James Karl Butler is a serial entrepreneur who has built four companies from the startup phase into a million dollar business. He is the author of seven books and talks about his most recent book, The System is the Secret. He tells Jason why it’s important to have a good system in place and how strong systems are the key to business growth in any industry you are in.

Key Takeaways:

[2:05] Good systems are the key to growing your business rapidly.

[3:40] James talks about the various moving parts needed for a successful business.

[4:50] How do you develop a good lead generating system?

[15:05] You need some kind of lead magnet that will attract your potential customer to your website.

[18:35] How do you find good talent for your company? What’s the hiring process?

[23:30] Ask your potential employee lots of questions about your business to see who they are as people and also see where you’re business is lacking.

[25:00] Crave out 90 minute blocks once a week to work on these very important systems.

Mentioned In This Episode:

The E-Myth by Michael Gerber

Influence by Robert Cialdini



You got to have your goals, your mission, and kind of your vision of what you want to do.

The most important system for you to have in your business is getting that lead flow.

It’s not fun to examine parts of your business that are not working.


Jason Hartman:

It’s my pleasure to welcome James Karl Butler to the show. He is the host of the Sound Laws of Success podcast and the author of 12 books including his latest, The System is The Secret: Proven Ways to Implement the Systems that will Transform and Grow your Business.

And listeners as you know or may know, I had Michael Gerber on the show many years ago and he is the author of The E-Myth and that series of books kind of inspired me as to the importance of systems in our businesses, but it does leave off after a lot of the philosophical ideas of why it’s important and Jim is here to help us actually drill down on that and implement real systems in our business. So, it’s a great pleasure to have him on the show today. Jim, welcome, how are you doing?   

James Karl Butler:

I’m doing great. Thanks Jason for having me on the show. I really appreciate it.


Yeah, the pleasure is all mine and like I said to the listeners, I hope that’s accurate, you know, that you begin where Michael Gerber and maybe some others leave off.


Yeah, I think so. I mean, I read obviously read Michael’s book The E-Myth and I’ve read his ebook Mastery and other books that he’s written and having grown four businesses from the startup phase over a million dollars in revenue that are my own businesses also growing a multimillion dollar business that wasn’t mine before I got into my own business.

I realized that systems are really kind of the secret to what makes business work, especially if you’re growing rapidly and you have to kind of figure out how to have lots of moving pieces. So, I wrote the book for the purpose of helping people understand here’s how the pieces fit together, so I wrote – there’s 16 specific systems that I talk about and we can kind of go through those a little bit here throughout the book, but the goal is to help people understand how to actually put the system in place, then having an assessment at the end of each section where you can say, am I following the system or not? Where are the holes in the system that I need to plug up so I’m not losing prospects, I’m not losing clients, I’m not losing money, because that’s really where I think the rubber meets the road. The system is when you start – you feel pain.

You either lose money or you realize you could be making a lot more money because you don’t have an effective system in place. So, that was the goal of the book and it’s a 500 page book, so there’ a lot of content in there that really helps you understand here’s what the new step by step as you put those systems in the place.


500 pages? Wow, that’s big.


Yeah. There’s lots of content in there. I wanted to cover everything I could about systems to really be helpful to people listening and people reading the book know what to do to actually put their business in place and make those things happen.


Sure, you know Jim, it really is true, because if you think about it, it’s hard to overlay, you know, systems on to a variety of businesses. You know, every business is so different and many franchise businesses, they claim to have a system, probably most do, many don’t though. When you talk about systems, how could it apply to so many different types of businesses?


That’s a great question. I think basically the philosophy is everybody has to bring prospects and other businesses have to sell a product to that business, that person, and make them a client, and once they become a client, help them buy additional products and services, utilize those services. If you’re growing your business, you have to have people that you’re going to help you to grow your business, you have to have employees, so I have a section about hiring systems and staffing systems. How to train people, then how to develop those individuals into leaders.

