, you create a revolving door. People buy great marketing only once. Acquisition isn’t enough, you must work hard to retain by having a great product/service and the best customer service.

Retain

If you focus only on a great product or service (retaining), but don’t have a great system to acquire, you fit in the category of a lot of businesses who think that because they make a great chair somebody ought to buy it. It’s a high quality way to go out of business.

Be Profitable

But even if you’re great at both acquisition and retention and you don’t set your pricing to be profitable, you’ll be out of business very quickly. And conversely, if you’re simply very profitable at the expense of acquisition or retention, word of mouth will quickly put you out of business.

Focus on all three – acquisitions, retention, and profitability. Check your business against these three and shore up the one or two that is keeping you from creating a great business.

By the way the purpose of OWNING a business is radically different than the purpose of business in general. People get these two things confused and it significantly endangers their ability to grow the business they always dreamed of. Next week will talk about the purpose of OWNING a business.

Most businesses reflect the strength of their owner/founder, who are really good at one, two, or maybe even three of the seven. The successful business makes sure they get the people and systems in place to have all seven humming.

Get a handle on these seven elements, and get off the treadmill. All great business owners do.

The Seven Elements of a Business are:

1. Vision & Leadership (mission, vision, principles)
2. Business Development (sales, marketing, research)
3. Operations & Delivery (get a process that delivers a consistent experience)
4. Financial Management (improve cashflow and profit just by paying attention)
5. Customer Satisfaction (almost no one has a process for this critical Element)
6. Employee Satisfaction (treat them like they are #1 and they will do the same for your clients)
7. Community, Family, Self (how is your business impacting the world around you?)

STAY IN YOUR ELEMENT

The key is to know which Elements you are really good at, and how to get others to bring the others up to speed. Sometimes early on, we have to cover them ourselves, but knowing which ones you’re great at and which ones you want to off load puts you in a better position to get off the treadmill faster and get others doing the things that aren’t your cup of tea.

KEEP IT SIMPLE IS STILL THE RULE.

If you can’t stand in the middle of the room and share your system for each of the Seven Elements in 30-120 seconds, it’s likely you’ll never use it. Systems are not 3″ binders that sit on desks. They are a remarkably simple set of lean, efficient, time-tested set of steps that everyone knows and everyone uses in the every day of doing business. For most businesses, your entire Systems Manual with all Seven Elements shouldn’t be more than a few pages long. If you can’t share it from memory without memorizing it, you won’t use it.

FIGURE OUT WHAT YOU’RE DOING AND GET IT OUT OF YOUR HEAD.

For each of the Seven Elements, ask yourself:

1. What is the process I do now for each Element? (You’ve got one, whether it’s well thought out or ad hoc.) Write it down.
2. What part of that process is working? What isn’t? Keep what is, and take your best guess at what would work to change what isn’t. Don’t spend hours or days thinking about it. Just change it. The only way you’ll know if it works is if you try it. If it doesn’t, change it again until you find the right process. If it’s broken, those quick “experiements” won’t be an worse than what you’re doing and will lead you to the best process.
3. Get others involved. Create ownership by having others take a stab at the processes that will effect their work the most. They’ll likely to know more than you do about it anyway.
4. Keep it to one page or less per Element. Resist the temptation to write an Operations Manual. It will sit on a shelf and you’ll never use it. Some of the processes you write down should be less than half a page; maybe one of the Seven might take a full page, but see if you can’t keep them to less seven steps or less per process. Again, if you can’t stand up and share the whole process quickly, you won’t use it.
5. Prioritize the ones that create the most challenge for you. Get outside help if at all possible. Otherwise you’re going to have to gut it out yourself and get them working in balance with the Elements you love doing. Until you do, you will be owned by your business. After you get all Seven humming, you’ll be on the path to actually owning your business and getting off the treadmill.

Get all Seven Elements of a Business working for you and you’ll be on the path back to the passion that brought you into business in the first place. Get all Seven Elements in place and get off the treadmill. You’ll make more money in less time.

I wanted them to know that it’s the only number that matters in the long run (others might be more important in the short run), so I asked an egg vendor:

“Would you like to get to a point where you could choose what to do with your time and your money?” She lit up.

I said, “Wealth is simply the ability to choose what to do with my time. We need to figure out how to become wealthy, not rich (riches=money).” She agreed and recognized instantly that having more money, if it didn’t create a better lifestyle for her, would not solve anything.

