Episode 4: How to Design a Better Company Infrastructure (Transcript)
[00:00:00]Rem Oculee: Welcome to the Exit Mindset podcast. I’m Rem Oculee. I spent years researching and studying exit strategies to improve businesses, and I’m here to help you increase profits, increase your company valuation, and get you more work-life balance. Have you ever wondered why a company is such a mess? Have you ever wondered why no matter how good it looks, there’s always something missing?
[00:00:30] Have you ever noticed that something always seems to go wrong? All the time? If this part of the operation is working, the other part isn’t working. If this part is working, then something is going wrong with the other side of it. On and on and on, and you spend your day fixing things.
[00:00:46] That’s called an infrastructure problem. Today we’re going to be talking about infrastructure and what causes some of those issues that you have. The main focus is to take the perspective of a buyer of your company. So we’re talking about the Exit Mindset here. The Exit Mindset dictates that you look at your company as if a buyer is going to come in and buy it from you, and they’re going to put a price on it.
[00:01:09] So we all know they look at three things. One of them is your product. Then they look at your conversation. Lastly, they’ll look at your infrastructure. Infrastructure is the piece that makes things happen, the part that produces. It’s where it all comes together. So let’s talk about that a little bit.
[00:01:30] Why is it that you have an infrastructure problem? I will tell you about 80% of it is the lack of planning, and 20% of it is the resources. Of course, resources matter. You can argue that 100% of it is a lack of planning, and 100% of it is a lack of resources because, ultimately, you can’t do anything without resources.
[00:01:48] Either way, it’s either zero or one hundred. With planning, it’s either zero planning or one hundred. Either you planned, or you didn’t. No matter how good the plan is, no matter how much resources you’re spending, at the end of the day, we’re talking here about merging these things together to figure out an optimal level that could be workable.
[00:02:05] Now, your company could be very, very good with this product. But if the infrastructure isn’t conducive to sending the product out to the marketplace from the beginning to the end, you could have a drastically lower valuation on your company. The buyer would look at it and go, “Look, they’ve got a good product, they’ve got a good conversation with the consumer, but they can’t make it happen efficiently. Or it doesn’t work out effectively.”
[00:02:30] When that happens, they’re going to do one of two things. Either they’re going to look at your company and say, “You know what? I don’t like it. I want to get the hell out of Dodge.
[00:02:38] This is too much of a mess for me. I can’t fix this mess.” Or the other thing they might say is: “You know what? I could fix some of these things that they’re overlooking. It is not that complicated. Maybe I could deploy some resources, or I could bring some of my expertise to bear. Next thing you know, I could have this whole thing running correctly or dialed out like a machine.
[00:02:59] So let me give them maybe half of what they’re asking for, or half of the company’s value because I don’t think they even know where to begin.” The last thing you want is somebody coming in and doing this to you. Now you might argue that would be unethical. But I would say to you, maybe it is ethical.
[00:03:16] Maybe it’s not so bad. Maybe it’s not the buyer of your company’s obligation to go and try to fix your company. It’s not his obligation to come and say to you, “Wow, you’ve got all these problems. I’m going to fix them for you, and then I’m going to give you the full price.”
[00:03:38] If you sell anything that does not have a complete package, you should expect the other party to value it based on how it is at that particular time you’re giving it to them. Based on what you have there. In the case of infrastructure, it is a critical component of your entire Exit Mindset, and it’s also part of your sanity. So keep that in mind, because a lot of people go insane. I’ve been there in the trenches with you. I’ve seen what it’s like when you have poor infrastructure, and it starts to become a problem.
[00:03:58] At some point, I started realizing that the problem is fixable and that the problem is not so much that it’s terrible people or units, or this or that. It’s more that I haven’t organized it effectively. Over the years, I’ve learned how to put that together, and I’m here to show you that you can do that.
[00:04:18] You can look at it more efficiently and produce a higher valuation model, which is what you’re looking at in the end. Let’s look at how the model is useful for you so that you could have more profits because inadequate infrastructure causes lower profits. The second thing that benefits is time.
[00:04:40] Nothing will help you save your time and create a better life for you more than infrastructure – a good one. Because with a good foundation, you’re going to be able to have operations move fluidly, which is efficient, and that produces the results you’re looking for. Imagine all the great things you get from it besides that, and besides your time and the profits. You’re going to have employees that are happy because good infrastructure produces a better work environment.
[00:05:13] When you look at a company, let’s not forget that the better work environment runs the show. Because the worse your situation is, the less productive you’re going to get, and the fewer results you’re going to get from your enterprise. If your product is king, and everybody knows the product is king, then your infrastructure is the kingdom, which means that it’s the garden.
