Business Owners: Learn How to Use Power Tools

Starting a business is hard. It takes bravery, optimism, hard work, and a special kind of craziness. We’ve all heard the statistics. Only about 20% of companies make it past the two-year mark. Only about half of all business make it to the fifth year.

With so many challenges working against you, wouldn’t it be great if you had some big, meaty tools in your business toolkit? Not just chisels and screwdrivers, but chainsaws and jackhammers so you could cut through big issues?

In The 7 Stages of Small Business Success, I talk a lot about the growth cycle of a successful business and also point out some of the challenges organizations will have to address to survive.

Without getting too far into the weeds, the first three stages talk about how to design your vision, position as an expert, and how to assemble your team. And then comes Stage 4.

Welcome to Stage 4: The Systems Stage

Many business owners and entrepreneurs (I call them BOEs) love Stage 4. That’s because at this stage, your profit equation gets way better—you start to make a lot more money without expanding your effort exponentially. When this happens, you’ll find that you have more flexibility in your schedule to do the things you love. (Remember how you used to do stuff, before you started the business?) You can begin to think about travel and doing some of the other things you enjoy.

What is the source of this liberation? Systems! In Stage 1, you decide on the eco-system of the business (what kind of business you will be such as a franchise, licensing company, SaaS, recurring revenue model, project-based, etc.), and then, ultimately, create the recurring processes that will implement the designs set forth in Stages 1-3.

When your business gets to Stage 4, you start living the life you might have fantasized about when you started your business. Up until this point, you had a job running a business, and it was probably pretty demanding. But when you reach Stage 4, you’ve got a business, which is way better than a job, BTW. Now it’s time to rethink the ways you do things. You built your business by hustling, being 100% passionate, and pitching in to do all kinds of things on your own, just to get them done. But in Stage 4, it’s time to step back and figure out how to develop reliable systems. Sounds great, right? But for some of us, building a business that runs without us doesn’t sound great—it feels risky.

So, What are Power Tools?

Power tools will help you minimize the risk (real or perceived) of creating systems that run without your direct, daily supervision. These are efficient and consistent methods you can use to build rock-solid systems. Power tools help build the systems that enable you to scale up without losing control of the things that made your business great in the first place. These tools will help you increase efficiency over time while improving your own quality of life (after all, who wants to work 18-hour days forever?), your ability to manage a growing business, employee satisfaction, and (woohoo!) profitability.

Power Tool: Shaving

If you’re following the process mapped out in The 7 Stages of Business Success, you know that customer service is your number one priority. Team building is number two on the list. But there’s also a long list of tasks, to-dos, and duties that fall outside these top two priorities. Even if they’re not your personal priorities, they nonetheless take up buckets of your time. That’s why you want to get comfortable with the technique of shaving.

Shaving off time. Shaving off effort. Shaving off wasted dollars.

When you’re looking for places to shave, start with tertiary, or third-level, tasks. There are probably dozens, maybe hundreds, of changes, big and small, you can make that will give you more time to focus on your priorities. For example, instead of sending your accountant to the office supplies store each week, should you have a standing order delivered? Instead of increasing your accounting staff, should payroll be outsourced? If you hire an HR firm, will that free up sales managers from recruiting new employees (so they can focus on sales?)

Look closely at every area that is not among your top priorities and think about the types of incremental changes you can make. Shaving can reap big rewards, giving you and your team more time and more money, without decreasing performance. What is it worth to you when you shave away minutes or inefficiency? Do this math to determine your Fixed Cost per Minute:

Start with the Total Fixed Expenses per Year

 ÷ 2000 hours per year (adjust the number to reflect your actual number of operating hours)

 ÷ 60 minutes per hour

= Fixed Cost per Minute

Power Tool: Consistency

When your teams usually do what you want, that’s good. When they consistently deliver the goods, that’s great. Consistency is the difference between “good enough” and “excellent.” And this kind of dependable performance can’t happen without making sure everyone understands expectations.

I know, I know. Your employees feel like training sessions and instructional videos are a waste of time. They might roll their eyes at how-to manuals. They want the freedom to create their own paths to success. But it’s your job to ignore this kind of push back. Consistency is foundational for any large company that succeeds year after year. Maybe you’ve heard of McDonald’s, Apple, Amazon, Zappos, Marriott, and AT&T? These are companies that rely on training and consistency among thousands of employees, from cleaning crews to CEOs, and that doesn’t happen by just letting them “figure it out.” Training sets the standard. Consistency enforces the standard.