Sound familiar? We struggle with the same issue, the decimal point is just in a different place. The key is Net Profit. If you have Net Profit, now you have the freedom to choose what to do with it – the seed money for Wealth. To drive this home I asked the Kenya business owners to switch out the term “Net Profit” with “Your Freedom Number”, and to report it to each other every month, along with how the were going to reinvest it to create more wealth. They got very excited about the idea and there was a lot of buzz about their “Freedom Numbers”. I also challenged them to have a long term Freedom Number – the accumulated Net Profits over time that would truly create Wealth – the ability to choose what to do with their time.

One of the big “ahas” from being with business owners in Kenya was that the Cycle of Poverty is identical here with seemingly successful business owners – we haven’t really broken out of the mental Cycle of Poverty. The decimal point is in a different place, but we’re mortgaged and leveraged to the hilt and Net Profit is something we use to go to the movies, not reinvest in our business. After all, how could $50 left over at the end of the month have any impact anyway? I might as well just use it to enjoy the moment.

The egg vendor had the same question. She figured she might have 200 shillings ($2.64) of Freedom Money at the end of a month. We did the math. If she reinvested it and bought 20 extra eggs the next month, and kept reinvesting her increasing Net Profit for 18 months, her personal income would go from 4800 shillings a month to 30,000 shillings a month, with 10,000 more shillings to still reinvest in her business! $2.64 is a great Freedom Number if you see it that way.

What is your Freedom Number (Net Profit) this month? What are you doing to create more of it? Are you reinvesting it to build Wealth or using it for short term comfort?

Net Profit is the most important number in your business – it’s your only Freedom Number. Focus on it and you’ll make more money in less time.

In a recent article titled “Are we Becoming Less Entrepreneurial?” Scott Shane cited 30-year trends going back to 1977 that fewer people are starting new businesses over that time. Other research conflicts with that to some degree, but virtually everyone seems to think that it’s harder to start and run a business these days.

As with most things, there is rarely an easy one-line answer. I see at least four factors that someone running a small business has to fight through these days:

1. Long-term cultural shifts in the way we view life and opportunity
2. The constantly increasing costs of running a small business due to government controls and regulations and other factors (such as health care)
3. Pro-active resistance and disincentive by the SBA to start true small businesses.
4. Pro-active support and incentive to mid and large-sized businesses by the congress and SBA that create artificial competition for small business.

The overwhelming uphill struggle is against #1, cultural shifts. Numbers two through four added together don’t come close to the problems number one presents.

Entrepreneurship is not declining because of Walmart. He who makes the rules wins. If you play by Walmart’s rules, you will lose, but millions of small businesses are figuring out they can build businesses around rules that Walmart can’t touch and are doing fabulously.

Nor is health care the reason. It doesn’t help, but it is only one in a pile of factors in the decline Shane cites. People who claim they aren’t going into business for themselves because of health care risks wouldn’t go into business anyway. They are risk adverse and if health care wasn’t an obstacle they would find another one as an excuse. Health care wasn’t any better for someone 75-100 years ago but people started businesses.

Also, the SBA has spent 50 years proudly killing people’s dreams by showing them empirically that their dream doesn’t work as an Excel spreadsheet. It doesn’t take a genius to know this – almost no small business makes financial sense out of the box, which is why they go through 5-7 iterations before they find the pot of gold. That’s what entrepreneurialism is all about, and the SBA’s SCORE advisors – mostly middle managers from large corporations who never started anything – are hell-bent on keeping you from the joy of that journey. They would much rather have you sit in a cubicle than give wings to that once in a lifetime longing you have.

Government regulations and a burdensome tax code are also factors. Regulations are never put in place in response to small business abuses and yet small business has the same regulations and tax code as the biggest businesses. That’s why Goldman Sachs was able to make $2 billion last year and not pay a cent in tax while most small businesses will pay a significant percentage of their revenue in tax.

But all of these are just bumps in the road compared to the cultural shifts that are undermining entrepreneurialism in America. In the last 50 years we have undergone a dramatic shift toward an entitlement society. Only 1% of entrepreneurs come from the upper class while fully 27% come from the lower class. Being soft and avoiding the struggle has not made us better. When we receive things without working hard for them we gain a sense of entitlement that leads to dependency that results in a full-blown sense of victimization when the handout I’ve been used to is no longer there.

None of that helps us start new businesses. Way too often I hear from business owners that conditions around them are keeping them from succeeding. This is a mindset of victimization – it’s not my fault, it’s the world around me.

