Dan Martell - How to Build a Business That Runs Itself

00:00:00.000 I went from barely making six figures a year

00:00:02.360 while grinding a hundred hour week struggling to get ahead

00:00:04.840 to today, making over a hundred million dollars a year,

00:00:07.680 working half the hours

00:00:08.960 and owning multiple businesses that run without me.

00:00:11.640 SOPs and spreadsheets alone, they won't save you

00:00:14.160 because your business only runs when you're there.

00:00:16.640 So today, I'm gonna show you how to flip that

00:00:19.320 and build a business that runs without you,

00:00:21.340 even if you're starting from scratch.

00:00:22.780 That way you finally get the freedom

00:00:24.800 you started a business for in the first place.

00:00:27.140 First things first,

00:00:28.400 we need to define what I like to call your North Star metric.

00:00:32.380 You need to be able to tell me

00:00:33.840 what is the math equation that defines your business.

00:00:37.280 If you know this, then everybody on your team

00:00:40.760 can align to it, you can optimize for it.

00:00:43.960 The North Star metric is that one number

00:00:46.520 that if it gets better, it tells you the business got better.

00:00:50.160 If you don't have one,

00:00:51.280 it's kind of like building a house without a blueprint.

00:00:53.660 Everyone's running around, hammering and sawing

00:00:56.220 and putting up walls, and all of a sudden

00:00:58.240 you step back and you look and it's just a pile of lumber. Like you haven't built a home. Every

00:01:03.520 business I start starts with a Northstar metric. For example, restaurants, revenue per seat. My

00:01:09.640 media company, revenue per followers. Martell Ventures, enterprise value created for dollars

00:01:14.700 spent. The way I came up with that is I'm putting my money into a business and I'm creating enterprise

00:01:20.960 value because you don't get wealthy with revenue. You get wealthy with equity. And that's the way

00:01:25.960 we measure enterprise value. So of course the dollars I spend to generate equity value is the

00:01:32.080 ratio that if everybody can get aligned with, then we make it better because enterprise value is

00:01:36.360 creating predictability, durability, and revenue that has nothing to do with cashflow. Think about

00:01:41.880 it for you. Is it revenue? Is it lifetime value? Is it retention? Is it customers? Is it five-star

00:01:48.920 reviews? Once everyone's clear and building in that same direction, your systems actually start

00:01:54.720 driving real outcomes, not just keeping people busy. But let's be real, just knowing the metric

00:01:59.780 doesn't move the needle. There's still some work that needs to get done. So the next step to build

00:02:04.520 a business that runs without you, clone yourself with the 108010 rule. You don't scale by doing

00:02:10.440 more. You scale by strategically inserting yourself at the right moments and in many ways doing way

00:02:16.140 less. It's kind of like Steve Jobs. If you actually like go back and hear how he worked with his teams,

00:02:21.440 he didn't do all the steps.

00:02:23.060 He could have never possibly done that.

00:02:24.740 When he built the iPhone, for example,

00:02:26.100 he talked to Johnny about the material science

00:02:28.100 and the different equipment and the design and the thoughts.

00:02:30.320 Then Johnny went off and he built prototypes

00:02:32.160 and then Steve came in and they talked about it

00:02:33.800 and they refined it.

00:02:34.560 So this is how you do it for yourself.

00:02:36.020 And that's why it's called the 108010, the first 10%. 0.69

00:02:38.420 That's where you set the vision.

00:02:39.780 You talk about what the definition of done looks like.

00:02:42.800 You talk about the essence of it,

00:02:44.700 the way the customer's gonna feel,

00:02:46.660 where you've seen it done well.

00:02:48.180 If you can draw a picture, draw the picture.

00:02:50.200 If there's a wireframe, draw the wireframe.

00:02:52.280 But the clearer you can communicate the vision,

00:02:54.740 the better this is gonna work.

00:02:55.900 The second step is 80%.

00:02:57.460 It's let your team run, let your team execute,

00:03:00.620 let your team do the work based on the vision

00:03:03.500 that you both agreed and saw together.

00:03:05.700 And the final 10%, this is where your taste comes in.

00:03:08.560 This is where the refinement, it's review and polish.

00:03:10.960 That's for Steve Jobs was getting on stage

00:03:13.220 and doing the demo.

