TAKE IT TO THE SEVENTH LEVEL!

WHAT LEVEL IS YOUR BUSINESS?

So, what the heck is a seventh level business, you might ask! Well, that’s what we’re here to talk about so let’s dig in! A seventh level business is a business that has successful made it through all seven levels of the Real Value Coaching process. Yes, I named my process because I spent a lot of time observing my own business journey, the business journeys of many others, and the different levels all of them tended to go through on their journey to, well, to the seventh level. Did they all get there? Absolutely not! You’ll find out why in a bit as we make our way through the seven levels. 

A first level business is a business that is just getting off the ground. You’re licensed, you’re trained to some degree of competence or incompetence, you’re hungry for some kind of change, you’re hungry for more than you’ve been experiencing and so you head out on your own to make a difference in the world, create something with your name on it, experience some new level of freedom, and make more money. You don’t intend to stay at a first level business, although many do, but you have to start somewhere so why not at the first level. At the first level of your business, you are setting up the basic structure, the systems (if we want to actually call them that at this point), you’re trying your best to get some clients, maybe, if you’re smart, you’re actually trying to differentiate in some way (although most don’t at this level). You’re not so sure you fully know what needs to be done in all situations because, where you came from, somebody else did some of that stuff for you so you know you’re going to have to figure some things out along the way. However, you’re not deterred at all by this because the excitement of your new venture helps you overcome any fears or anxiety you might have about the not knowing parts. You’re confident you’ll figure it out come hell or high-water. This is a business that is in survival mode and on its way toward stability. We don’t call it a success until, maybe, levels 3 or 4, so until then just know that it’s called survival mode on the way toward stability.

A second level business is a business that has made it through that crazy first or second year without completely imploding. It obviously hasn’t killed you, although many of you get close. You’ve got some clients now, although they’re typically not the best ones you could or should have, but they’re paying the bills and have allowed you that freedom and some of the income you were seeking when you ventured out on your own. You’ve worked through some of those things you weren’t so sure about in the first level business, you’ve made some mistakes and hopefully corrected them, and none of your mistakes or missteps resulted in anything serious to your business. They consisted of the normal course corrections any new entrant to a field is likely to get from their clients and customers. You make a mistake, somebody points it out, you correct it and make note to not make that error again, and you move on better for the experience. As you’ll find when we walk through each of these levels together, many people will stay at levels two, three, four, maybe five forever, often without knowing any better. To them, it’s just business and it’s supposed to be this way because they don’t know any better. A second level business is sustainable, not necessarily profitable, but it’s paying its own bills, giving the owner an income, maybe creating some income for one other person, but it’s still completely reliant on the founder to keep the machine running. The main source of income production is the founder at this point. 

A third level business is what we would say is at the stability level. You’ve got a steady book of business. You’ve learned how to swap out some of your C, D, and E clients, the ones who pay less and demand more, and you’ve replaced some of them with a few more A and B level clients. These are the clients who pay your fee, more or less, don’t make egregious demands, they’re clients you might actually have some kind of relationship with, maybe local, and you’ve started to feel really good about the path you’re on. You’ve reached stability, you’ve got a few more roles and functions filled in the now growing organization, and you can actually take a day or two off without taking a massive hit to your paycheck. You’ve figured a few things out about delegation, you’ve outsourced a few of those low dollar, low effort functions, you’ve started to develop something that looks more like a system, and you can see what you think is success off in the distance. However, a third level business still relies fairly heavily on the founder for revenue production. This means the founder is daily stepping into the technician role to bring in income, even if you’ve got some help with the revenue production roles in some form or fashion. A third level business has basically just figured out how to do something a tad faster, maybe a tad better (whatever that means) than somebody else doing the same thing in the same market. There’s still very little differentiation between you and your next closest competitor in the eyes of the clients. Your products and services are still considered commodities to some degree, although in a third level business you’re starting to figure out that there’s more out there for you, and also that you might want to start thinking about how to differentiate or die. Levels two and three make up the vast majority of people and businesses who come to us for coaching. It’s at these levels that the founder is still busting their tail to bring in revenue, they rarely take vacations, at least not extended ones, and they may actually be starting to get a bit burned out at this point. In a third level business, one of the biggest issues I see is a big lack of leadership development.  Going from a level 3 business to levels 4 and beyond typically requires some leadership skills, as well as leadership development skills. This means that the level 3 business owner will need to be working on their own leadership development skills, but also starting to develop some leaders within his or her organization. 