Circumstances don’t make me who I am. How I respond to them does.

Relearn the joy of the struggle and shed your sense of dependency, entitlement and victimization. It’s a deadening mindset and will keep you from getting where you want to go.

He who makes the rules wins. If you decide you can’t make any of the rules (victim), you lose.

Being a business owner isn’t any harder than it was 30 years ago, it’s just harder to convince people they don’t have to lose.

Planning does not create success or even the best plan. It also doesn’t create action. Most planning just creates paper, spreadsheets, complexity, doubt, paralysis, and dream-dampening. There are two things that create a far better plan than planning itself.

If you believe that meticulous and detailed planning of every possible contingency is the best way to create success you won’t like this post. To make matters worse, I’m probably going to accuse you of living in a dream world.

How many SUCCESSFUL businesses were started from a highly developed business plan? Next to none. And of the very, very few I’ve found that were started from a business plan, when asked how that worked out for them, most laughed but none said that reality had followed their excel spreadsheet plan.

Yet we keep slavishly promoting an antique practice that has almost never done anything for anyone except get someone an “A” in an MBA class on how to build a business plan. Oh, and it will get you into debt, because banks are still requiring business plans so they have a teddy bear to hold while they give you money. None of those work out either, but most banks haven’t figured out there is a much better way to see if someone is going to be successful.

This isn’t a blog on the attributes of success (maybe I’ll do that one next week), but creating a 30-page business plan isn’t one of them. To the contrary, the simpler the initial plan, the better, because it’s going to change anyway.

I advocate a 2-Page Strategic Plan (never do another classic Business Plan unless you have an antique bank asking for one). A simple 2-page Strategic Plan is set up to change, adapt, and be clarified every one to three months – you know, sort of like life.

It shouldn’t take more than a few hours to do it because, again, like life, it’s going to change very quickly. The only part that is likely to not change is the objective – what do we want to see as a result? The rest of it is up for grabs – anything that gets us to that result will be added and anything that isn’t will be removed.

Once you’ve got a simple plan, the two keys to making it into a great plan are:

1. Commitment (to the objective, not a plan)
2. Movement (in a purposeful directions toward the objective, not “activity” based on a plan)

It is NEVER how good your plan is that creates success, but how committed you are to the bad plan you’ve got and how willing you are to get moving on it NOW. As you move with absolute commitment in a clear direction toward the objective – that commitment and that movement will work together to make your so-so plan into a world class one.

Commitment and movement create success, not a tortured 30-page document. And a simple 2-page plan will become brilliant over time if there is enough commitment to the objective and enough movement to inform you what to keep doing and what to keep changing.

Stop thinking, get a clear objective and get moving with abandoned commitment toward that goal. Use the movement to make the plan better all the time. You’ll make more money in less time by committed movement than you will by sitting around trying to figure out what might go wrong.

As I was writing my new book “Making Money is Killing Your Business” and getting feedback on it, a lot of people told me that some of the principles in this book are things they’ve never heard before. I’ve frequently heard, “I’ve never been given permission to think that way.” Allow me to set the record straight. I’ve never had an original thought in my life and I’m pretty sure no one else has either.

Picasso said “Good artists borrow. Great artists steal.” There is nothing new under the sun and when I hear people claiming they have an amazing new way of doing something that no one else has ever thought of, it usually turns out it was all just marketing.

One of the big re-discoveries of old truths for me was that a business is supposed to throw off three things for us, time, money and significance. But for some reason we only expect it to give us one: money. And because we focus on just making money, our business never gives back time or helps us have a significant impact in the world around us. We’re too busy making money to get to the important stuff.

As a result everything is backwards. We build a business and take whatever lifestyle that business happens to throw off for us, which at best usually involves having money, but rarely a lot of time, and almost never significance. This isn’t surprising because “he who makes the rules wins,” and we too often let our business and the business world around us make the rules for us. Making Money was written to help us take hold of our business and re-make the rules in our favor so that our business finally becomes our servant to do our bidding, not the other way around.

On Monday, I’m able to head to London, Belfast, and Nairobi Kenya largely because I’ve been committed to making my business live by my rules. I have to rein it in every day of every week, but simply being committed to do so has made all the difference. Working for free with business owners in Kenya is a great reward for having made the rules in my business. I’m looking forward to a lot more time, money, and significance to come as I force my business to live by my rule: Live well by doing good.

Are you making the rules or reacting to your business? He who makes the rules wins.