That’s an aspect of any business you’re in, then I have a section on crisis management, because no matter what business you’re in, it’s just a matter of time before you have something happen that you didn’t plan for and that kind of helps you grow through, here’s all the different possibilities of things you can have.

Ten specific categories of problems or disasters, things you can have, and for you to kind of think through the work on here’s what I’m going to do if this happens or here’s how I can prepare for that, so it doesn’t blind side you and take you out of business. Then there’s – every business has financial aspects to their business, how to grow their business, how to manage their cash flow, how to, you know, do all the different things like that and there are – how to be more productive. That’s something that every person needs.

So, I go through a lot of detail about how I’m able to be so productive writing lots of books, getting lots done, drawing multiple businesses at the same time and then how to stay on the cutting edge, so you don’t get overtaken by upstart competitors. I think that’s a big thing now is that you, no matter what business you’re in, if you start making money, you’re going to have competitors who try to copy you and try to take your business away form you, and so how to prepare and anticipate that continually attack yourself so you can grow your business in that way as well.

I then have a section in there about how to balance your life, how to balance your systems and your family as well as with your business, because sometimes, like, even Michael Gerber talks about this in his book The E-Myth is that sometimes as you grow your business, you may not, if you don’t have good systems in place, you may not, your business may not explode, but you will, because you don’t know how to manage all the details you have, so you’re constantly in your business working on it all the time, but you’re not working on it, you’re not working on your family relationships, and so as the result something has to give, so that’s kind of the idea there to help people together.

But I think going back to what you said, the really core crux of the issue is you gotta have to have leads coming into your business and have to know how to tell and persuade people to buy your product or service and how to market that effectively.

So, I’ve spent a large portion of the book is about how to track leads in your business. I actually have 12 main categories of how to inbound and outbound lead flow systems. I go through 95 specific ways to generate more leads for your business and so I go through that in the book as well.


Yeah, good. I like what you mentioned about the competitors and, you know, how we live in this very fast changing world, obviously, there are so many interesting stories about businesses, especially larger fortune 1000-type companies, being willing to take the very bold step to cannibalize their own business intentionally in order to evolve it to another level, because that’s what competitors do. They either – they have to do it or someone from the outside will do it. That’s just kind of an interesting comment I wanted to make or point out, but let’s get into the leads and sort of the basic stuff and talk about how to systematize that.


Well, I think first off, you need to work on something everyday in your business to generate more leads, so regardless of what your business is, I mean, if you’re listening to this and you’re in real estate or you’re a chiropractor, physician, a doctor; if you’re a small business owner, if you’re retail business, you have to have people coming to – or even if you’re just online, you have to have people coming to your business and being exposed to your idea, what it is you’re doing and educating them, so the best way to generate leads is to offer information that helps people know what to do and so, I think there’s kind of really, I guess, the three steps of what your inbound or outbound lead flow system really has to have is you got to have ways to generate those leads to get people to come to your site.

You gotta inform and educate people about what it is that you sell and have some kind of limited time offer, so that people want to respond to that over the period of time, because all people are procrastinators and if you don’t get people limited time, there are probably going to wait, which means you’re not going to have any business and that’s not going to be good for you and then you gotta be able to persuade those people to buy it from you and have a good pre-sale system in place so that persuaded before they even talk to you or sit down with you that you’re the person they should do business with and I think that’s really critical today with there being so much competition out there, so many different varieties of things you really want to get out there and make those things happen.

So, if I were to kind of divide up what those categories are, so you know what you need to do, and again, each one of these categories in the book, I tell you here specifically things you can do and there’s 95 tool things amongst the 12 different areas, but first obviously is direct-marketing. How you’re marketing them, whether it’s direct mail or your business card, you’re making phone calls, if you’re doing specific targeted ads or publications or online or if you have your own catalog; if you have a newsletter, if you’re doing upsells in your business, if you have some kind of coupon or something like that.

