In this article we’re going to have a look at business systems.
This is by far the most overlooked aspect of running a successful business.
We’ll look at what they are, why need them and how they can help you build massive value in your business.
What Are Business Systems?
In short, business systems start with documented procedures and processes that allow your business to run without you.
This is often referred to as an operations manual and its purpose is to capture the collective “know how” of the business.
The poster child for business systems is McDonald’s. This is a complex, worldwide, multi-billion dollar business that is essentially run by pimply teenagers who can’t even be trusted to make their beds.
How do they do this?
They manage to run this hugely successful and profitable business because they have amazing business systems. Their operations manual covers everything from hiring to product delivery to customer interaction.
Why Business Systems Are Often Overlooked – AKA Don’t Make This Expensive Mistake!
There are two major reasons why business systems are overlooked by many small business owners.
The first reason is that business systems are “back office” functions. Unlike the latest marketing strategies, sales techniques or other highly visible aspects of your business, good business systems are considered by some as boring.
While building them may indeed be boring, the incredible power they give you is anything but.
The second major reason that business systems are neglected is because of a perceived lack of urgency. When a business is small or just starting out, there are seemingly much more important things to do like sales, marketing and order fulfillment.
With all of these important things vying for the increasingly scarce time of the business owner, business systems seem like something that can be put off until later. However, just like any other accumulation of neglect over time, it rarely ends well.
Why You Want Systems In Your Business
It’s a sad situation when a business owner goes to sell their business and finds out after putting in many years of hard work, that their business is worthless.
It’s not so much that the business itself is worthless, it’s that they ARE the business and without them there is no real business to sell.
In cases like this, they can’t sell it for any kind of reasonable sum beyond the value of their stock and maybe a small, nominal amount for “goodwill”.
There are numerous benefits to implementing systems in your business. Here are some of the most important.
It builds a valuable asset. It’s nice if your business gives you a great cash flow to fund your lifestyle. But wouldn’t it be fabulous if one day when you decided it was time, you could sell your business and have the biggest payday of your life?
You can only do this if you build the value of the business and that can only happen if it is a system that can continue running without you.
Leverage and scalability. Systems give your business the ability to expand. You can replicate your business in other geographic areas yourself or by franchising or licensing the rights to your business system. Many fortunes have been made this way.
Consistency. Consistency is one of the keys to delivering an excellent customer experience. You may not like the food at McDonald’s but one thing you can say about them is that wherever you go they deliver a very consistent experience.
Lower labour costs. When you and your staff don’t have to waste time and effort re-inventing the wheel each time, this improves your efficiency and reduces your labor costs.
Your Business And You
Let me ask you a question. If you went overseas for six months leaving your business behind when you came back would it be in better or worse shape than you left it? Would you even have a business left?
If you answered negatively to either of these questions, then it’s likely you don’t have a business – rather you ARE the business.
Many small businesses, especially when they are sole operators or where all the partners work in the business, make the mistake for reasons outlined above, of not thinking about systems.
After all, the business is small and the founder or founders perform all roles.
Unfortunately, this thought processes dooms them to staying small and remaining a prisoner in their business.
They often find themselves in a catch 22 situation. They have no time to work on the business because they are too busy working in the business. And they can’t get away from the business because they haven’t developed documented systems and processes.
So they’re stuck in a business that has become a self-made prison.
Don’t get me wrong, they may be financially successful. Their business may be thriving with a loyal base of customers but the problem is they are stuck – shackled to their business.
If they were to leave or get sick for an extended period of time, their business would cease to exist.
The problem is that all the “know how” of the business is stuck in a silo between their ears.
The only way out is to make time to create and document these business systems.
Thankfully this daunting process is not that difficult when we break it into chunks.
In our next article we’ll start this process and go through some of the practical first steps of creating documented business systems.