In this video, you’ll get answers to these questions:

  • What is a business operating system?
  • What are popular business operating systems?
    1. What is EOS?
    2. What is Traction: Get A Grip On Your Business?
    3. What is Scaling Up? What is Mastering the Rockefeller Habits, by Verne Harnish?
    4. What are Objectives and Key Results (OKRs)?
    5. What is E-Myth by Michael E. Gerber?
    6. What is 4 Disciplines of Execution by Sean Covey?
  • What is in a business operating system?
  • Is a business operating system essentially SOPs?
  • What size company should have a business operating system?
  • Will a business operating system work for all business types?
  • Can you implement a business operating system on your own?
  • Should you implement a business operating system on your own?
  • How hard is it to implement a business operating system on your own?
  • What is the best process to implement a business operating system on your own?
  • How do you stay on track?
  • Who can help your business implement an operating system?
  • How much does a Traction EOS implementer cost?
  • Do I mentor companies using Traction EOS or other operating systems?
  • What are the first steps? (learn, hire, or implement 1 concept)
  • How can a business operating system avoid legal problems?
  • Where can you learn more?

Video Transcript

Should your company have a business operating system? You will get the answer to that question today. You will also get the answer to a number of related questions like: What is a business operating system? What are popular business operating systems? What is in a business operating system? What size company should have a business operating system? Will a business operating system work for all types? Can you implement a business operating system on your own? Should you implement a business operating system on your own? How hard is it to implement a business operating system on your own? What’s the best process to implement a business operating system? How do you stay on track? Who can help your business implement a business operating system? How much does a Traction EOS implementation cost? Do I mentor companies who are trying to implement Traction EOS or another operating system? What are the first steps to implementing an operating system? How can a business operating system avoid legal problems, and where can you learn more?

I’m Aaron Hall, an attorney for business owners and entrepreneurial companies. If you are a business owner, I create these videos to give you educational information to discuss with your attorney or your other professional advisors, so you can spot issues and grow a great company. If you don’t yet have my free cheat sheet, Seven Common Legal Mistakes Made by New Businesses, you can download it at aaronhall.com/free/. If you don’t have it yet, go ahead and just get that at aaronhall.com/free/. You sign up; we will email you that PDF right away.

What is a business operating system? A business operating system is essentially an accountability system so that what you plan to do has a process. Breaking that down into steps has a process, making sure people know what they are supposed to be doing and have an accountability system for them and a feedback loop to you so that you, as the business owner, know that things are getting done, and you see what that progress is. You will also know if there are problems and what needs to be addressed.

So, a business operating system is essentially having a system in place to operate your organization: a written step-by-step process so that you achieve the goals that you, as the visionary, have laid out for your business. We will get into a little more detail in a moment. But first, you are probably wondering “what are popular business operating systems?” Well, the one that opened my eyes to this whole world was EOS, which stands for the Entrepreneurial Operating System. I learned about it from a book called, Traction: Get A Grip On Your Business by Gino Wickman. And many people consider Traction to be the Bible of entrepreneurial or business operating systems.

EOS Worldwide is the owner of the EOS trademark, which stands for Entrepreneurial Operating System. Traction: Get A Grip On Your Business is, in my mind, one of the best-operating systems for small companies. But let’s talk about some of the others. They’re Scaling Up by Verne Harnish that’s a book. Another book of his is Mastering the Rockefeller Habits, again by Verne Harnish, has a very similar operating system presented in a different way with some different terminology, but again, very similar to Traction or EOS by Gino Wickman.

Another popular operating system is OKR or Objectives and Key Results. Another popular one, E-Myth by Michael Gerber. E-Myth is a book, or a series of books, that talks about the importance of thinking about your business as a system or even as a franchise that can be separated from you as the owner. It was one of the first books that I am aware of that helped business owners think about their company as an operation separate from themselves. So think about if you run a bakery; well, you may be the baker, and the person meeting with customers, and the person, who runs the cash register. But in order for a bakery to truly have value that is separate from its owner, you need to think of it as a separate operation, the different people that go in those seats, and the process for hiring those folks, training them in, holding them accountable, and then tying that into your financial system. So, E-Myth really started a movement of thinking about your business in the form of processes, or at least that is the first book that I saw that encouraged business owners to transition from operating in the day-to-day of their business to thinking on their business as operating system. Verne Harish basically said think of your business as something that can be repeated with a different operator, a person different from yourself. So, get everything in your head into writing.