[00:05:35] It’s the place where everything happens. Infrastructure doesn’t mean just the mechanics of what you have. It includes everything from the moment you produce the product to the moment that you support it, and afterward. Anything that leads to the creation of the product and the support of that product for the longterm is infrastructure.
[00:05:56] This is how we distinguish it from anything else in your operation. You look at the parts that produce the product. It doesn’t matter if your product is a service or an actual physical product, because at the end of the day, what you do to create the outcome for the consumer will be managed and fulfilled by the process that you created through your infrastructure.
[00:06:20] Let’s talk about solutions. Let’s talk about how you could start looking at your infrastructure and how you could start building and improving it, getting it to where you want. The first thing you have to do is look at your problems. If you have an issue, usually it is caused by infrastructure.
[00:06:41] Even if you look at your marketing conversation systems, they’re part of your infrastructure. Whatever you built falls under that category. The critical thing to do here is to try and see the forest through the trees. The problem is many times you’re on the ground, and you’re going from one place to the next.
[00:06:58] From one part of your infrastructure to the next. You’re looking at problems, and you’re very tactical. You need to be more strategic at that point. So the first thing you’re going to do is go ahead and see if you could take a high-level view of what you have in there. The first thing I would do is break down your operation into multiple units. You might have a company with six or seven people, and maybe they do things that are all over the place.
[00:07:24] Maybe one person does one thing here, one thing there, and the other person does two or three. Sometimes that happens in smaller companies. If you’re one of those companies, the first thing you have to do is not look at them as units, but look at the jobs that need doing. So you might break down your process into operations, sales, advertising, customer support, you name it. Whatever fits your model. Take each one of them and forget how many people are in that unit.
[00:07:54] It could be one person. It doesn’t matter. Or it could be ten people or more in different cases. Or it could be, in the case of the small company with six or seven employees, that two people are doing four jobs in the same unit. That’s the operation. If that’s the case, that’s still broken down by type of work and not the person.
[00:08:16] Often, the mistake I find people make is that they break it down by people. They take one person and say, “Okay, let’s do what you’re doing. Let’s see what kind of work you do every day.” The person sits down and spends three hours listing everything that they do, and by the time you’re done, you have a list as long as your arm that you don’t know what to do with.
[00:08:35] Then you get the next person, same thing, and the next person, the same thing. That’s not an efficient way to figure out how your infrastructure could work better. The better way to do it is to look at the overall operation and be objective-oriented. Look at, “What am I trying to do? Or what am I trying to accomplish with this particular part of the operation?”
[00:08:49] For example, let’s say it’s a client services unit. Instead of taking every person and trying to figure out how they’re helping the client, try to figure out what they are trying to accomplish. What is the outcome? Take that outcome and start deconstructing it. Go backward to find out what elements are needed for the unit to achieve success.
[00:09:15] When you do that, you’re going to be able to come up with better answers than if you went out there and just did every tactical thing that you could find under the sun. Now don’t get me wrong. The tactical issues do matter. Sometimes big problems are fixed by small solutions, not necessarily the big complex solutions. But the big thing you need to understand is that when you dissect the problem, dissect it from the higher level, and figure out where the big issue is.
[00:09:41] Then see if there is a part of the infrastructure for that particular unit that is not necessarily working perfectly. If you fix that, other things might settle. I’ll give you an analogy for that one. You could have a great car engine, but sometimes one bolt is not attached correctly, or attached the wrong way, or missing. That could wreak havoc on your journey down the road.
[00:10:01] So what you want to do is assess if any small parts need to be adjusted. Also, elicit your team members’ help with what you need. Go to them and ask, “What are the problems that you have that need to be fixed?” A lot of times, nobody knows the process more than the team themselves. They’ll tell you what the problems are.
[00:10:20] The key to this is to keep an open mind. Be an active listener and listen to what they have to say. Then try to take those solutions that they propose and see if they can be implemented. Sometimes the solutions they bring out aren’t the most effective because they wouldn’t fit your budget.
[00:10:36] They would have to fit with some other part of the operation. But you need to listen, and that’s the critical component to the whole thing. So that’s how we are going to approach the problem of solving and understanding the part of your operation called infrastructure. Now, remember, we’re not looking here for massive, specific, drastic changes.
[00:10:59] We’re just looking to see how we can improve it. Now what’s going to happen here as you improve those parts, is you’re going to find other parts pop up and need fixing. So this process never stops because you have to assume that you’re growing. That’s the assumption here. I’m assuming every one of you is growing.
