Oct 5, 2021
7 Steps to Building a Smart Business Engine With Luke Fatooros
We've all been in a spot in our business where we're trying to work out how to get from A to B or how to get to the next level. But what is the next level? How many levels are there?
Luke Fatooros from Ideas Into Business shares with us the 7 steps to building a smart business engine to give you time, money, and freedom.
Learn more on how to build a smart business engine at dorksdelivered.com.au
Why are there seven steps? What are the steps to building a smart business engine to give you the time, money, and freedom?
Luke: Let me start with my $12 million mistake or failure. It's something that I don't recommend, but this was my first step into business. My first business was a store that my father and I shared with $800. We thought we were going to conquer the world, and the first 14 months were a living hell. We didn't know what we were doing. We had all the ambition and enthusiasm, and that was really what got us through the first 14 months.
When we eventually learned a few things, such as how to distinguish myself from the competition, my first joint venture took off. After all that pain, it eventually became a $12 million, 65-staff business after five years. I was winning awards like Entrepreneur of the Year, Microsoft top companies, the Westpac finance.
And then I lost everything. My partner had to go to the staff and tell them we had to close this business. What came out of that were life-changing lessons. There are three critical lessons I want to share with you, and this was how the seven steps were formulated.
Luke: I had to learn how money works and how money flows. The first lesson was to stop trading time for money—I didn't know what that meant. I had to move from a limited earning structure to an unlimited earning structure.
When I lost that business, I learned the difference between being self-employed and being a business owner, and I understood creating wealth in business. I realised that my business was worth nothing because it was strapped to me. We become burnt out when trying to build a business the wrong way. It took me 7 years to recover.
Luke: By contrast, when I built my second business, a distribution business, I had three factories in China, the Philippines, and Korea, and I'm supplying five countries from a desk.
That gives you a lot of flexibility with the way you can travel. You're not tied to a location, which is something that's becoming very important with our current times.
Luke: If someone saw me with my notebook at my home office, they would think it's a joke, a hobby. But that business was valued at $3.5 million up to 3 years. It's not how fancy a business looks on the outside. It's how structured internally.
When I was 12 years old, I was given the opportunity to make these number plate brackets. It sounds like such a boring product, but I was getting $6 a bracket. I was able to make one in 1.5 hours. I sped up my processes. By the time I was 13, I was making 10 number plate brackets an hour, so I was then making $60 an hour relatively.
I went on to employ people, but the lesson that I learned was people are lazy. Don't tie things to money, and don't tie things to yourself. If you have a problem or a key person in your business has a problem, how do you overcome that? How do you make sure that you aren't the key person? How was that valuable to the next person that was buying it?
Luke: This comes to this thing called sequencing. You cannot step out of the engine. You cannot hand down management or the responsibilities with regard to the foundation of your business to anyone else. If you have a vehicle that's got a broken engine, you cannot paint it green hoping that the engine would work.
That is what people do in business. They change the website or invest in social media marketing and think this is going to grow the business. That has to come at a certain point. Your sequencing is wrong.
Luke: People have this business idea, but people focus on marketing strategies, negotiation, sales, systems, processes, etc. But there's a thing called you. We all have our own personal brands. People don't buy your products and services. They buy you. They buy the image that you are projecting. Every one of us projects a particular image that we think we need the world to see.
Relay that to buying a Samsung phone or an iPhone. The image was around the inspiration and message that Steve Jobs had. Who's the owner of Samsung?
Luke: Exactly. No one knows who arrived second on the moon.
Every one of us has self-sabotaging patterns and limiting beliefs. We might think we're marvellous, but the truth is we're actually not. You want to be the best version you can be of yourself and your business. How do your customers want to perceive you? You have to pay attention to that.
When I started my first business, we went from $1 million to $12 million in 5 years. That incredible growth, the prestige and recognition, and so much money coming to my life as a kid made me think I was invincible. It didn't do any good because even though I sort of earned the success, I didn't know how to handle it. I didn't have mental maturity. My ego was running my show—a self-sabotaging pattern.
It doesn't matter how fancy you get into your marketing sales strategy. If you have this self-sabotaging pattern, your business is just never going to make it. What I've learned over the years is the people who resist openness, self-development, and willingness to learn are the ones who desperately need this help the most. That's the self-sabotaging trait. That is a disaster in business. Optimise your mindset.
The six inches between the ears is the most important six inches to measure on your body.
Luke: There are lucrative niches, and the money is naturally flowing into those lucrative niches. The common mistake is when we have meat; we try to sell it to vegetarians. It doesn't matter how fancy your meat is; a vegetarian is just not going to buy your meat. That's not a lucrative niche for your product.
My philosophy is to just follow the cash. What you want to do is you want to find customers who buy from you the quickest and the easiest.
Out of 100 customers, there will be some of them who will buy from you instantly—they love you and your brand. I call these your real customers.
