Building A System

When I first got involved in investing I originally looked at investing in Securities such as stocks bonds and commodities. I realized that I needed to have a system in place in order to control my emotions. One of the first systems was that I found was the turtle trading system that was designed by Richard Dennis. The trend following system that Richard designed can be found on Google very easily. He developed the system from a bet that he could take anybody off the street and teach them trading. The end result was very successful and many of those turtle traders now manage their own investment firms. They were primarily successful due to their adherence to the system, and how well defined the system was. Every step of the system had rules. They invested in bonds, commodities and currencies. They entered into a position after a breakout trigger, and they increased their position at set points using a pyramid approach. They had formulas to determine how much to initially invest, and how much of their portfolio was dedicated to any one asset class. Finally, they set a trailing stop loss to control their exit position. There was no room for guesswork and emotion. To make the jump from owning your job to owning a business comes when you can step away from the business and it doesn’t fall apart. The end goal is to replace ourselves with a system that executes itself through automation and delegation. If we want to duplicate the success of the turtle trading system in our own business, we need to have the same approach as Richard Dennis.

We start by laying the foundation. We need to know what we are investing in, what’s the entry point, what’s the exit point and what we are going to do while we hold it, how we decide to purchase, and what we do while we are holding the purchase. The more detail we can provide, the easier it will be to replicate. The second piece of the foundation comes from the financing. Where are we getting the funds for each piece, and how much we are investing. Next, we are going to isolate each component of the foundation into steps. Each step will have a process attached that is specific and repeatable so that if two separate individuals follow the process, they will both get the same result. This should cover value creation, sales, marketing, and value delivery. The last piece is finance. For this piece we take our system to financial professionals and develop a financial plan. The more you know and the more you have planned out prior to talking to financial professionals, the better strategies and advice they can provide when building your plan.

At this point we have isolated and created processes for each step of our system. We will need to identify Key Performance Indicators to measure the success of that step. Our system will have a flow through it, and we want to take measurements to identify possible bottlenecks. These can easily be identified by looking at the capacity and efficiency of the previous and following steps. If there is more capacity available, we can focus our efforts on the poorly performing step. We can rewrite the process, find efficiencies or further automate and delegate the steps to increase productivity. We can also look at scaling the business up to increase flow.