Third and fourth level businesses typically have some of the additional roles and functions filled that the founder used to do back in the first and second level business. Once they learn they can offload some of those low dollar things, they find a new level of efficiency and freedom. What they haven’t learned yet is how to build up other leaders in their business. They typically know they can’t get to the next level without people, so they start seeking out more people. Maybe they take on a trainee or two, maybe they bring in an office manager of sorts, maybe some kind of scheduling efficiencies, and maybe even another higher-level appraiser functions being handled by some additional talent. But if you aren’t making leadership an area of study, you will most certainly struggle to grow and scale the business in any significant way. It will move in fits and starts. What I mean by that is that it will look and feel like you’re growing, but people will be coming and going. This is when appraisers start complaining that training somebody is a waste of time because they pour their time, knowledge, wisdom, and energy into somebody only to have them leave after a year or two to start their own company. Friends, hear me on this point: very few people in this world want to venture off on their own and start a business. The vast majority of people want to be part of something bigger than themselves. The vast majority of people want to be led somewhere by somebody with a vision. The vast majority of people do not want to be strapped with all the decisions that need to be made on a daily basis when running a business. Are there some out there who have the sole intent of leaving when they can? Of course! But it’s the leader’s job to vet people on the front side of the business, we call this the ‘before’ unit of your business. Every business has a before unit, a during unit, and an after unit, and vetting people before you pour into them is part of having a well thought out before unit. 

But that’s not what most level 3 businesses are focused on, or good at. They’re flying by the seat of their pants, for the most part, and just trying to fill roles to get work done. This is why leadership and vision are so important when scaling your business from a level two or three to something more. One of the biggest differentiators between a level 3 business and the upper levels is the level of leadership and vision from the upper levels of the company. And everybody listening probably knows how difficult it can be to exhibit strong leadership and vision when you’re also the busiest technician in the company. To go to anything higher than a level 3 business, and it doesn’t matter what kind of business it is, there must be some kind of leadership focus at some level, along with some kind of vision. I’ll talk a little more about what I mean with leadership when we talk about some of the other levels. 

By the way, in case you’re wondering, people can move through the levels really fast if they have a mind and a plan to, but most of these levels typically take a year or two each to move through, so a third level business could be at the five- or six-year mark at this point. Some might be at the 10-year mark at this level. Again, none of it is set in stone and some business stay at levels two and three for their whole lives. In the appraisal business, it’s not uncommon to see businesses still at level one or two at the ten-year mark and with no plans to change or grow in any way. I’m not judging any of these levels negatively in any way, I’m simply pointing them out to you to give you some things to think about with your own business. Much like your GPS in your car or your smart phone require some kind of location services transmitter and receiver built into it to communicate with the satellites, if there’s no way for the phone or vehicle to communicate with the satellites, there’s no way to triangulate your precise location and, thus, no way to tell you what’s needed to get to the next location. By identifying what stage or level your business is in at the moment, we can start to identify the steps necessary, if needed and wanted, to create a map to the next stage. So, I encourage every business owner to ‘triangulate’ in on their business every six months or so to get an idea of where they are relative to where they want to go. Once you know where you’d like to take your business, you can start to research what is needed to go to those other levels. And again, I can’t stress this enough, every level of growth requires something new added to your bank of knowledge. You don’t necessarily need experience to get to the next level, but you do need a willingness to open your mind and seek out what might be needed to get there. What is needed to grow through the different levels is typically something you don’t have right now. It’s in your internal capacity to learn what’s needed and to start applying it in your business, for sure, but it will probably be a tad uncomfortable because you have to first accept that you don’t know something, or maybe that you’re not good at something yet, which can be really difficult for people to do. 

I’ve talked about this natural phenomenon many times on this show how, as human beings, we are constantly in a state of seeking comfort, familiarity, and putting ourselves in positions where we can utilize our greatest strengths. You’re really good at appraising real estate so what do you find yourself engaged in for most hours of the day? You find yourself in the act of appraising homes most of the day, and why wouldn’t you? The problem is that we get into ruts where that’s all we do for years and years and we tend to avoid seeking out the areas we aren’t so good in and adding to our wealth inventory list, our list of vital skills that can lead to more business, better business, more time, more freedom, increased income, more peace, and so on. We plug away at something over a 20- or 30-year period of time thinking we’re getting really good at that thing, which you may very well be, but you aren’t necessarily adding any new skills or insights that would allow you to take your life and business to the next levels. Typically, from level 3 on up, many of those skills fall into the category of what many call ‘soft skills’. This is the management stuff, leadership, vision, communication, and a few others. The point I’m trying to make is that you can build a nice little business with the skills you currently have. But if you want to take things to another level, another level of skill is required. Yes, adding greater understanding and knowledge about different aspects of appraising real estate can take your business and income to the next level. Yes, adding some more 3 and 4 letter designations after your name as an agent can potentially get you some more business and make you a better agent. But if you want to start building a team in real estate, or start adding people in your appraisal business, or managing a team of processors and client service roles as a lender, you’re going to have to add some new skills to your repertoire, it’s that simple. The bottom line my friends, to go from a level three business up to any of the other levels, you must become a developer of people. Don’t want to develop others? No problem! Stay at the level you’re currently at or bring on somebody who is into people development. 

