Systemise your business

If I had a dollar for every time I heard people say they are either too busy to have a holiday, or they couldn’t leave it to others to run the business while they were away, or it wouldn’t be a holiday as they would be tethered to their emails and phone calls and disengaged from their families, I’d be able to go on holiday and still make money.

It doesn’t need to be like that. Let me tell you a secret – well, ‘secret’ is probably the wrong word as what I’m going to tell you is what most small business gurus will tell you – systemise your business.

Michael E Gerber of the E-Myth books fame, Dale Beaumont founder and CEO of Business Blueprint and author of the Secrets Exposed series, and Koos Kruger founder and CEO of Business Companion all give the same advice.

Let’s look at an example.

Larry the Landscaper is super busy and works around 100 hours each week. He gets up, goes to work, comes home, and either falls asleep in front of the TV or drags himself straight to bed.

Larry is working in the business rather than on the business and has really created himself a job and not a business.

Larry’s philosophy for coping with the workload, or not coping as is probably the case, is ‘just do it’, rather than figuring out how to get the work done using innovative systems to produce consistent results.

Now, I concede, that this is easy in theory and hard in practice, but it takes continual steps forward to climb a mountain. So, make time to systemise your business.

Systemising

Josh Kaufman in his book The Personal MBA – Master the Art of Business describes a system as:

"… a process made explicit and repeatable – a series of steps that has been formalised in some way. Systems can be written or diagrammed, but they are always externalised in some way. The primary benefit of creating a system is that you can examine the process and make improvements. By making each step in the process explicit, you can understand how the core processes work, how they are structured, how they affect other processes and systems, and how you can improve the system over time."

Systemising is the process of documenting everything you do in your business – from answering the phone and opening the mail, to pricing work and after-care service. There are many ways to do this and some aren’t as daunting as you might expect.

Here are some ideas:

Over the course of a week write down what you are doing – sort of like keeping a log book. Use short sections of time and be quite specific. Use this as a starting point to document the tasks you do every day.
Use voice, video or screen capture technology to document the tasks; for example, answering the telephone.
When training someone, get them to document the task they are undertaking and then review and refine it. This might take several iterations.
Create an intranet site where your documentation and videos can be stored and accessed from anywhere. It’s very easy to do this. You create a Google Sites account and then a sub-domain to your website with the URL going to Google Sites.
Make a start. The most energy you spend to get something moving is getting it to start.

So, what does documenting and systemising your business do for you? Here are some of the advantages:

It clarifies your thoughts and relieves stress.
It can be used to train staff and provide a resource for staff to refer to, which will increase your staff’s confidence.
It makes you question if there is a better way to do something (part of working on the business rather than in the business).
It creates the ability for a task to be replicated the way that you want it to be done, without you actually doing it.
It lets you guarantee the quality of work because your staff will follow the same process.
Your uniform processes are simple to audit.
Staff will feel relieved because there is structure.
It lets you sit on a beach in Bali knowing that tasks are being performed the way you want them to be done.

Without putting systems and processes in place, your business will become all-absorbing, with endless tasks to complete – like painting the Sydney Harbour Bridge. However, when faced with the reality of their all-absorbing tasks, or finding an alternative, most business owners would rather live with their endless tasks than risk the short-term frustrations of systemising their business.

Systems and processes allow others to share the load. These people then become what a studio recording is to Taylor Swift. A Taylor Swift song can be played by millions of people all at the same time. It sounds the same every time it is played, and Taylor Swift collects a royalty every time the recording is played. Create a recording – a system – of your business, your talents, your way of doing something and then, like a song, replicate it, market it, distribute it and manage the revenue. Without putting systems and processes in place, your business will become all-absorbing.

Create an asset

If you systemise your business, you are creating an asset and increasing the value of your business. The value of that asset is directly proportional to how well the business operates. And how well your business operates is directly proportional to the effectiveness of the systems you have in place and upon which your business depends. Your business no longer depends on you, your staff or other people, but on the systems.

As I said in my book Run Your Business Better, most small businesses are actually not a business but a job for the owner. What would happen if something happened to that owner and they couldn’t work for a while? Say they had an accident and couldn’t work? Sure, they might have income protection insurance for the period they were out of action, but what happens when they are ready to start work again? There are no jobs in the pipeline and customers and clients have moved away from the business and found alternative service providers.

What happens if you want to sell up and retire? A lot of small business owners have not even considered that they could sell their business, so when they retire they are happy to just know that their customers or clients will be looked after. It hasn’t occurred to them that their business could be worth a lot of money.

You probably have an idea about what your business is worth to you but that is based on your earnings (I think of it as a salary for the owner for doing a job – not for building a business). Without you, though, there are no earnings, so any prospective purchaser is only going to pay for the value of the assets such as any tools and machinery they are acquiring (and probably at a fire-sale value). Systemising your business creates an asset – a business – that can be replicated without you. And then you’ll start to see the value of your business increase.

Let me illustrate.

Henry is a sole trader home handyman. He has an operating profit of A$100,000, which has been steady for the past five years. He also owns tools and a van worth A$20,000. Henry pays himself the whole A$100,000 as a dividend each year. Henry wants to sell the business and retire. What is the business currently worth?

Without systems in place, the maximum value of Henry’s business would be A$20,000 – the value of the tools and van. With systems in place, the value of the business could be several times the operating profit plus the tools and van. So, if Henry spent one day a week for a year systemising his business then his operating profit may drop that year, say to A$70,000. But his business might be worth A$300,000. For a A$30,000 investment, he is getting a return of A$300,000 – sounds like a good investment to me.

There are many different ways to value a business, but the bottom line is a business is only worth what someone else is prepared to pay for it.