Franchise Rage: Keeping it too simple

I get to meet with Texas business owners trying to decide if they should grow or sell their business. The answer generally lies in knowing how to value the business and deciding if that's sufficient for future plans or not.

If growth through franchising appears to be attractive, we then get to work preparing the business for it. This involves defining and documenting their proven and successful business model. We also represent the most successful franchise operations, so in time we are able to bring qualified operators to the business and the operation grows territory by territory.

It would seem to be a simple thing, just follow the proven plan and success will be yours. This should be a KISS, Keep It Simple Stupid, approach to making money; however, life proves success is never that simple. The danger in a franchise strategy for growing a company is the potential for an adverse relationship to develop between the  franchisor and the franchisees. Here is how it can happen.

A franchisee's operation is struggling and the franchisor recognizes that they are trying to operate  outside the proven plan. Warnings about this issue are repeatedly given; however, the operating problems persist and eventually the new franchisee begins to attribute the problems to the franchisor's inability to help them. The two sides continue to blame each other creating a vicious cycle of further bad business. What we have is an example of a sound system being destroyed as a result of the fundamental attribute error.

This everyday error occurs whenever we think an action is being caused by the actor instead of the stage. In traffic a car suddenly cuts in front of us. Our reaction is to think that happened because there is a bad (or rude) driver in front, when in fact that driver could be skilled and polite and narrowly averted an accident by quickly changing lanes to clear a road hazard. As long as all the driving incidents are the cause of other bad drivers, better driving skills that anticipate road hazards are never developed. Instead, we develop road rage.

Blaming problems on fundamental personal attributes of either the franchisor or franchisee is not a simple answer, it's a simplistic answer. Oliver Wendell Holmes said "I would not give a fig for the simplicity this side of complexity, but I would give my life for the simplicity on the other side of complexity." It is the difficult responsibility of both sides to go one step deeper into the situation and ask "Why is the proven method being altered?" What if the issue is not personal character but is the situation? It means a willingness to suspend judgment and get deeper into the complexities of the specific situation and how the model applies to it. Only after passing through this complexity it is reasonable to get back to keeping it simple.

In our process of guiding Active Investors into purchasing a new franchise, we have them contact other franchise owners to learn about their experiences. The alert Active Investor is going to ask how they handle difficulties that might make them question the plan. Is there any evidence of franchise rage?

If you are considering franchises, you want a successful system; but you also want a happy family.

Photo credit: star5112

A Puzzle or a Mystery?

Malcom Gladwell's What the Dog Saw is the source for this post, although anything by him can be equally inspiring. Malcom asserts there is a difference between a puzzle and a mystery. And what a difference that makes to the Active Investor!

I love Sudokus, especially when trying to relax. They are classic puzzles. As you work with them, more knowledge is developed which leads to the solution. That's how all puzzles work. You keep developing more information until the solution emerges. A mystery is the opposite. You may have all the information up front. You're unable to solve it because of the way you are looking at it. More data only further obscures the answer because there is now more being incorrectly viewed. A mystery is only solved by finding the correct way to look at the existing situation.

Our western educational systems present the world as a big puzzle and they offer the promise that if we just get enough education we would be able to solve our  problems with the data we would now be smart enough to collect. There is no doubt to the value of an education; however, it's not this simple. Life is a mystery not a puzzle.

Sherlock Holmes solved mysteries. It wasn't only that he collected more data (which he did). In the Sherlock Holmes stories, he connected all his observations to solve the mystery. These connections catch most readers by surprise because we are still collecting more data in our minds when Sherlock has been eliminating dead ends and arriving at the unseen answer. Perhaps the single Sherlock quote that best sums up all of these time-honored tales is his comment to Watson, "When you have eliminated the impossible, whatever remains, however improbable, must be the truth."

In a mystery, we quickly get to a point where more data only causes more confusion.  A solution only begins to evolve when we disregard our training to collect more information and begin to realize the problem is that we are looking at it the wrong way. When we change the way we look at things, the things we look at change.

Business is also not a puzzle and more analysis often leads to more frustration. Like life, business is a mystery. The successful business owner or professional doesn't need more information than the competition. The successful Active Investor needs insight. The key to the information age isn't more information. It's developing better ways to connect what we may already know.

As an example, we still hear of business people viewing sales and marketing as a numbers games. There is goal setting that encourages mindless activities repeating a minimum number of daily "fishing" activities. The idea is that if any number of data points get high enough, success will be forced to happen. Success can never be forced. Look at what's already going on. Eliminate the impossible and whatever remains, however improbable, must be your truth. That is, the truth of what you are about, where you need to take your enterprise. Actively invest in those things. Success evolves from those activities that are working and that you believe in.

How can you determine if you are seeing a possible solution to your mystery? One clue is if the resulting activities are in harmony with the Active Investor blog theme: growth follows activities that are repetitive, powerful, and gentle. If they are, you may have your insight.

