For any business to succeed, it must first become a system so that the business functions exactly the same way every time down to the last detail
This guide provides an overview of how to build a business that is independent of you and is able to operate even when you’re not involved.
Small businesses are often great places to work because they are informal, and have far more flexibility and ability to respond quickly than their bigger, formally structured counterparts.
But what happens when the business owner is ill, or wants to take a few days off? What happens if they want to spend some time on product innovation, marketing and sales, training or planning, but find themselves far too involved in the day-to-day running of the business to be able to do so?
In The Cashflow Quadrant, Robert Kiyosaki highlights the danger of being responsible for everything, noting that when this type of business owner goes on holiday, so does their income. “True business owners,” he says, “can go on vacation forever because they own a system, not a job. If the business owner is on vacation, the money still comes in.”
During the start-up phase of a business, you are likely to be involved in almost every aspect. If it's customer-facing, you'll deal with customers every day. If it's a software company, you'll be writing code.
During this phase, effort will equal output. And you'll see the rewards of your hard work in the results. But at some point, the challenge of taking care of everything will begin to wear you down.
If you are passionate about what you do, chances are that the business will grow, you will acquire more customers, and suddenly you will find yourself unable to be everywhere at once.
It's at this point that entrepreneurs discover that hard work is simply not enough and they are not able to continue to run the business in this manner. That’s when it's time to stop working in the business and start working on the business.
This is why business systems are critical. They enable the business owner to extricate themselves from mundane daily operations and delegate to employees. Systematising a business means putting in place processes and procedures that can be replicated and are not dependent on any single individual.
Globally renowned business coach and author Brad Sugars, says that one of Action COACH's 14 points of Culture is about systems: "I always look to the system for a solution.
If a challenge arises I use a system correction before I look for a people correction. I use a system solution in my innovation rather than a people solution. I follow the system exactly until a new system is introduced. I suggest system improvements at my first opportunity."
Systems also enable you to set formal benchmarks in place by which to measure ongoing tasks. They allow you to be more objective when it comes to staff performance appraisals. it enables you to manage the promotion of employees and to expand your staff numbers more easily.
And of course, it means you can take a holiday without getting too stressed about what's happening back at the office.
Which types of businesses need to systematise?
The simple rule is that if you employ staff, you need systems. If you aim to grow the business, you will have to systemise it to facilitate growth. Remember that if you plan to sell the business at some point, you will have to demonstrate that it is not dependent on you – having systems in place will make it that much easier to sell your company as an efficient and well run entity.
How to systematise a business
Unless a system is documented, it can't be repeated properly. You may have a system that has developed over time and works well because the people who do it have been doing it that way for a long time. But if that process is not written down, how can you train others to create the same results?
Developing your own set of policies and procedures – creating systems – will help your business run more smoothly, whether you are there or not. The best way to implement systems is to create an operations manual. This will be particularly important when you start to hire staff.
You'll want them to understand every detail of how you want the business run, from how customers are greeted when they come in the door, to what day of the month you order supplies from a vendor.
An operations manual maps out exactly how things get done in your business. Start with your company's mission statement, the products and services it offers, and any goals or values about your business that you may wish to communicate to others. Include an organisational chart and job descriptions.
You may also want to focus on distinct areas:
- How-to procedures, such as how to open and close your office, store, warehouse or other physical locations
- Phone numbers, e-mail addresses and other ways to reach clients, vendors, suppliers, insurance companies, the security company and other important contacts
- Business-related policies, such as whether you issue refunds or accept payment by credit card
It’s clear that the operations manual is a tool kit for replicating your knowledge of your business and what you do on any given day. As your business grows, you may wish to have separate manuals for different departments or divisions.
Many businesses can be broken down into five main categories:
- Organisation – everything that is involved in the day-to-day running of the business.
- Marketing/Sales – how leads are generated, how they are followed up and how you handle customer service, for example.
- People – include staff positions, job descriptions, staff records.
- Technology – all the hardware and software that is required to keep your business up and running.
- Capital – financial statements, budgets, profits and cash flow
You may want to add categories that make sense for your own specific type of business.
Quick tips to create your own operations manual
- Identify the processes of your business
- Chart and write procedures to show:
- Get the team excited about it
- Create work instructions (and bring existing ones into the system)
- Create forms and databases (and bring existing ones into the system)
Develop a Franchise Mindset
A franchise is a business format that is replicated over and over again. Adopting a franchise mindset essentially means that you behave and act as though you are going to franchise your business, like MacDonald’s or Nando’s.
The founder of the franchise creates a system that delivers a product within very particular parameters (quality, taste, experience etc.) at multiple locations nationally and globally.
To do that, the creator of the franchise needs to:
- Understand exactly what value the business should deliver to the customer
- Create a set of processes that can be operated by people with the lowest possible level of skill
- Capture all processes and practices pertaining to the operation in an operations manual
- Provide training and development to new employees so that they are able to effectively learn the system
- Be deliberate about the culture they wish to create within the organisation
- Specify how the brand is to remain consistent across locations
Michael Gerber, author ofThe E-Myth Revisited, says there are several processes involved in the systems development cycle implemented by franchisors. Gerber maintains that your systems strategy is your business strategy, and the business systems you put in place are your business. This goes back to the idea of the franchise prototype – if you do it right, your business will run itself, systematically and predictably.
“You have to think strategically about what systems will have a meaningful impact on your business,” says Gerber. “Is it in your best interest to come up with a system that properly routes a prospect through your phone queue?
Maybe. Or what about a system for shipping out packages? Possibly. The strategy will be different for every business; the key is to exercise your best judgment on what system to begin with that will create the result with the biggest impact on your business.”
Gerber stresses that systems should be dynamic. “When you notice that you aren't getting the results that you expect from a particular system, you might be tempted to jump to an innovation phase, to step in and immediately implement changes you think will help. Resist this temptation! Don't even think about it until you've taken a good hard look at what's really going on.”
Systems evaluation is an essential (but often forgotten) step in understanding your business better. By taking a good hard look at your systems and their intended results, you can determine where innovation (or possibly elimination) needs to occur.