How to Build a Level-Three Business

Last month one of the richest men in the world quit his job. Bill Gates, who built a software empire with a foothold on most computers in the world, decided it was finally time to leave Microsoft.

Questions surfaced on the Web. Would Gate’s leave a leadership hole at Microsoft? Would Microsoft succumb to Google, its primary competitor? While these answers will only be answered in the coming years, one thing is clear, that Microsoft is a company with enough talented support staff and systems in place to continue its role as one of the top software companies in the world.

The news peaked business expert David Finkel’s attention, who leads the transformation team of the BIG Business contest. Finkel knows Microsoft will do just fine since it’s a level three business, with the systems and personnel to keep the company rolling right along. A level three business is a business that isn’t dependent on the owner being there for it to function, grow, and succeed, says Finkel. In fact, Microsoft has been a level three company for a long time, with Gates handing over the CEO position to Steve Ballmer in 2000 and gradually reducing his day-to-day role while providing limited advisory support.

Many successful small to medium-sized businesses are eventually confronted with the transition from a level two business, where the owner is typically involved in all aspects of the business, to a level three business, where the owner can relinquish standard business activities and work on growing the business further. Our two BIG Business contest winners, and all the semi-finalists for that matter, are small to medium-sized businesses that are faced with the often difficult transition of transitioning to a level three business.

Our two winners, Premier Christian Cruises and Software Testing Solutions (STS), are both facing growth that requires handing over aspects of their business to new employees. John Sanders, the owner of Premier Christian Cruises, looks to McDonald’s systems-based efficiency for inspiration for the different Premier companies that include Premier Productions, Premier Christian Cruises, Premier Auction, and Camp Electric.

“The biggest challenge I see at Premier Christian Cruises is on an organizational hierarchy structure, in moving to systems versus being very people based,” Sanders said. “Right now I feel all the owners of our companies are doing all the tactical work, we’re doing all the cooking of fries… instead of doing the strategic work.”

A level three business develops systems for cooking fries and hires a fry cook to follow that system. Relieved of fry cook duties, an owner can build franchises. The primary advantage of a systems-based level three business isn’t necessarily leaving the business behind, it’s developing a systems-based structure where the business owner can ON the business, as opposed to in the business, Finkel says. Working on a business allows a business owner time to grow a business by finding and establishing new markets, put efficient systems in place, create new products, groom new team members, and other things to help a business grow. Working in a business limits a business owner’s time to create new markets.

Premier Christian Cruises wants to charter a cruise ship every month, which, given the demand, is possible. However, Sanders needs to put systems in place that will keep his company running smoothly, then focus on the company to build it where he can charter a ship every month.

“The key is to start somewhere, and build to progressively be able to focus more and more of your time ON the business,” Finkel said.