00:03:14.600 That's his favorite part was,

00:03:16.200 okay, based on what you built,

00:03:17.620 I'm gonna demo it this way, this way, and this way.

00:03:19.840 So make sure we refine it so that it really pops

00:03:22.420 when I talk about it on stage.

00:03:24.080 The magic isn't doing it all, it's knowing when to show up.

00:03:27.580 Here's my favorite quote on the topic.

00:03:29.620 80% done by somebody else is 100% fucking awesome. 0.66

00:03:32.800 And guess what? 0.78

00:03:33.380 If it's not, go be better.

00:03:35.560 The more you stay in the vision and the review part,

00:03:38.760 the more your team can scale without you.

00:03:41.360 Next, we need to talk about

00:03:43.060 what I like to call the camcorder method.

00:03:44.760 Let's be honest, we all hate SOPs.

00:03:47.280 making them updating them reading them i mean it's so crazy like people have these fully documented

00:03:53.280 systems that nobody opens nobody looks at and they honestly they become stale in like six months

00:03:58.300 after you create them in the first place however they're a hundred percent necessary i like to do

00:04:03.980 it completely different than the way most people do the best systems aren't typed they're recorded

00:04:09.040 a few years ago i was talking to my friend and he's like yeah i created an sop but it didn't

00:04:12.880 really work and i was like well how'd you do it so he said i took my whole team we went to tahoe

00:04:16.940 for an offsite. We spent three days building the company way, this document, this handbook,

00:04:22.980 and everybody spent all this time documenting every aspect of the business. And then they got

00:04:26.300 back. Nobody ever used it. And six months later, it became stale. It wasn't even updated. It wasn't

00:04:30.760 useful. That is not the way to do it. Instead, use the camcorder method to document how it's done

00:04:36.340 so that you've got the training. Then the person creates the checklist. Then it's their responsibility

00:04:40.600 to update it and maintain it, not for the people at the top to do it. Plus, it's done well. You're

00:04:45.320 doing the work saving you all that time. So instead of a regular SOP, I use what I call

00:04:50.160 the camcorder method. And this is how it works. First, press record. Meaning like on this really

00:04:56.260 expensive, hard to find software called Zoom, you can get on a meeting all by yourself, share your

00:05:01.240 screen, record it to the cloud, hit record, and all of a sudden do the thing you're doing. The

00:05:06.360 only difference is you talk out loud and explain why you're doing what you're doing. If it's

00:05:10.600 processing your inbox, if it's creating a pitch deck, if it's having a sales call, whatever you

00:05:14.840 do, just record it. Once you've got the recording, you've got a few of those, then you can give it

00:05:19.760 to somebody else. Let your team turn it into a repeatable system. Have them document and create

00:05:25.000 the checklist. So with that, now your marketing, your ops, your fulfillment, your hiring, they all

00:05:30.420 get done without you becoming the help desk. So once you do that, we can now move on to the next

00:05:35.560 step to make sure your business runs without you. Running the business by the numbers. Here's why.

00:05:41.000 Numbers don't lie.

00:05:42.220 People do.

00:05:43.080 I've seen great people try to tell me what they're feeling.

00:05:46.420 And I believe, and I think, and I've seen.

00:05:49.720 Show me the data.

00:05:50.820 Like, I understand you're bullish.

00:05:52.940 You talk to this person.

00:05:54.260 They gave you some optimism about what's going to work and how it's going to work.

00:05:57.300 It reminds me of this guy I knew.

00:05:58.500 He had this agency.

00:05:59.580 And he's like, yeah, I don't really like looking at my numbers.

00:06:02.280 I'd rather just, like, do it the way I feel.

00:06:04.820 I mean, that's why I have a business in the first place.

00:06:06.660 And then his revenues went down.

00:06:08.320 And he blames marketing.

00:06:09.300 customer's upset and he fires someone he has no metrics to understand what's actually happening

00:06:15.100 where it's broken and he thinks that just because of his desire to run the business based on his

00:06:20.680 feelings to have the freedom so he doesn't feel like he's like built this prison of structure

00:06:25.420 it's like dude you're firing people and the customer's upset that's enough for you to decide

00:06:29.400 hey i probably need to get the data so to do this in a way that you don't go insane you just need

00:06:33.860 your team to report on two things the first off is you need the leading indicators the leading

00:06:38.540 indicators are things you're going to measure that are correlated to the outcome you want.