You’re skipping to the person directly, that’s kind of what that’s there. Then you have your specific kind of, if you have print ads or any kind of marketing that you’re doing that you do to a trade show and hand something out that causes them to go to your website or do business with you, you got your internet ads and are 15 different categories within the internet ads along that you can build your leads from with that and I can go through all these different categories, but I guess the real essence that I wanted to say is that you got three types of leads coming into your business regardless of what your business is.

You’ve got hot leads, you got warm leads, and you’ve got cold leads and your goal is really through your pre-sales process and everything you do is to attract people obviously who want to do business with you now with the hot leads, but you’re going to have some people who are maybe skeptical or not sure whether it’s the right option or not and they are warm and with some persuasion and education, they can be convince that you’re the right choice for them, so they can be moved from warm to hot and then you have cold leads, people you’re attracting, people that aren’t even the right fit for you and your business and those, I guess, would be considered bad leads in the context of you might be wasting your time on people who weren’t even the right fit for you and your business and so I think that’s what part of the lead flow system, because you got inbound lead flow systems, you got outbound lead flow systems with your follow up and things like that; that are going to make sure you’re getting – not leaving money on the table with your current clients as well.


On those, do you recommend a software tool? I find that a lot of the systematization in any business really comes from that software platform.


Absolutely. I there there are several different software platforms out there. You just got to have something that works for you.


Which ones though? I want you to be specific though. Like, which ones? Any particular likes that you have?


Oh okay. I’m familiar with InfusionSoft. There’s other ones out there like AWeber and others, but InfusionSoft is really good. It’s a little bit more complicated, but it’s a great way to systematize things. You can kind of setup all the different marketing funnels that you use and then set it on autopilot so that you constantly have those leads going out there, but even if you’re a brand new business and you can’t – it’s maybe a little bit more expensive than you wanted to do.

Here’s what I’d recommend you do, is that, even if you have a great tool like InfusionSoft, you still got to do this work. You gotta look at what you’ve got, look at your marketing funnels – list all the products that you have on a paper that you want to sell, that you currently are selling, and my first recommendation would be, can you simplify that so you’re not trying to sell – that you narrow your focus to figure out what you’re best in the world at, but regardless of let’s say you have five products or ten products or even like for realtors, your background is in that, you’re going to have a lot of inventory that you’re going to have that you can offer to people, but what you want is buyers coming in and they’re interested in buying that inventory and so, what you want to think about here is how many leads do you have coming into your marketing funnel everyday and that’s an important question for you to ask right now. So, whether it’s right now, what does it need to be in order for you to reach your goals.

So, one of the systems I talk about in the book is you got to have your goals, your mission, and kind of your vision of what you want to do, so if you want to, let’s say, sell $100,000 in a month, just as an example, just to keep the math simple, and your average product that you sell is a $1,000, basically what you’re looking at there is, okay, I got to sell 100 products every single month and you kind of divide that out. How many people are coming in everyday and so if you have three people a day, for example, then you gonna build and make that goal happen.

Now, obviously if you don’t have a 100% close ratio, you going to have to bump those numbers up. So, say you have a 50% close ratio, you’re going to need to have six people coming into your marketing funnel everyday, so you can get three qualified leads coming out that, you convert then and will actually buy something from you.

So, what you want to look at is if it’s going to require six people to come into your marketing funnel everyday, ask yourself the question, who’s in charge of managing those leads when they come in? Is it something automatic or is there someone on your team that’s responsible for that or maybe you, yourself, as the business owner. Then you gotta think about if I – what’s the three best ways I generate leads right now that are consistently working and if you don’t have three, you only got one, then you need to look at how can I add more ways to get the lead flow up.

So, it’s kind of like a spigot on a bathtub, you’re turning up, and if it’s just dripping out – it’s better to have it consistently dripping a little bit everyday, so even if the bathtub is plugged and you’re going to fill up your bathtub eventually. You have to remember is most people, they have holes in their bathtub, so there’s consistently leads flowing out as well, so you gotta have enough volume and you have to have systems or marketing funnels underneath those holes in the bathtub to catch that water or those leads coming out and put them back into the top of the bathtub into another lead funnel that’s going to actually help you generate more business and so that’s a really important thing is to think about what’s consistently generating leaders for me and where are the three best ways to generate fast lead flow.

