How to add massive value to your business without spending a fortune!
Is this even possible? I hear you ask, or is it one of those clickbait headlines just to get you to read the article? Over the last ten years, I’ve been working with small businesses, and if there’s been one way of really adding massive value to the business it has been to systemise the functions within the business. This doesn’t necessarily require massive investment in complex equipment or IT systems and can be achieved without spending a fortune.
Let me explain what I mean. In days gone by, before the introduction of the electric starter motor, the only way to start a car engine was by physically turning the engine over. To get the engine going you had to turn the handle a couple of times, feeling for when extra resistance is felt, signifying that one of the engine’s cylinders is reaching compression, ready to spark into life.
This is when a firm swing on the handle is required, before backing off and seeing what happens. Hopefully, the engine would burst into life, and off you went. However, on lots of occasions, the engine wouldn’t start, or even worse the kick wouldn’t be quite right and the result could be a broken wrist. Even if it did start, If one cylinder is misfiring then the whole engine runs poorly.
What’s this got to do with adding massive value to a business. Well, one way of thinking about your business is to liken it to a four-cylinder petrol engine, each of the cylinders represents one of the four key systems in your business (Operations, Finance, Management, and Marketing) that need to be in sync with the others and firing automatically for your business to run smoothly.
This description of a business, as an engine works just as well for a small sole trader as it does for a large multinational, all businesses have these four functions. However, as much as all businesses have these functions they don’t necessarily have these functions operating as well as they should. Effectively they are hand cranking their business engine rather than using an electric starter.
Below is a brief description of each of the systems you need in your business.
Operations.
An operations system refers to a collection of processes used in the business that deals with the questions of ‘what’ needs to be done, and ‘how’ it needs to be done in a systematic way. The simple fact however is that most small businesses don’t have these systems in place. In the majority of small businesses, the way things are done has grown up organically over the years and is passed down from employee to employee using oral methods.
Often when I look into why things are done in the way that they’re done I uncover spurious reasons. For example, one company had a process for loading materials that was really awkward for the employees. It turned out that they were all following a procedure introduced by a left-handed employee many years ago that worked for them, but not for the vast majority of their right-handed employees. It’s quite common in many businesses to find out that they do things in a certain way because ‘that’s the way we’ve always done it’!
The thing is when chaos hits, businesses that lack systems or have broken systems are exposed, which is why for example customer service is difficult to master. If Johnny has to remember how to serve a customer because his supervisor is off ill that day, then there’s a good chance the customer will experience either very good service or leave disappointed.
Leaving customer experience to ‘chance’ is a symptom of poor operational systems and is a sin that lots of businesses are guilty of. It’s not a difficult fix, having documented operational processes and procedures is something that most businesses know they should have and can implement very cheaply.
Finance.
It’s the same with finance, ask most small business owners how much profit they made yesterday, last week or even last month and it’s a good bet that they won’t be able to tell you.
They’ll know how much cash they have in the bank because that’s the way they monitor where they are with the business, and this is why they get caught out when a big bill comes in unexpectedly.
The sin that most business owners commit is leaving the finance side of their business to others (their accountant or bookkeeper) thinking of it as purely a compliance situation. I.e. I’ve got to keep my business legal with the tax authorities be it sales tax, payroll tax, or corporation tax.
Knowing and understanding the numbers in your business, not just profit and loss, is a massive competitive advantage that most small business owners miss out on. Even knowing relatively simple metrics like customer acquisition cost (how much it costs you to get a customer) can make a massive difference to your business. If you know this metric and your competitor doesn’t it’s easy to out-compete them. Again, systemise your finance operation and you can start driving your business looking forwards because you’ll know the numbers that matter in your business.
Management.
The next cylinder in our business engine is the management cylinder. The purpose of this cylinder is to manage three things in your business:-
- The people in your business.
- The systems in your business.
- The time in your business.
People.
How you look after your people is key, Richard Branson put’s employees before customers using his employee-centric management system, saying that happy employees deliver great customer service, whilst unhappy employees don’t. I’m not saying that you adopt Branson’s approach to your employees but the point is that it’s a systemised approach to employee relations, and it’s by design not accident. By the way, I don’t think you would go far wrong if you did. It’s having the right people in your business that will allow you to a) grow the business and b) have time out of the business.
Systems.
Whilst every effort should be focused on making the systems in your business self-managing this is not always possible. Your management system should include a dashboard that monitors the health of the systems in your business. Regular reports from each of the systems will allow you to monitor the system’s effectiveness. For example, if you monitor the time it takes for raw materials to be converted into delivered products, then you can assess how effective your operation’s system is. If this metric changes then it could indicate problems in your operation’s system.
Time.
The management of time is a key function of any business. For many businesses ‘time’ is a fundamental commodity that they sell, think of Solicitors, Consultants, Tradespeople even activities like Hairdressing, they all sell time. Lots of these industries are very good at tracking and billing for time, however, not all are. The management guru Peter Drucker famously said “If you don’t measure it, you can’t manage it”. I recommend that small business owners monitor the time they spend in their business and the activities they are performing, and those of key employees. This way they can’t derive strategies to improve both.
Marketing.
The final Cylinder or system in your business is your marketing system. A marketing system’s purpose is all about conversions. It needs to be able to convert suspects (people you don’t know but match your ideal customer/client profile) to prospects (people you know and have a relationship with but haven’t bought) to customers/clients (people who have bought from you), to high-value customers/clients (people who buy from you on a regular basis). And do this on a consistent basis. Ideally fully automated but essentially systemised.
Ask most businesses for their operations manual and it’s a fair bet that they will have one, ask them for their marketing systems manual and I’m going to go out on a limb and say that they won’t have one. They hand crank every single order and customer they get. It’s what I like to call marketing desperation, you see they get an order, fill that order then go looking for the next one.
Having a systemised way of marketing your business to such an extent that you can predict exactly how many customers you will have and the value of them to your business is incredibly valuable and enhances the overall value of the business significantly.
Final Word.
Systemising your business is the first step in building a high-value self-managing business. It’s high-value because the business should not now revolve around the business owner and therefore sellable. It’s self-managing because others can take the processes and procedures and manage the business without the business owner’s involvement. The thing is until you have all four cylinders firing automatically you have to turn the whole lot over by hand. So your business maybe just a few months old or even 10 years old if you’re still having to hand crank your business then it’s time you started to build your four-cylinder business engine.
Want some help?
If you’d like to know where you and your business stand at the moment, why not book a FREE strategy session with me. During this highly valuable session, we’ll look at the 5 things you need to be doing to build a high-value self-managing business. Just hit the button below to find out more and book your session now.
Twelve intensive half-day meetings.