Personally, what I didn’t love about E-Myth is I felt like it left the reader saying, I love this. I want to do this, but not exactly knowing how. And that is where Traction: Get A Grip On Your Business came in. That is a book that gives you the nuts and bolts of how to do it. Another great book that talks about an operating system is, Four Disciplines of Execution by Sean Covey. However, I don’t think it’s as comprehensive of a system. It really is just focusing on a couple key components, just like OKRs or Objectives and Key Results. So again, I highly recommend Traction: Get A Grip On Your Business, which talks about how to implement the entrepreneurial operating system discussed by author Gino Wickman.

All right, so what is in a business operating system? If you Google Traction EOS pie chart, you will see some of the subjects I’m going to talk about today. Basically, the entrepreneurial operating system has six pieces of a pie. The first one is the people section, and that’s broken down into two parts. You need to identify the right people, so the people who have the qualifications and the core values that you have that look at the world with the same respect and life goals, those core values, that lifestyle philosophy. And then second part of having the right people is, making sure they are in the right seats. So, making sure they have the qualifications for the specific duties that they are doing. And how do you do that? That’s broken down in the Traction: Get A Grip On Your Business book.

The second of the six pieces in the pie chart are vision. There’s eight questions to figure out what is your vision for the business, and how do you make sure that it’s shared by all people in the company, so they all have that same vision where they are going? There’s an old saying from the Bible, “Without a vision, the people perish.” And without a vision in the company that’s shared by everyone, the company will go different directions, or the people in it will and it will struggle, and it won’t have the same Traction. The next or third category is data. Making sure that you as an owner have a feedback loop between what’s happening and you are knowing about it, knowing what the results are, and you are able to measure (this is the second part of this) whether the data aligns with your expectations and if it doesn’t, what’s happening? Do you need to change something, change the system, etc.

So, having that feedback loop, and Traction talks about how to set that up with routine meetings in management, where you have certain information presented to management on an ongoing basis, so you can make sure you are getting Traction in the company. Processes, making sure that all your important processes are documented and followed by everyone. That’s the fourth category. Fifth, issues. Make sure that if there are any issues or problems in the business, they are getting on a list and they are being dealt with. The Traction process is called IDS: identify, discuss, solve. And then sixth category in the EOS system is Traction, making sure that you have established quarterly goals, which Traction calls rocks, but quarterly goals towards your one year goals, and two-year goals, and ten-year goals. So, you have broken those big goals down into quarterly goals or rocks, and then you have a regular routine or pulse in meeting to review those with the company. So, that is what is in a business operating system like EOS, discussed by the book, Traction by Gino Wickman.

All right. Is a business operating system essentially SOPs or Standard Operating Procedures? I think you could definitely characterize it that way. But, there’s a little bit different emphasis. Standard operating procedures are typically a list of procedures in a company that people reference from time to time. Whereas an operating system is the full pulse of the company. It’s the marching orders of the company. For example, the leadership team is reviewing on a weekly basis issues how are we progressing towards our goals and talking through those important key parts of the business. So, yes, it’s standard operating procedures, but it is so much more than that.

Will a business operating system work for all business types? I believe that there are going to be some business types that have some limitations. I think all businesses can benefit from most of an operating system like EOS, but not every business. For example, it’s my understanding that law firms can struggle with implementing an operating system, and here’s why. Often law firms are not run generally like a single business. It’s actually a different business for each of the partners who are rainmakers. You may have them all under the same brand, but you are essentially having small businesses with a partner who each partner has their own values, their own goals, their own procedures, they might even have their own team. And so when you have that, you can actually implement a business operating system in each of those mini-businesses. But you may have great trouble implementing an operating system for the entire firm. Real estate agents, I understand, are similar to this.

You might have a large real estate organization, but they don’t necessarily have the same values, the same operating procedures, or the same way of bringing in clients. And so sure, at the large organization or umbrella organization level, you might be able to implement 80% of a business operating system, but often not a hundred percent. Why? Because ownership and power, and leverage is divested from a central operating hub or management to the individual real estate agents who are actually running their own small businesses.

