Editor’s Note: Due to a scheduling conflict caused by the Year in Review features last week, Strictly Business is running off schedule this week.
Two years ago I was doing a book study with a young man who wanted to learn more about the world of business. I’m a business fan. I love learning about what works and what doesn’t and why some companies do well and others fail. We were reading The E Myth Revisited. It’s an update on a classic entrepreneurship book. We were reading it a chapter a week, and we’d meet up at Cafe Zella at Wilshire and 15th. I like that place a lot. It has a great selection of breakfast items and good sandwiches and burgers for a lunchtime menu.
I have a soft spot in my heart for restaurants, especially the small mom and pop style. I know how much hard work it takes to feed people and to keep the lights on in a small location. The profit margins are razor thin in the restaurant industry, and with food you have a huge problem of waste, spoilage, and changes in what people like or don’t like depending on this year’s fad diets or trendy menu items.
Often I am asked when I am going to open a restaurant, and my answer is a resolute, “probably never!” But if I were to open a restaurant it would be a breakfast joint. They have the highest profit margins on their products, and the lowest waste / spoilage of any type of eatery (except for an ice cream parlor but that’s its own headache). Breakfast joints are highly profitable for another reason and that is the repeat customer. For example, I stopped in at Teddy’s last week where I was interviewing Jason Gilbert of ClearFuze Networks. He runs a company that provides technology services to law firms and the medical industry. He has breakfast there essentially every day of the work week. Along with about 85% of the other patrons.
My habitual spot is Bagel Nosh. I’m there probably 3 times a week and usually it’s the Nova Lox on Rye toast for me. Being a regular there, I’m known and what I want is generally known. That familiarity is one of the reasons that brings me back there. I often do breakfast meetings there and I see many of the same faces doing the same thing. Because most everyone in America likes breakfast, you have a large market that is not subject to the whims of the foodie and / or fitness world. For example, once upon a time Cajun was the popular choice, but then that fell out of favor so the cajun restaurants died off. But Norm’s continues to thrive.
From a business perspective, breakfast is a good model since it generally falls into the simple formula of bread, eggs, meat, potatoes and coffee. Sure there are the specialty items like pancakes and waffles but for the most part the formula is a basic four part plate with the main variation being preparation. That means that it is pretty easy to calculate your food cost, maintain your inventory and train your staff.
It’s that ability to create the same product, repeatedly, at the same quality level, with the same care that is a major lesson I learned from the E-Myth Revisited. The ability to create systems that reduce stress on entrepreneurs is what makes them successful and makes them able to scale. It prevents the burnout so often experienced by the business owner who is in their 4th to 8th year and can’t take it much more. They used to love what they do, but they’re exhausted and losing their passion.
As I was speaking with Jason about his experiences as the founder of ClearFuze and how he’s built that business, from doing it all himself with a laptop, into a multi-million dollar security solution for those industries that require high level solutions, I was reminded of the lessons of the E-Myth and the importance of systems, delegating, and hiring the right people, and more importantly, firing the wrong people quickly. It’s a maxim of any experienced C-Level Executive, that the majority of your problems come from the people that you should fire but haven’t. That goes for customers as well. Most of the problems of any business come from those customers that we should get rid of, but hold on to out of fear that we won’t find another to replace the lost one. This is a mistake. Holding on with the problem client, saps the creative energy and love of the work, stresses out the staff, and creates an all around bad experience for everyone.
Jason and I spoke at length about how he’s built business, what makes for a good client experience and how he’s implemented systems in his service based company to provide excellent safety and security to his clients. That’s coming in the next Strictly Business column.
David Pisarra is a Los Angeles Divorce and Child Custody Lawyer specializing in Father’s and Men’s Rights with the Santa Monica firm of Pisarra & Grist. He welcomes your questions and comments. He can be reached at firstname.lastname@example.org or 310/664-9969. You can follow him on Twitter @davidpisarra