Developing business insight is the mystery. There is no puzzle.

image credit: Egan Snow

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Creating Products from Services

An objective of The Active Investor blog is to inspire the thinking of small business owners and professionals to create greater lasting value in their business. There is perhaps no better way to do this than to find ways to create products from services.

A product without services eventually becomes a commodity with business going to the lowest cost provider. Selling only services is a bit like selling air. You can't really sell time. You can only rent your expertise for some time. Expertise is intangible and difficult to either prove or differentiate and in the end the amount that can be sold is always capped by a time limitation. If you want to sell the enterprise, because it's your expertise and you're leaving, the residual value is relatively small. However, when the business offers a deliverable solution that can be named plus is easy to understand and refer, you have hit a "value-added" sweet spot. Here is a personal example.

Names are important. They give the offering tangibility. As a Texas business broker, I create marketing plans for my clients, as do many other business brokers. Since most small business buyers come from the internet, this plan includes multiple internet directory listings, which again, other brokers do. So far, we're still at the services level. I've then created a unique product offering on top of these services named Business Opportunities Bulletins (BOBs). With some creativity and technology, each client listing can appear on the first Goggle results page of significant search terms used by potential buyers. If a client wants to be found by potential business buyers, here is a product, a BOB, that does exactly that.

A BOB is easy to understand. The art of selling your business is to be presented to interested parties and still keep the sale confidential. Prospective clients can see how this is already working for existing clients. They "get it" immediately.

In this example, the product's name is a take-off of my own name. If a need for my business broker services gets touched upon by someone in my network, it's easy for them to explain and refer my product (my service).

Building BOBs takes time,  expertise, and technology but their existence adds critical value both to immediate marketability and to the ultimate value of the brokerage practice. A product has been created out of services common to the industry. How many products can be developed from your services? Something with a name that is easy to understand and refer. I can't image anyone who can't develop at least one more.

Image credit: EraPhernalia Vintage (catching up)

Critical Point Analysis

Clockworks have long been metaphors for systems in general. They illustrate energy transformation, cyclical behaviors, information encoding, and much more. One aspect of systems they clearly illustrate is the existence of a critical point.

Imagine the power involved in controlling the heavy hands of a large tower clock. The drive gears must exert crushing force to keep the hands at exactly the correct position. A critical point analysis of the clockworks would be an effort to find a point in the system where the movement of those hands could be stopped with only the pressure from a single finger. In this example, it's the flywheel. Stop the flywheel and everything else halts. That's a critical point and it's the spot of greatest advantage to any planned system intervention.

Business is an incredibly complex system with hundreds of gears (relationships) that mesh together to make it work. The idea that a critical point may exist in a business is difficult to prove; but since the clockwork metaphor seems to be working, it's worth exploring. If there was a critical point in a business, how could we identify it? What would it look like?

Within the clockworks the parts with the greatest mass and largest energy requirements, the hands, are also also the slowest moving. Our critical point, the flywheel, has little mass but is in continual motion. The critical points exhibit speed and repetition but not a lot of substance.

These characteristics are what make ideas critical points. Once an idea starts to spread, the heavy hands of execution begin to move. Internet and advertising consultants tell us extended repetition of a message (the idea) is far more powerful than a single large presentation. A business works because the people involved believe in it.

Critical points have the same characteristics we've already found in the powerful creative forces of nature. They are Gentle, Powerful, and Repetitive. When we find a critical point and dedicate ourselves to it, like an Archimedes who has finally found his place to stand, we can move our world.

Image Credit: poltag

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Our Invitations

Invitations take many forms, from the formal printed style seen here to the subtle courting signals every society develops. They are powerful tools that open the doors of significant relationships and because of that we handle them with great respect.

Every piece of marketing material should be considered an invitation. We invite the market to experience our product or service; however it's often done in a strange manner. We use a cost benefit analysis approach. There is no doubt that before an invitation to do business is accepted, a prospect will consider costs and benefits; but to base the invitation on this design dehumanizes the prospect and commoditizes the business.

Imagine being an Event Planner rather than an Active Investor developing a marketing strategy. Successful events always have a feeling that is forever kept in the attendees memories. We often forget the details about exactly what happened at an event; but we will continue to remember how it made us feel. Business transactions are similar social events, especially those of an introductory nature. As we are invited to potential business opportunities feelings are remembered as much as any transactional benefits.

Since advertising and networking have become facts of life in American business, we're all continually exposed to them. They are forms of invitations. What will be remembered is how they make us feel. No matter how timely or creative it might be, unsolicited email feels like spam - disrespect and nothing else. On the other hand, even the coldest of calls that includes a sincere request for advise feels like appreciation. Invitations invoke our feelings.

In response to our rhetorical question, "Do you need a written invitation?" the answer is generally "It certainly wouldn't hurt."

Image Credit: Matt Biddulph