So, in my opinion, it’s still worth trying to implement, but understand that certain things, certain parts of an operating system might just not be possible in an organization where you actually have many businesses. So that’s going to be law firms with partners running their own practice areas, it’s going to be large organizations that have multiple departments that are somewhat disconnected from each other, and here’s what I mean. I’m not talking about accounting and marketing; I’m talking about an entire business division that has its own customers, its own products or services, and it’s own marketing plan, which may be very different from a different division. That’s where an operating system like Traction EOS may struggle, at least if you are trying to implement it company-wide.

What size company should have a business operating system? Generally, my rule of thumb is once there are more than eight employees, that’s typically when you need to start having documents for your procedures, and by the time the business gets to eight employees or more, the business owner starts becoming a little further removed from the front lines of the business, because now responsibility has been delegated to those eight employees, and the business owner is relying on the employees to report back regarding what’s happening on the front lines of the business. That is where a business operating system can be very helpful, specifically because it provides a feedback loop for information to get back to the business owner. It also allows the business owner’s vision plans, training, and proven processes to be pushed to the front lines to ensure that the business owner is not too disconnected and the employees are not too disconnected from the business owner. Certainly, by 15 employees or 20 employees, you need to have some operating system in place.

Can you implement a business operating system on your own? You certainly can. It just will take a longer period of time. I tried to implement it on my own in a law firm that we were operating, and it just took a lot longer. It probably took a couple of years to mostly implement EOS in our law firm.

Should you implement an operating system on your own? Well, I think that depends on whether you can have more time or more money to allocate to something like this, and how much that will pay back. For example, let’s say it costs you $40,000 to hire an implementer to come in, so that’s a consultant who would come in and work on your business. Do you have $40,000? And if you invest that $40,000 and you start getting more Traction on your goals by the end of the year, will you make substantially more than $40,000? If so, I think that’s a good justification to hire an implementer to work on this as soon as possible. An operating system will help you get Traction and grow much quicker. And I say grow, but I mean in the direction you want to grow. Maybe that’s profits; maybe it’s the number of employees; maybe it’s the number of offices. Maybe it’s influence or reach with your customers. Whatever goals that you set out, an operating system will help you get there quicker. But it is tough to implement because it’s a lot of new procedures, and new learning, some bumps and mistakes along the way.

An implementer can help you in significant ways because the implementer can focus on running the systems, and running the meetings, for example, facilitating those meetings while you, as the owner, work on your part as the owner casting the vision, talking about the methodologies that work, talking about the ideas that work. It’s hard for you as an owner to learn a new operating system, try to implement or facilitate that, train the team on that, and then also do your part as the owner of casting the vision and talking about the other processes and goals, et cetera. I tried to do it, and we had an implementer come in a couple of times. They are expensive, and so it’s difficult to know whether to justify that. And I really think it depends on the size of your company and whether you have the money for it. So, my rule of thumb is if you can generate substantially more than $40,000 to $50,000 in profits in a year by having an implementer, I’d say that could be a very good option for you.

How hard is it to implement a business operating system on your own? The concepts are not hard, but it is simply hard to be the one facilitating a new system, which is what an operating system is, while also fulfilling your role as the owner, answering all of the questions, and filling in the system with the substance that’s unique to your business.

What is the best process to implement a business operating system on your own? I would start with a few, like one or two, I should say, exercises. Get those running well, and then expand to the next one. So, don’t try to take it all on at once because it’s just simply too many processes to figure out. Do one, master it for a month or two, and then move on to the next one. And that’s what we did. Actually, we tried to implement it all at once, and it was very frustrating and wasn’t working. But when we implemented one exercise, or one discipline, or one process at a time, that’s when we started getting Traction. It took a couple of years to self-implement. Whereas, if we had an implementer, we probably would’ve been fully implemented in six months to a year.

How do you stay on track? Well, the best-operating systems have a process, so you keep revisiting. Are you staying on track? For example, in EOS, you have weekly meetings where you are reviewing your one-year goals, your quarterly goals, any issues, any data, metrics, or scorecard that you’ve developed to know how you are doing on leading indicators and lagging indicators. Let me pause for a moment and explain what that means. In EOS, each week, you are going to look at your scorecard. This is a scorecard you have created. It might have lagging indicators about the success of your business.