I think those are really two important questions that everybody business owner should think about and ask themselves, because if you know your three best ways are to generate quick lead flow, when things slow down, you can turn up the volume really quickly, fill up your pipeline with leads and then work on those, but you always want to – what you want to strive for, what you want to have in your business is have consistent lead flow, steady lead flow, so that it’s just constant dripping, so you’re having everyday, you’re having six new leads coming into your marketing funnel or ten new leads or a 100 new leads or a 1,000 new leads, or whatever your business is setup to do and the most important system for you to have in your business is getting that lead flow so you can handle a number of leads coming in and that’s really what I’d recommend on lead flow is that you gotta – and then have the right kinds of leads, because obviously if you’re bringing in, if you’re filling your bathtub with cold leads that you’re going to have to do a lot more work with, you’re not really focusing on the right market niche to build and attract the right kind of business for you to really make your business crank and do a lot of volume.


Okay, I want to switch gears to hiring and staffing systems, because that’s just so critical, you know, you talk about follow up of those leads, but before we do that, just any insights and tips on the actual lead generation. You talked about the importance of, you know, whether the leads – the difficult leads, the cold leads, the easy leads, whatever, but any tips on the actual lead generation. You know, what exact things does one do.


Well, again, part of what attracts people to want to come into your marketing funnel is you have to have a good lead magnet, you have to have something that’s going to cause someone to say, I’m willing to give up my email address or my phone number or whatever that is, so maybe that’s an article that you write that’s helpful to people that they can download, maybe it’s a podcast, maybe it’s having a webinar, maybe it’s going speaking at an event, maybe it’s setting up a specific offer where you give away a course for free or something like that.

I know there’s several different people who do that where they have a free course that teaches you something about a particular skill and they are giving their most valuable context or a lot of their valuable content to them for free, because that’s what attracts people then to say, I need help with this and they’re not sure if they can trust you or not, so they really have to do that.

So, I think that’s really important on your website, you should have some kind of away to teach people something, but also a way to capture their lead flow, so maybe what that is you give them, let’s say I’m going to give you ten mistakes that the people or prospects in your business might make and I would put down here’s five of them.

If you’d like to get the other five, you know, the email address and I’ll email you a special report PDF with all ten of them plus I’m going to give you this particular ebook that I’ve written that can really help you out with that, so when you get that lead magnet, they’re going to be excited about actually starting the dialog with you and that’s actually the very beginning of the conversation, so you can then schedule an appointment.

Maybe you have a series of videos that teach them some things, help them get to know you a little bit, there could be events that you could do. I really think that, even if people are calling into your business, you can have on-hold marketing that you can do where you talk about an offer that they have, if you have a physical location, a sign on your business where if you have a vehicle that you drive around that has signage on it, things like that, trade shows, what you’re handing out at those trade shows, it’s going to generate leads or bring people back to you.

There’s so many different kinds of events that you can do, but I think the key thing is what is your offer that’s going to attract people to say, I need that, I need help with this, that they can recognize that you’re the one that you’re the one that can help solve their challenge or problem and if you can deliver that to them in a way and package that in a way that’s very attractive to them, that’s very beneficially.

So, I give you an example of this. One of the things that’s really valuable is reciprocation where you give something to somebody and they feel obligated to something back with you. Robert Cialdini talks about that in his book Influence: The Psychology of Persuasion and one of the things that we discover in our retail business is if we gave people a gift just for showing up for an appointment, that would help trigger that response, so we’d give them, you know, we give them some jewelry or something like that, but they actually get something when they come in. It’s like a gift box. They love unwrapping and do that.

