Stage 4 of Business Success: Welcome to the 1 Percent

Last year was a doozy for business owners, but it came with a silver lining. The number of people starting their own business hit a 13-year high. In fact, the U.S Census Bureau reported that more than 3.2 million people applied for employer identification numbers in 2020. Yes, many of these people are part of the gig economy or independent contractors. But new filings among business owners who tend to employ other workers were also up 12% over 2019, and at the highest level since 2007.

Sure, many of these businesses will fail, but many others will grow and thrive. This article is for the fabled 1% of those businesses. These top-level achieving businesses are rare. Only the top 1% reach Stage 4 of Business Success–The Systems Stage.

A True Business is Born

When it comes to creating systems, timing is everything. Some Business Owners and Entrepreneurs, or BOEs, try to develop systems right off the bat, slowing down progress and hindering growth. Others wait too long and find that their business is out of their control, that some departments are money losers, or that their margins are too thin, and they’re not sure why.

The time to create systems is in Stage 4 of Business Success. Remember that Stage 1 is Strategic Planning. Stage 2 is about specialization and reputation. Stage 3 is about synergy–finding smart people to run every part of your business. Once that is all in place, it’s time to create systems.

What are Systems, Anyway?

The practical definition of a system is any activity or group of activities that can run independently. BOEs don’t have to be there to ensure things get done. Systems are a way of inserting predictability, consistency, and reliability into every part of your business. You stop telling people what to do and start telling them how to do it. It’s time to rely on processes and systems.

The good news is that once systems are in place, the owner can step back a bit. Instead of running the day-to-day, they are managing systems and processes.

Instead of signing checks, your accounting team has a system for creating and approving expenses. You stop spending Saturdays analyzing the sales for the week; your team must now create those sales reports, analyze, and react. Systems assign responsibilities, establish checks and balances, and produce predictable outcomes.

How to Get Started

Creating systems sounds great, but it takes time and effort to get them in place. It also takes patience as people change their routines and adapt to the new systems. Get started by asking yourself:

? Does every employee at my company have a job description?

? Do they have goals and metrics in place to measure those goals?

? Have we created standard operating procedures for repeating tasks?

? Does each department have a budget?

? Do departments have a return on investment goals?

Next, take a look at company processes and think about ways to automate them, schedule them, or even digitize them. For example, many companies have gone through the uncomfortable process of transiting payroll into a cloud-based system. When this happens, employees must be trained to go online to check remaining vacation days and sick days or to request time off. Accounting must enter data into a new system. Managers must report sick days. Everyone complains. But once everything is up and running, suddenly, a cumbersome process becomes easy. HR spends much less time tracking employee time off. Managers feel more confident granting vacation time. Once the system is up and running, it automates several time-consuming tasks and makes review and analysis quick and easy.

You don’t have to invest in a new payroll system to see these kinds of benefits. Are you sending an employee to Costco every week for office supplies? Why not get toilet paper, coffee, cleaning supplies, water, and even snacks delivered each week? The same goes for office supplies like paper and toner. Not sure how much you use each week? Develop a formula for ordering and place an order once your supplies have reached a certain point.

This is also the time to think about outsourcing to a specialist who can do the work cheaper and faster. In this economy, almost any area of your business can be outsourced, including payroll, HR, accounting, marketing, sales, customer service, warehousing, mailrooms, transportation, legal services, and more. Think about your specialty and what your business is known for, and focus on that work. If you’re a marketing firm, of course, marketing stays in-house, but why not source out HR? If you’re a medical practice, doctors and nurses are essential, but you may be able to outsource accounting and payroll.

Don’t Forget to Monitor

It’s not enough to optimize systems. BOEs must also measure and monitor. I often advise starting by trying to make every business area 1% better and then measure and watch to see if your improvements are working.

In the earlier example, I recommended doing regular orders of office supplies. Let’s say it took your staff six hours a week to create a list, go to the store, return, and unpack everything. When you make a new system, and you’re looking for an incremental improvement, your new system can still spend five hours a week ordering and unpacking. They may tell you it’s just as much trouble to order it as it is to get it. But when you monitor and measure, you’ll know you’re saving an hour a week. It doesn’t sound like much, but what if you saved an hour a week for every employee? Small efficiencies add up quickly.

Real-Life Example

Like many companies, when my office brought in a new employee, we scrambled a bit. We hurried to name a “buddy” to show them around, slapped together some training sessions, and passed the new employee around in a desperate attempt to get them up to speed without disrupting everyone’s day. It wasn’t ideal.

So we created a new employee how-to manual for each of our training programs. We eliminated the last-minute drama that had been part of training and instead developed a well-thought-out process, with predictable steps, that everyone understood.

It took a fair amount of time to get these materials in place. Some people resisted it, insisting that each employee and training should be completely customized. Others complained that the preparation took more time than preparing on the fly. Of course, they were wrong. Now new training sessions are manageable. Several people in our office can conduct them. The process is methodical, measured, and easy to repeat again and again. Yes, it took some effort upfront, but the stress and panic have disappeared, and training is just another thing we do over and over—no big deal.

What’s Next?

Once you get systems in place and your company is running like clockwork, you’ll want to make sure everyone continues to follow processes. That doesn’t mean looking over everyone’s shoulders, but you should keep an eye out to make sure systems are working. Good systems are more than timesavers; they improve quality and consistency. That’s why Stage 4 businesses are in the 1%.