So an example of this would be profits. How much profit or money have we brought into the bank? That’s a lagging indicator because the signal is delayed from the time you did the action. All right, so what is a leading indicator? Well, a leading indicator is something that you are able to see very quickly how you are doing, and it leads to money, or profits, or the actual goals that you are trying to achieve. For example, if you have a social media channel, you might look at how many videos are we getting produced each week. They might not even have been published, but they’re produced. That’s a leading indicator because it shows if you are on track to actually get the interaction with customers or clients through social media later. So, first leading indicator, how many videos did you produce this week? The second one might be how many were edited or how many were published. The third might be how many views you had. And so, whether something is a leading or lagging indicator isn’t as big a deal. What is important is that you are not just looking at data that has come in at the end of the line, but rather, you are looking at what are the things we need to do now. Maybe it’s sales calls, for example, that will eventually result in achieving our goals. So, how do you stay on track? It’s by reviewing your scorecard, your metrics and dealing with any issues that may come up on an ongoing or routine basis.

Who can help your business implement an operating system? Well, if you want to do something like EOS, you go to EOS Worldwide, and you can find trained and certified EOS implementers. These are people who have paid to have access to the training. They’ve gone to some training, and they usually have access then to ongoing videos and support; it’s kind of showing that they’re committed to this methodology and understand it well. Usually, implementers will provide a free meeting because they believe in giving first. It allows you to essentially sample their expertise their personality, and so I usually recommend you find two or three implementers and meet with them to really figure out who’s the right fit for you and your company. And you will find that there are many different styles of implementers, just like there are many styles of attorneys, business owners, or salespeople. Likewise, with implementers.

How much does a traction EOS implementer cost? Usually, it’s about $6,000 per day. Some are a few thousand more, some might be a couple thousand less, and generally, you are paying for them either on a monthly or quarterly basis. So, you will have them come once a month or once a quarter is fairly common. You might be wondering, do I mentor companies who are implementing EOS or another operating system? No, I stick to my lane, which is legal. Helping business owners avoid legal trouble for their business and set themselves up for legal success. There are other people who are experts in business operating systems, and they’re going to be the best ones to serve you.

All right. What are the first steps? Well, I’d recommend getting… It’s called Traction: Get A Grip On Your Business by Gino Wickman. In my opinion, that one’s the best. And just start working through it and start trying to implement one or two of the concepts in it. And then, at some point, you may say it’s time to bring on a professional to help us implement that. But in the beginning, get the book, and learn about it. It’s an easy read. I remember sitting on the floor in a hallway in a church, reading the book, Traction: Get A Grip On Your Business, as one of my daughters was in some sort of dance class through community ed. So, it’s an easy read. You can find those, steal those little moments, and it’s a game changer. It really is an operating system. Takes you from having to figure out everything about business to finally taking the best practices that successful companies use. By the way, I’ve never encountered a successful company that isn’t on some sort of operating system. It might be a homegrown operating system, it might be something they’ve developed themselves, but often it was refined over many years, and you don’t need to wait many years to figure this out on your own. Now you have books like Traction: Get A Grip On Your Business

How can a business operating system avoid legal problems? The significant problems that can destroy a company through lawsuits or other legal risks can often be mitigated by a solid checklist that allows you to revisit how are we doing in different categories and do we have any risk or exposure in those categories. If you don’t yet have the free cheat sheet that I give out, the Seven Common Legal Mistakes Made by Businesses, make sure you get that, at least. That’s at aaronhall.com/free. And I use this YouTube channel to talk about a lot of the mistakes and pitfalls, and problems that have destroyed businesses so you can learn from those lessons and avoid them yourself. So you are welcome to subscribe to this channel if you want to learn more about legal problems that can be avoided with a solid business operating system. And at some point in the future, I anticipate I will probably provide some sort of additional training with my entire checklist that I go through with my clients. That is a checklist to preemptively avoid problems and avoid the risks that can destroy business. If you want to learn more about that, I will provide a link down below.

All right. Where can you learn more? Well, in the description box below, you will see some links to additional resources. If you find those helpful and you’d like other videos like this, you are welcome to subscribe here. You are welcome to give it a thumbs up or a thumbs down, depending on whether this was helpful to you.

Again, I’m not a master at business operating systems. But, I do always recommend that my business owner clients implement an operating system. And if you are not sure which one, go with something like Traction: Get A Grip On Your Business That’s one of the easiest ones to implement early on, and there’s a lot of support with other businesses throughout the country. In Minnesota alone, there are at least a thousand businesses; I’m guessing maybe even 10,000, that are using the EOS operating system discussed in Traction: Get A Grip On Your Business. All right, thank you for watching today, and I look forward to seeing you on the next video.