A level four business is marked by having some kind of team. You’ve got 3 to 5 people in the organization, they’re making the business more efficient, more client service focused, they’re making you more productive, maybe even to the point where you’re wondering what to do with the extra time, they’ve helped you free up. If you’re like most though, you fill up that freed up time with more work and, again, why wouldn’t you? But, at a level four business, your team views you as more than just a technician. Your team views you as a source of wisdom and vision for them and the company. You’re starting to realize that to really grow and scale, you now have to be better at helping your people be really good at what they do, make sure the right butts are in the right seats, and start thinking about how you can help your people lead better lives as a result of working with you. Its typically at this point in your business that you start to see why I’m so adamant about referring to your people as your ‘talent’, instead of just your workers or employees. When you see them as talent, you seek out and hire talent. You see potential in people based on their attitudes and personality, not just on their current skill set. You hire for attitude and train for aptitude. You may not be an awesome leader yet, but you’re beginning to see why leadership is important, just how valuable having people is to you and your growth, and how developing those people is a profitable and fulfilling skill to develop. 

Taking your business to a level 5 business is exemplified by the owner not having to work in the business on a daily basis. This is where I tend to lose some folks. ‘Whaaaaat!? Not work in the business? Are you kidding me? What exactly would I be doing if I wasn’t working in the business, Blaine?!’, and I get it. After all, you started your business to work in it. What would be the point of running a business and not working in it? Well, to clarify, with a fifth level business the owner moves away from doing the day-to-day technical work that the business’ revenue is generated from. Essentially, up until this point, the owner has been trading his or her time for dollars. That’s not to say that the owner wasn’t doing really well trading her time for dollars, but it means that when time isn’t being traded, the dollars either stop, or slow greatly. The owner takes two weeks off, the income takes two weeks off, or is at least reduced substantially. Maybe they have some other revenue producers in the company, but they don’t produce anywhere near as much as the owner and the owner is needed, more or less, on a daily basis to give orders and direction or things start to go sideways in a fourth level business. In the fifth level business, the owner is required for leadership and vision, for inspiration and coaching, to some degree, and to help clear some of the bigger obstacles that present themselves from time to time, but the fifth level business owner makes his or her money from their ideas and guidance and not from their technical prowess. I can tell you from working with lots of businesses over the years that many strive to a fifth level business, or at least say they do. However, pulling oneself ‘out of the field’, so to speak, can be quite difficult for many because so much of their identity is tied up in the doing of the work. You know yourself as a plumber and that’s the business you founded. You built the business being a plumber. The name on the sign is Jim’s Plumbing Service. Your tag line is, ‘it’s a shitty job, but somebody’s got to do it!’ Everyone knows you as Jim the plumber. All of the sudden, you’ve got 4 or 5 apprentice plumbers working for you and they’re on their way to becoming Journeymen and Master plumbers. You’re no longer needed in the field to dig ditches and fix plumbing problems and you start to have an identity crisis. “Who am I?”, you say. This is the crisis that sometimes happens when climbing the ladder from your fourth level business up to the fifth level. 

The successful fifth level business is one where the owner has safely made the transition from doer to strategic thinking. When you’re always the doer, it can be very difficult to also be a strategic thinker. When you’re always the doer, it can be very difficult to be a big thinker. Big thinking pulls you out of the day to day for brief periods of time that you eventually have to come back to. For some, the coming back to the day to day from the big thinking is too painful so many just put their nose back the grindstone and choose to stay there because it’s easier. The known is easier than the unknown and the unfamiliar. Just know that going from the fourth to the fifth level with your business can be scary. It can be a bit destabilizing personally because of the identity component we just talked about. It can also be a bit of a slog because it most certainly entails lots of systems building. Think of the systems being built as the elevators that take your business and life to new levels. One of the main purposes of any business is to give the owner what he or she wants. I know, many of you are idealists and that’s really sweet. You’ll say something like, ‘the purpose of my business is to make the world a better place’, or ‘to touch the hearts and minds of people in my community’, or ‘to give my people a wonderful place to work and to make a decent living’. Sorry gang, that’s not the purpose of your business. Nobody starts a business just to give people a job. Nobody starts a business to make the world a better place. And nobody starts a business to touch the hearts and minds of the people in their community. People start businesses because of something the owner wants. They want more money, more time, more freedom, a feeling, an experience, maybe more control over their life. How they go about getting those things is what the business ends up being about. It’s the owner’s desire to feel something or experience something or have more control over something that leads to them developing something of a mission and a vision, which may very well include making the world a better place or touching the hearts and minds of the people in their community. But those missions and the vision emanates from the initial desire of the owner to get something, have something, or be something more through the business. The primary goal of the busines is to give the owner what he or she wants, fight me all you want on this point. 

