Investing 101

Business systems can help you build massive value in your business. These are a group of documented procedures and processes that allow your business to run without you. Often referred to as an operations manual, its purpose is to capture the collective “know how” of the business. Let’s take a look at and use the multibillion-dollar fast food chain, Burger King, as the poster child for business systems, considering it is essentially run by teenagers who can’t even be trusted to make their own beds in the morning. How is this accomplished, you ask? They run this hugely and wildly successful and profitable business because they have time tested and proven business systems. Their operations manuals cover everything from hiring and customer interaction, to product delivery.

Let’s take a look into two major reasons why small businesses overlook implementing business systems. Reason number one is, unlike the latest marketing strategies and sales techniques or other highly visible aspects of your business, business systems are back end or back office functions and are considered by some as less important or boring.

Reason number two that business systems seem to be neglected is because of a perceived lack of urgency in getting them done. When the business is small, the seemingly much more important things to do like sales, marketing, and order fulfillment take priority over building and implementing a procedures manual.

With all of these important things demanding and requiring the increasingly scarce time of the business owner, business systems seem like something that can be put off until later. However just like any other accumulation of neglect over a prolonged time, it usually doesn’t end well.

It’s a sad situation when a business owner goes to sell their business and finds out after putting in many years of hard work, that their business isn’t worth much at all and not even close to what the owner perceived the value to be. It’s not so much that the business itself is worthless, it’s that they are the business and without them there is no real business to sell. In cases like this they can’t sell it for any kind of reasonable amount, and if they can sell it to somebody based on the value of their stock maybe they will come by an investor that sees the potential through their own vision. There are many benefits to implementing systems in your business. Here are some of the most important.

If built right, it’s a valuable asset: It’s nice if your business gives you a great cash flow to fund your lifestyle. Wouldn’t it be great if one day you decided it was time, and you could sell your business to the highest bidder and have the biggest pay day of your life? You can only do this if you build the value of the business and that can only happen if it is a system that can continue running without you.

Leverage and scalability: Systems give your business the ability to expand and grow. You can replicate your business and move into other geographic areas yourself by franchising or licensing the rights to your business system. Many fortunes have been made this way.

The Cost of Labor: When you and your staff don’t have to waste time and effort reinventing the wheel each time, this improves your efficiency and reduces your labor cost.

Consistency: Consistency is one of the keys to delivering an excellent and predictable customer experience. You may not like the food at Burger King, but one thing you can say about them is whenever you go, they do deliver a very consistent experience.

If you want to determine if you have a business versus if you are the business, here’s a question I’d like you to ask yourself. If you went overseas for seven months, leaving your business behind, when you came back would it be in better or worse shape than you left it in? Would you even have a business left when you came back? If you answered negatively to either of those questions and you ARE the business. A mindset and a business plan modeled like this dooms your business to staying small and you remaining a prisoner in your business. Many real estate investors often find themselves in a catch 22 situation. You have no time to work on the business because they are too busy working in the business. And they can’t get away from the business because they haven’t developed documented systems and processes. So they become stuck in a business that is become a self-made prison.

“If it ain’t broke, don’t fix it”, that’s what my mom always said. She meant to imply if something is working don’t mess with it, there’s no reason to try and make it better. In business I like to apply that same motto, and apply it to something I call “systems modeling”. What I mean is this: if after you do your exhaustive research on a subject matter, and you find something similar to what your system goals are, you can model your work and system flow after that proven method. Don’t reinvent the wheel, you have to be careful with modeling though because this does not imply or suggest that you copy someone else’s work. Instead this idea suggest that you take bits and pieces of what you need that can apply to you and your business systems, rearrange it, reword it, and make it your own. Unless you are in an arrangement where copy written work is given to you to use or expressed consent is given to use someone else’s material exactly, this could get you in the hot water legally. Do not plagiarize.

Franchising and licensing are ways that one gets access and rights to use another company or owner’s material but that’s not the only way. Another way which works for some is to join a membership, club, or become a contract employment where access is given during the timeframe of that membership or contractor agreement. Either way this is a great strategy to leverage the work, materials, processes, and systems that someone else has already taken the time to develop.