So, think about that for your business is, what can I give them that’s going to be like that experience of Christmas morning of opening up a gift and saying, wow, I can’t believe they gave this to me and they feel this obligation to what’s next, how can I repay this person for what they’ve shared with me, how they’ve helped me out.

So, I think that’s really key distinction to what makes a lead magnet work is, is there that sense of awe, that sense of wonder of wow, this is like Christmas morning, opening up something, and I’m so glad I met you or I’m so glad I found your website, I’m so gad I had a chance to talk with you, because you gave me something I really need and I’m grateful to you and I can’t wait to go to the next step with you.


Okay, one of the most critical things of any small business is hiring and staffing and recruiting, let’s talk about some of the systems for that, because these are critical, just attracting talent, very, very important.


I have another book, so that’s in chapter 12 of my book The System is The Secret about hiring and staffing systems. So, I would say there’s two parts to it. First, you gotta, again, you got to attract the right kind of talent to you and you’ve always got to recognize that most people that come to you or where you’re looking for people really makes a big difference and so there’s something I talk about that about the kinds of questions you ask in the interview and so if I were to break down how that system works.

First off, it’s how you attract people and then kind of the law of three that I learned from Brian Tracy is that you want – before you hire one person, you want to interview at least three people, you want to interview that person three different places or three different times and then you want to have three different people in your business interview them and the reason that’s so helpful is you are able to weed out or recognize things if you see someone in different situations.

So, anybody can sound good for 20 or 30 minutes when you’re interviewing them for the first time, but if I give them a specific task or assessment and say, I’d like you to do this for me, this is the second part of the interview, for example, I’m going to have a secondary interview with you, but before you do that, I’d like you to fill out this little survey or I’d like you to do this task for me and so you can get something back or they respond back or you could even – I’ve done it even in our businesses where we’ve had people actually have to make phone calls.


Say, okay, here’s what’s going to happen and they call a cell phone and maybe it’s my wife or somebody else and on the other end they’re taking notes of how well they’re actually doing in this task and imagine something that’s going to work what they need to do in their business. The other thing is, then the third time they come in it’s actually have them come in and do a try-out interview where they come in and actually work with you and they give them specific tasks and you watch how they work and how they behave and what they do, you know, there’s so many books that have been written out there about the cost of making a bad hire.

Brad Stanford in his book (#20:23?) says that the, if you make the wrong mistake, it’s like going to pay 23 times a person’s salary just in the cost of opportunity cost and everything else of hiring the wrong person, so it’s really critical, as you mentioned, that you’re hiring the right kind of person and a good hiring system is all about what do you do once that person comes in for the interview to know are they the right person, can they do the task, will they do that task for you, are they qualified.

So, there’s one thing to look at the resume, it’s another thing to actually sit down and talk to them and ask them questions that draw that out of you. So, in the book, I go through the different kinds of questions you should ask in the interview. There’s 11 specific types of questions you can ask and what you should be discovering from those questions that you ask in the interview and then, so, I think – once you hire someone, you gotta tell them, here’s what we expect and a lot of people don’t know what they need someone to do.

They know that they’re overworked, they’re stressed out, they gotta have someone in a position, because they can’t handle all the work that’s going, so they kind of throw that person the job and then they get frustrated, because that person isn’t doing the work clearly and they feel like I’ve got to take a back and do this. I’ve got to put it on someone else or – that’s a really big mistake, I really wasted my time hiring that person, but if you can be really clear about why you’re hiring that person, what the specific standards are that you’re going to have that person do, you’re going to be much more successful in doing that. One of the things that I asked, this is part of the hiring system that we use is when someone leaves there’s five questions that we ask that everybody who’s on the hiring – if it’s myself and my wife.


The exist analogy you were talking about.


The exist interview, yes. So, after we’ve done that, we kind of go through why should we hire this person or someone else. How we rate this candidate, how do we feel they would interact with other members of the team, because that’s really important, what current skills do they have that are going to help them take off right away. What skills might they be lacking. Those kinds of questions are all really important that you ask and think about and do.