For example, when a customer returns an item for a refund, what is your policy? How do you deal with complaints? Non-working products? People who just changed their mind? Make sure everyone dealing with refunds knows precisely what to do.

If a vendor requests payment upfront, is your accounting team authorized to cut that check? What other processes and regulations does accounting need to follow? What kind of oversight is in place?

When your sales team pitches a new client, what tools are they expected to use? What messages should they convey? What lists are they using? Are they allowed to negotiate price?

You get the idea. You must develop policies that are well-considered and mapped out in ways that make them easy to understand. (But you don’t need to do this yourself. There are consultants that can do this for you.)

While some people will initially push against the new parameters, building a culture that relies on procedures and protocol actually creates a shared understanding among your employees. While some existing employees may bristle against change, new employees will embrace well-developed training programs. Your systems and guidelines are there to reduce hesitancy and doubt and will ultimately allow your teams to operate more independently. When they know the rules, they’re more confident moving forward faster.

Power Tool: Measuring

You’ve heard the term “flying blind.” Without measurements, you and your company are flying blind, and I don’t have to tell you that this is NOT good. Each time a BOE approaches a new task or initiative, they should ask themselves what results they expect. That means you must become skilled at measuring results. In addition to shaving, you must be clear about the gains you’re expecting and figure out how you’ll evaluate those gains. Sure, writing down a plan for these types of initiatives and mapping out the results you expect may seem tedious. But it’s well worth the effort.

For example, if you want to give more responsibility and accountability to your head of operations, that person deserves to know what you expect from them. You should map out your intentions and goals and how you’ll be measuring that person’s success. After all, if you don’t spend time upfront setting up clear expectations and goals, how can the head of operations meet your expectations?

It’s also a good idea to set up meetings at certain milestones. These meetings are scheduled opportunities for your head of operations to share with you all the ways they’ve met your expectations, or, if they fell short, you can further explain what’s needed to achieve success.

A True Business is Born

In Stage 4, you will shift attention a bit. While you may have been hyper-focused on sales and employees in the past, now you’ll spend more time developing systems. At first, you got everything done by finding little corners of time to handle it. In Stage 4, instead of rushing around to take care of all kinds of tasks on nights and weekends, you’ll put systems into place that create consistency and predictability.

For example, you may decide to outsource bookkeeping. Or you reserve Fridays for bookkeeping tasks. Or you meet with an accountant every Friday. Whichever option you choose, you’re creating a system that assigns people, time, and effort to each function. Instead of doing a little bit of it here and there, you set aside a time to deal with these kinds of tasks, and the people around you understand this schedule and plan around it.

After all, how many employees would stick around if your business issued paychecks whenever they could? How many accountants want to spend a part of each day chasing down the president to sign checks? How many cleaning services are happy to let you send their monthly fee whenever you get around to it?

By developing a systematic approach for each part of your business, whether it’s accounting, marketing, sales, customer service, innovation, or operations, you enforce discipline on yourself (If it’s Monday, I have my weekly meeting with the head of operations.). You’ll also allow others to organize their efforts around your systems (It’s Thursday—the sales team will be in to review this week’s sales numbers.)

A well-developed system minimizes rapid-fire directions and last-minute fire drills. Instead, you have employees who are empowered to take the initiative, solve problems on their own, increase short-term effectiveness, and create long-term time efficiencies.

What Do You Do Next?

Many BOEs left their last jobs because they felt weighed down in analytics, meetings, and reports. After all, BOEs are doers. But that doesn’t mean you don’t need to use the power tools in Stage 4. To recap:

• Develop a list of tertiary tasks in your business—everything you and your team do that doesn’t directly contribute to profit, customer service, or team building.
• And then think through ways to shave down, create efficiencies, outsource, delegate or minimize their impact on your time and on the time of your team members.
• Develop operating guidelines, job descriptions, and policies for all parts of your business.
• And finally, create goals and measure success.

Want to Learn More?

The principles of business success, including more on the nature of all stages of business development and profitability, are covered in my best-seller, The 7 Stages of Small Business Success. You may also find helpful advice the book I co-wrote with Caryn Kopp, Biz Dev Done Right, a #1 Best Seller on Amazon.

And, of course, I’d love to hear from you directly. Visit my website or shoot me an email….What is your Fixed Cost per Minute? Where are you stuck? What Stage are you in currently? What is your dream Stage?