00:06:43.020 Y'all want more profit. I get that. Number of profit goes up, you're happy. But what you need

00:06:47.540 to teach the team is to figure out what are their activities they do before that happens. If it's a

00:06:52.720 sales function, it's the number of calls they did that day. If it's a marketing team, it's the amount

00:06:56.700 of leads they generated. There needs to be leading indicators that correlate to the results you want.

00:07:01.020 That brings us to the second type of numbers you got to look at, which is the lagging indicators.

00:07:04.600 These are things like revenue and churn and profit

00:07:07.300 that happen after the fact based on activities

00:07:10.380 that came from the leading indicators.

00:07:12.160 When you can get everybody to understand,

00:07:14.320 I do this and the volume goes up

00:07:16.520 and then the lag indicators goes up and everybody wins

00:07:19.540 and you connect those two things,

00:07:20.900 now you're running a business with numbers

00:07:22.620 that you don't have to be involved in.

00:07:24.100 Here's why.

00:07:24.820 What gets measured gets moved.

00:07:26.620 Now you know exactly what to measure.

00:07:28.400 You've learned how to clone yourself with the 108010 rule.

00:07:31.000 You've built systems with the camcorder method

00:07:33.100 and you're running the business by the numbers

00:07:34.760 instead of gut feel.

00:07:36.220 But here's the question I hear every entrepreneur

00:07:38.360 who finally steps back.

00:07:40.100 If my team is running the business, 0.78

00:07:41.780 then what the f*** am I supposed to do now?

00:07:43.760 And that's where most founders either slide back 0.97

00:07:46.680 into the weeds because they feel useless or worse,

00:07:49.780 become completely disconnected, stop innovating

00:07:52.720 and ultimately cause their own business to stall.

00:07:55.500 When the business finally runs without you,

00:07:57.860 you need to step into your next level,

00:08:00.200 which brings us to our last,

00:08:01.440 but arguably the most important point,

00:08:04.100 leading from your zone of genius.

00:08:05.960 It's the thing that you do that creates value

00:08:09.080 for your team, for your customers, for your family,

00:08:12.320 that honestly, if you didn't even get paid to do,

00:08:15.320 you'd probably be doing it anyway.

00:08:16.900 That's why I always think the best businesses to start

00:08:18.780 are doing the thing that you do when you procrastinate.

00:08:21.080 Think about all the people

00:08:21.960 that all they do is spend time on YouTube.

00:08:23.700 They should just get a job doing YouTube stuff.

00:08:26.700 The way I like to think about it,

00:08:28.200 it looks like work, feels like play.

00:08:30.360 So here's how you find it.

00:08:32.080 First off, find the high leverage moves.

00:08:34.940 Think about vision, mission, values,

00:08:37.420 the stuff that only you can do as the founder.

00:08:39.980 Then what you wanna do is build a team

00:08:41.640 that builds the business of like really talented people

00:08:44.600 that you trust, that are creative,

00:08:46.540 that are driven and share in the upside with them.

00:08:49.020 And then lead like an artist.

00:08:50.660 Think about what an artist does.

00:08:52.080 They bring strategy, energy, taste,

00:08:54.600 essentially magic that only you can.

00:08:57.280 Now, if you tell me you're stuck just managing tasks,

00:08:59.960 You're not leading, you're just limiting.

00:09:02.040 Your job is to multiply, not maintain.

00:09:05.400 When you operate from your zone of genius,

00:09:07.600 you stop being the glue

00:09:09.040 and start being the accelerator of the gasoline.

00:09:11.800 That's when the business actually scales without you

00:09:14.040 and because of you.

00:09:15.420 Most people don't allow themselves

00:09:17.620 to integrate all aspects of themselves

00:09:20.220 so they can truly live into their zone of genius.

00:09:23.240 And look, if you're a business owner

00:09:24.940 and want help directly from me to implement these strategies,

00:09:28.000 just message me, coach on Instagram,

00:09:29.960 and let's make it happen.

Dan Martell - September 28, 2024

How to Build a Business That Runs Itself

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