Watching a business grow is one of the most rewarding things an entrepreneur can experience. But to elevate your enterprise to the next level, some fundamental elements must be incorporated into your business operations. At the top of that list are documented systems.
The key difference between being self-employed and owning a business is that a business can operate without the owner's significant and near-constant participation. Conversely, self-employment requires you to actively operate the enterprise. No enterprise will evolve to a true business without well-established systems.
When asked about systems, many small enterprise owners respond by telling you that they do it all in their heads. This may work on a small scale for mom-and-pop operations that have no desire to grow, but it will forever remain a barrier to building a large, enduring business enterprise. Every enterprise with an eye for growth should make systems development a priority from day one.
What are Business Systems?
Business systems are simply documented methods, processes and procedures for working through each of your operational functions. They must be created, developed and refined over time.
Why You Need Business Systems
Developing business systems has many more benefits than most small enterprise owners realize. Taking early, proactive steps to their creation can lead to many desired benefits as the business moves through its life cycle.
1. It's easy to get distracted when running a business.
New ideas pop up every day and owners and operators can get swept up in the hype of the latest business fads. Good business systems combined with a good business plan will help keep you focused on the relevant actions necessary to stay on course to achieve your targets.
2. Dealing with subcontractors, suppliers, distribution companies and other ancillary partners can become a source of frustration, delays and lost profits.
Having systems minimizes the unexpected. Partners know how you operate and can depend on you to run your operation consistently.
3. Your business should appear prepared, competent and professional.
For enterprises that may, at some point, deal with investors, documented systems are mandatory. Without them, you will not be taken seriously. Investors do not want to own a business that depends on the participation of one specific individual who tries to store the systems of the business in their head.
4. You've succeeded.
Your first location is up and running and turning a regular profit. With good systems in place, you now have some attractive options. Among them is expansion. With well-developed systems for human resources, marketing, finance and so on, you can now use them to replicate your success. Keep in mind that as you grow, you will likely need to expand your systems to include new areas such as distribution.
5. One of the most important benefits of good systems is that they will allow you to cash out.
If it's time to sell the business and use the proceeds to finance your retirement or fund your next venture, you have provided a roadmap that the buyer can use to step into your shoes, barely skipping a beat.
6. Onboarding and training just became much easier. New hires can follow a clear, consistent training plan to come up to speed much faster.
Less one-on-one time is required from co-workers when there is a well-developed training manual clearly explaining relevant work systems.
7. Consistency is the word that will most often pop up in a discussion on business systems.
Systems explain why a particular menu choice will look and taste the same at two different restaurant locations that may be thousands of miles apart. Customers expect it, but it applies to all areas of your business from quality control to store appearance and branding.
8. A business with good systems is an efficient business.
The development of systems can reveal bottlenecks and other inefficiencies that can then be revised and improved. An efficient business is usually a profitable business.
9. Many businesses have been threatened when a key employee with intimate knowledge of how undocumented systems operate jumps ship.
Properly documented systems can allow another otherwise qualified employee to step in and use the system manuals to come up to speed.
10. Business has been great and now you're thinking of taking that year-long trip on your boat with your family.
But can you just walk away for a whole year? Yes, and when you see an owner doing this, you see the signs of a business with well-developed systems.
11. No need to reinvent the wheel.
Without business systems, it's easy for participants to forget why they do things a certain way and forget lessons learned in the past by others. Good systems will keep you from straying off track or get you back on track more quickly when you do stray.
12. Is your To-do list getting too long? Thinking it's time for some delegation? Stop trying to do everything yourself.
With systems manuals available, areas of responsibility are more easily delegated. No need to ruminate about whether you explained all the relevant tasks and methods to the person taking over. It's all in the systems manuals.
Three general steps in system building: creation, development, and revision
To get started, collect what you already know. All businesses have some systems in place, even though they may be unconscious, undocumented and/or undeveloped.
Work from the general to the specific. Create a list of all business departments such as finance, marketing, distribution, human resources, and inventory and supplies. Continue to break it down further. For example, finance may break down into areas such as payroll, receivables and payables. When you get down to the actual activities, document specifics. Use the good old "who" (receivables clerk), "what" (send out overdue reminders), "where" (payroll workstation), "when" (twice monthly on the 15th and 30th), "why" (nudge clients to take action and maintain strong company cash flow), and "how" (use the automated computer software system to generate and send pre-written email reminders). Do this for each task needed to complete the relevant goals and objectives. Over time, make your systems as granular as necessary, but keep in mind that in real-world scenarios, a certain amount of flexibility is necessary.
Take advantage of your human resources. Enlist your people at every level to help you build your systems. After all, they often know how things run best, where problems tend to arise that may need attention, and are able to offer insightful and valuable solutions.
Everything changes and so will your systems. Rather than becoming complacent, schedule a regular or ongoing review of each of your business systems. You might say you want a system for managing your systems.
Keep it as simple as possible. Who hasn't faced the frustration of dealing with the red tape of a bureaucracy? This results when a chaotic patchwork of updates to systems occurs. It results from people updating a system without enough thought being put into how the updates fit into the current system and without the intent of keeping things as simple as possible.
If you're a serious entrepreneur who sees an unlimited opportunity and intends to take your business as far as it can go, you need to get started on your systems manuals. Is there anyone who shouldn't have systems? Yes. Your competitors.
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