So, when that person leaves the interview, we ask them some questions too like, you know, here’s what – now that you’ve been here for a couple of hours and you’ve watched what we do, I want to kind of tell me back what specifically you see your role at the company would be and tell me two or three ways specifically if we do hire you that you’d be able to maximize the effectiveness that we’d have in that role.

So, that’s one question we’ve asked, another one would be, like I’m curious, you did a great job today handling this, let’s say that this particular situation came up and it’s a challenge that you just recently had or something that maybe – someone dropped the ball and you’ve seen a hole in another system in your business and you say, if this happened, what would you do? And found out how they think on their feet, that’s really valuable and another good question, what did you learn from working here today and listen to what they say and that will tell you a lot about them as a person.

So, I think those are kinds of the questions of things that are really helpful, then once you hire them, then there’s a whole system of how do you get that person start it off right, so they can succeed and so I have 12 steps that I have of what – things that you should go through as you hire that person and 11 ways you can get the most out of people that you hire that I detail in the book, but I think that, again, going back to this is one of the most valuable parts of the book, one of the most valuable parts of any system is you got to have an assessment to say how well do we do, how well are we doing at this and so, at the end of each that section I have these little, on the scale of one to ten, ten being this is perfect and one being this is not ideal at all, how do you rate in ten or 12 different question. We’re kind of analyzing that system.

As you go through and see that, you say, wow, I didn’t think about that, where I missed that. I think that’s really the value with the hiring system is you know what you do to help people that you’re hiring have a great experience and you’re hiring the right people, you don’t make mistake, you can build a team that’s going to be cohesive, it’s going to really help you accelerate and put the foot on the gas and make your business get to where you want it to be.


Great advice. Jim, give out your website.


My website, Sound Laws of Success and on ther I have my podcast and then there’s also a book that I have there, Secrets of Implementation, you can download that if you like. So there’s 21 tips that I use to help me grow my business, you can download that for free once you put your email address in there.


Excellent, good stuff. Well, Jim, thank you so much for joining us today. Any final thoughts you want to mention just to sort of wrap this up?


Well, I think the key things that I mentioned is, is you gotta, don’t be overwelmed by the fact that you’re got to put systems in place. Everybody knows they need to put systems in place, but it’s probably the work that’s the most valuable that you’ll do in your business, but the people put off the most, because it’s hard. It’s not fun to examine parts of your business that are not working, but if you take time to schedule blocks of time out in your week.

So, let’s say you’ve got these 16 systems, if you can say, I’m going to work on my lead systems every Tuesday from 9 to10:30, for example. A 90 minute block. I’m going to work on generating two or three new ways I can generate leads for my business and you do that every Tuesday consistent, that’s going to be much more effective than just getting around to it once a quarter, once every six months, or not at all.

So, the recommendation that I would have is that to block – have a start and a stop time for when you can actually work on system development. Pick a day and maybe have two days a week or two blocks of time a week where you work on just systems development or maybe it’s lead flow system, maybe it’s your customer service system, maybe it’s your hiring system, but you sit down for 90 minutes and say, I’m going to work on improve this area of my business so that we have more money coming out of our business since this is the result of the actions I am taking. So, that would be my advice. Anybody can do that. Anybody can take three hours every week or 90 minutes or at least one 90 minute block and work on the systems development in their business to really help their business grow and be more successful.


I think that’s fantastic advice, because you know, when you get the systems working, it just becomes so much easier, you know? It reminds me of that old Saturday Night Live skit where they were in the little diner and it’s like cheese burger, chips, Pepsi, no Coke, Pepsi, remember that one? It’s hilarious.


Yeah, that was a good one.


But, you know, the point being that is the system and it’s just so critical to businesses. I think businesses live or die on just a few things really. They live or die on their brand and they live or die on their systems. The rest is relatively easy after that, so good stuff. This has been a great talk. Well, Jim, thank you for joining us and sharing some of this good advice.


You’re very welcome Jason, thanks for having me on the show. I appreciate it.


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