John Chow presented the other day at our Dot Com Lifestyle meetup, and the topic was Systems. How to create your system and what type of systems there are available out there. This is a recap of the meeting and how I feel about the whole thing. Mostly these are my notes.
The word system is really just a way to describe a whole process; A to Z that helps you get something done. In this case, the purpose of the system is to make you money.
The reason most businesses fail in the first year or two after they open is because they don’t have a system. They don’t have a way to repeat success and they’re usually shooting blind hoping to hit their target.
That’s just the harsh reality. The idea behind your business may be great, but it’s hard to duplicate and scale. The product may be the best out there but only one person knows how to make it so the business stalls. The customer service component is not there so customers don’t return. Maybe the product and service is great, but there is nobody marketing and calling up or following up to close sales.
As entrepreneurs, the options are nearly endless. We can start a business, we can buy a business, we can buy a franchise, or we can license a business. You can do all these offline or online. I prefer running my business online. Less overhead, better hours, more profitability potential.
You could start a business and have every component of the business planned out and have staff to help you get it all done. You’ll need accounting, human resources, production, quality assurance, fulfillment, returns or complains, and much more.
Using the traditional business model, you’ll need capital and you’ll need quite a bit of it. You’ll likely make money after 18 to 24 months. You’ll be in a good spot if you can pay your bills and have a little spending cash, but profits could take a while.
That is if you survive that long. This is more or less the traditional path of most small businesses.
If you have money or a big loan, you can buy an existing business. You’ll need to do research, find an owner willing to sell for a good price. Then if you get all that done, you’ll need to figure out how to run the business so it doesn’t go broke.
This is another option that is quite expensive and not necessarily lucrative. Maybe you’ll make money in a year or two, maybe in five years. But you can at least see if the business is good on paper, if it strikes an emotional cord with you to the point where you know you can keep it profitable and grow it.
Ask yourself, what am I going to bring to the table to earn more money with this business?
There is also the idea of a franchise. Franchises are really good systems sometimes. At least the good ones are, but the good franchises come at a price. Many times, a franchise is worse than a job in terms of financial burden, time commitment and quality of life for the owner, in other words, not very good.
But the best thing you can do for your business is to create a system. Start developing documentation, eliminate roadblocks to getting things done, and start creating a step by step guide on how to run your business.
This is the first step towards creating a system. The process of creating a system varies on every instance, but it is something similar to this:
Analysis > Documentation > Process Improvement > Testing > Design > Training > Deployment > Profit
Follow that short little chart above. Analyze the business to understand all the components that generate revenue and also those that produce losses. Document this information and create guides to explain how each component works with each other. Based on this initial analysis and documentation, try to eliminate those things that can’t be automated or delegated and do a round of process flow improvement.
At this time you can test the changes you’ve made and correct any incongruencies along the way. Once you have a process, tested and documented, you can train others to do the work for you and thus allowing you to add new products or continue fine-tuning the margins on the current products. Training is necessary if you want to delegate your tasks.
Ideally you’re doing many of these steps in a sequence but you are doing this on a staging or training environment. This way you’re getting live feedback from live data and experience, but only in a small test environment that won’t affect regular operations mode.
If you’re changing a cash register system for example, don’t just change it in all your stores all at once. Do a pilot test with a small group of cashiers and to make sure all the kinks have been ironed out. Keep Testing and improving and designing.
This way, when people are ready to deploy the changes, everyone involved is familiar with the changes and how to handle them.
Finally, you put things into action when you deploy this and hopefully you will make a profit. You may need to loop through the entire process several times or loop through a few steps over and over until they’re smooth and efficient.