So, if one of the primary goals of any business is to give the owner what he or she wants, then think back to what drove you to start that business. You didn’t start selling real estate because the world was so in need of yet another Realtor. You didn’t start an appraisal business because you felt such a strong calling to right all the valuation world’s wrongs. You started those businesses because you wanted something from them. Figure out what that initial calling was, what it was you wanted from your business and then ask yourself if you’re getting it from your business. If not, ask yourself why not, and try to get back to that place that led you to starting the business in the first place. From there, I implore you to open your mind to the fact that there are a variety of ways that could get you there. We all chose a path thinking that was the best path to getting what we wanted from the business. Maybe it was, maybe it wasn’t, but there are almost always a multitude of paths that will lead us to a desired destination. Going from a fourth to a fifth level business often entails recognizing that having you slog away at the technical work of the business is only one way to get what you want. And it may not be the best way to go to the next level. We can honor it for where it’s taken you up to now, but it might be time to step back and recognize that going to the fifth level is what may actually help the business survive and thrive into the future to continue exemplifying the mission of the business. 

So, if that’s a fifth level business, what the heck could a sixth and seventh level business be, Blaine? Well, one of the ways we grow our businesses from the fourth to the fifth level is by building up other managers and leaders in the business. The fifth level business typically has 2 to 4 good managers and leaders that are adding to the vision, the mission, and helping the owner do more than he or she could do on their own. The sixth level business is marked by having a team of strategic thinkers and leaders. You’re confident at this point that they could do your job as good, maybe even better than you. You’re very comfortable financially, but with your leadership team you’ve got more time and energy to think bigger. They’ve helped free up the vital CPU power of your brain and now you can see expansion. Maybe its local expansion, regional expansion, global expansion, maybe its expansion of products and services. Whatever it is, you’ve now got a team of superstars that are lifting you, and everyone else up, to higher highs. As you can imagine, when you start to get to the sixth and seventh levels the air thins way out! There is far less competition at those levels, not necessarily because those at the lower levels aren’t capable, but because many just have no interest of moving past a particular level, and that’s ok. 

What’s a seventh level business? My friends, a seventh level business is one that is so well refined and well run that it might make sense to franchise your business model, maybe license the business, sell the business for a nice chunk of money, or bring in some capital from a variety of sources to greatly expand the vision and the business. I spend only a little time talking about this level because, although it’s not uncommon, it’s a small percentage of the overall businesses out there, especially for appraisers, agents, and lenders. It’s one of the things we coach on all the time, even if my coaching students don’t recognize it. I use the words ‘salable and scalable’ all the time. When we’re talking about systems and processes and why they’re so important for a smooth-running business, it’s because the owner and the employees are buying the business every single day, they’re working in it. I hear owners say all the time that they have no interest in selling their business without recognizing that they are, in fact, trading their life and time for it every day. They are, in essence, buying the business. The question should always be, is your business worth what you’re paying for it? If it’s not, it’s time to do a market valuation and figure out what somebody else would pay for your business based on your level of business, your contribution, the client base, the likelihood of it continuing long into the future, the problems it solves in the market, and so on. I’m not necessarily talking about calling up a business consultant and having them value your business, although that’s always a possibility. I’m talking about an attitude and a deep look from you at your business. Is it giving you what you hoped it would when you set off on that path? What needs to be done, not to get you to a seventh level business, but just one level up from where you are now. You always have the option of going back down a level if you don’t like the next level, or don’t feel qualified for whatever reason. But remember that you’re buying your business every day with your life so it’s worthwhile to step back every now and then and ask the question, is it worth what I’m paying?

Thank you, my friends, for investing your most valuable currency with me again this week. Take a look at your business to get a sense of what level it’s in at the moment, and then start to ask the questions, ‘what would it take to go to the next level?’ Just ask the question. Asking questions costs nothing but may reap huge rewards. I would also like to take a quick moment to say thank you to the organizers of the Valuation expo that we just came back from in Las Vegas. We had an awesome time talking about building your business using social media and building a content platform. After that, a small group of about 25 superstars and I sat in a room for about 4 hours and dug deep on a bunch of ideas and business concepts. Jolene and I made some new friends, solidified some existing friendships, planted lots of seeds, and just had some amazing fellowship with some great thinkers and businesspeople. Thanks to all of you who took time out of your busy lives and businesses to come out, as always, I sincerely hope I was able to add some value for you. Until next week my friends, I’m out…