I think this is where a lot of marketing companies get things wrong. They all say that this is your ideal customer, but that doesn't mean those people are actually going to buy from you. When you've been in a business, or you've been trading, and you look back at your history, you see that there's a group that just hands you cash. Shift your focus toward your real customers, not your ideal customers.
I analysed why we struggled for 14 months with my first business. My business partner, Gary, was an engineer, so we thought we could do computer programming. We're going to write software to help businesses become efficient and more profitable. We thought this was just marvelous, so we took my $800 and launched the business. No one bought anything, and we couldn't understand this. We kept trying stuff, but the customers didn't want our stuff. Instead, they're looking for computer hardware. We quickly decided that we would give them what they were looking for.
We got rid of the software, and we opened a little shop in the back of some shopping centre. No one went there. We started putting the computers where people could see them. We still had a lot to learn, but we started to see a little bit of light.
If you are struggling in business, find where the money is flowing. Listen to your customers, what they are looking to buy, instead of ramming your product down their throat. Shift and sift to what the market really wants.
My first business really took off because we've shifted and sifted out of selling computer software, which was a dead niche. You can't keep flogging a dead horse, right? You have to be smart enough to move across.
How do you make sure you're not emotionally attached to that dead horse?
Luke: If you are absolutely in love with your idea, that's a self-sabotaging trait, and you need help with that. My help was a hammer on my head, and now I'm very aware of self-development and problems in my own business caused by my own self-destructive traits.
The people who ultimately fail are those who will not let go of their idea. That's ego, and that is a terrible self-sabotaging pattern.
Did you fix that through reflection or having other people come in?
Luke: Yes. I went through seven years of massive self-reflection and actually understanding that you need to get help in your life. I was not mature enough. I didn't have the structure to be successful in business, even though I was very good at business strategies.
I've done a lot of self-work over the years, and the biggest thing is getting rid of the ego. That's not easy for most people. But if you can do that, you're on your way.
Is there a certain size of the market that you need to start doing that? If you've been in business for a little while, say you've got a B2B business with 100 clients or a B2C business with 10,000 clients, how do you work out the numbers?
Luke: If you've got a bit of history in your business, you can take the time to analyse your database and then categorise them into A, B, and C clients. Who are the people who are just paying you and not giving you problems? Who are the people who won't just buy from you, no matter what you do, it's just never enough? And then who are the ones who buy from you after some hard work.
It's not about percentages, time, staff, or size. It's the process. Analyse, and then you'll be fine.
Luke: What do your real customers want to buy from you?
I've been in business since I was 23. I've done probably every sales course under the sun, and I've never seen anything that's told me the two secrets that I believe you need to have to achieve success in sales. The first one is don't sell.
That's a big one that I've had a lot of trouble grasping. I've realised you shouldn't be doing the sales courses. You are already the best salesperson if you're passionate about your product.
Luke: I agree. What you hear is the secrets of closing—how do you trick people into this or influence people?
Looping, straight-line persuasion, that sort of stuff.
Luke: When someone is buying for you, what is that one thing they are subconsciously looking for? When they walk in, they scan you for one thing before they even want to hear your pitch about your product. It's trust.
If I don't trust you, I don't care how fancy your Ferrari or whatever your thing is, I'm not going to buy from you. I'm going to try and find someone else who I feel comfortable with to give my money to. I've never heard a sales course ever tell me that. They all try to show how to influence, trick, close, overcome objections, etc. to get the money in the bank. I genuinely don't believe in that.
Even if you do that sort of tactics, will they be long-term clients? Are they going to be happy at the end of the day if you use some psychological neurolinguistic programming thing? Are they going to be the type of client that's going to be a raving fan and going to be sitting in your A-grade pile? Probably not. It's better to build that rapport and relationship and to make sure that you can know, like, and trust the person.
Luke: There are two ways that you can build trust to influence sales in the right way. The first one is your personal branding; the second is your hook product. Its purpose is to let your customers experience your value with the least amount of risk.
Luke: For example, there are two pie ladies in the supermarket. One lady has a stand with flyers, and the other lady has a stand with a little microwave and pies. The first lady is handing out brochures, telling everyone how marvellous her pies are. The other lady bakes, and she has samples in the oven. People could smell their aroma. She puts some on a tray, cuts it up, and invites people over.
The second lady is actually letting her customers try and experience. That's what you call a little hook, and there's no risk. They love it. The other lady is telling everyone how marvellous her pies are, but there's no experience. There's nothing going on there. And that's the two different ways people sell in the world.
One of the things I found was my competition was garages. This was the early 1990s, so they sold computers in converted homes. It wasn't a mainstream retail thing. Customers would go in and then speak with some dude behind the counter who is unbelievably knowledgeable on computers, but the customers don't know what he's talking about—ROMs, processors, etc.—so it freaked them out. That's not a good customer experience, which is what customers really want.
What I did was I put displays up even if we didn't have a lot of customers then. We had to prove our concept. We knew we were in the money, but we just didn't know how to be known yet.