[00:11:17] If you are growing, you’re going to have to adjust. You have to create more systems, more significant systems, more complicated. How are you going to do that if you can’t fix it when it’s small? You have to be able to fix it when it’s small, and you have to be able to fix the one that is big. The methodology for doing that is pretty much what I’m proposing for you here to begin.
[00:11:37] Now, I’m not saying that it’s all simple. You’ve still got to get your tools and start working on the problem. But at the end of the day, if you cannot take it from the highest level possible and drill down, do opposite of what comes naturally to you which is be tactical and take a bottom-up approach, it is not going to work out very well.
[00:11:54] I’ve seen over and over again, where other company executives, and other companies’ CEOs – I’ve seen personally, firsthand, where the only way it works is if you do that – a high-level view that’s broken down into a drill-down approach to every problem you’ve got.
[00:12:10] I cannot tell you how many companies I’ve seen selling for a lower price, because the infrastructure is weak, or because they can’t produce in the right, or the most effective way. In many cases, you’re going to find that a buyer is looking at that as an advantage.
[00:12:31] Sometimes, they’re in search of companies that have a good product and bad infrastructure. What they’ll do, is that once they’ve identified it, they can have a conversation with the seller, or sometimes the seller themselves are looking for a way out. It is a way to relieve them from the pain and agony of having a model that is not producing enough in terms of profits.
[00:12:52] So let’s talk about the plans. How do you set up plans for better infrastructure? You have to understand that no matter how much you plan ahead of time, it rarely comes out exactly the right way or the same way. There’s a saying, “No plans withstand the first contact.” Meaning that no matter how well you plan it, something’s going to go wrong.
[00:13:13] When you plan operations, and when you’re planning your infrastructure, you’re going to try your best to make things work perfectly. Sometimes you’re going to get the idea that everything will go well if you just execute that exact plan. But you need to understand that lots of times it doesn’t work that way. What’s going to happen here is that you’ll create a plan and it’s going to maybe not work, or work just halfway. Or work well, but for a little bit, and then it just busts on you.
[00:13:39] The thing you need to understand is what you have to do is take action. Create a plan the best you can. Try to figure out what the problems are. Try to anticipate what could happen and start implementing it. Now, what happens to you once you implement this power to that – there’s a magical power. You’re going to get the ability to assess what has happened and use that as a learning experience for the next round.
[00:14:06] So you have to think of your plan as multiple rounds. The first round is just an attempt, the second round is maybe another attempt, and the third round is just maybe a little bit better. Sometimes it takes ten rounds, fifteen rounds just to get to the right configuration. It does require patience and does require work.
[00:14:24] But if you’re trying to build a company that has great infrastructure, that has an ability to make a profit and to give you time, you’ve got to invest in what it takes to make it work the right way. So let’s talk about a Mindset Moment here. You need to remember that a system is as strong as its weakest link.
[00:14:45] Anytime you have a situation, where you have multiple variables, you’re going to have some that are stronger than others. If you want to have success in what you do, don’t try and just examine the strongest part of the offering that you have, or the business that you have, or the situation that you’re looking at.
[00:15:05] What you need to do is look at its weakest one, because the weakest one needs to be fixed. You cannot run faster than your weakest link. Example: If you take a car, it won’t run anymore or any quicker than let’s say, for example, the radiator can make it run. Because if you go above that, the car can run faster, but the radiator cannot run more quickly than that so that it will blow up.
[00:15:29] You’re going to stop. The car will overheat. It’s the same thing with your business, or in your life, or in everything that you do. You’ve got to look at the weak component, take that weak component, address it massively within your infrastructure and company. That is what you’ve got to look at. So go examine what the weakest point is that could break everything down. Don’t try and take weak points that don’t make a difference.
[00:15:53] You need to look at weak points that do make a difference, then slowly start to go down to the one that has the least impact. Once you addressed your weakest points, your entire system should be going forward in a massive way. When I mean massive, I mean as massive as the rest of it can do. However, if you keep it the other way, you’re just going to be subject to whatever that part can do for you. Action is everything. If you don’t use it, you’ll lose it. I’m Rem Oculee. I’ll see you in the next episode.
[00:16:25] Amber Giannone: You’ve just listened to the Exit Mindset Podcast with Rem Oculee. If you haven’t yet subscribed or followed, please do so in your podcast listening app. Or better yet, visit exit mindset.com to join the conversation, access the show notes, and discover our bonus content. Lastly, we want to help as many business owners as possible. If you know anyone who could benefit from the information given in this podcast, please feel free to share it with them. Until next time.