“The purpose creating a business is to sell it.” Michael Gerber.
Regardless of whether or not you’re thinking about selling your business, Gerber’s point is that a business should be structured and operate in such a way as to result in the highest possible business valuation. It’s not a sexy topic but the key ingredient in achieving this is systematisation.
For a business to function effectively, you should have systems in place that influence predictable outcomes. So once you have developed your business model, (Customer Segments, Channels, Value Propositions, Key Activities, Key Resources, Revenue and Cost Structures), in terms of what it is going to do and look like, consideration must be given as to how you are going to accomplish it. What are the key processes that must be in place?
Every system consists of a series of processes and each process consists of one or more activities that will involve inputs such as labour, raw materials, equipment, infrastructure and suppliers. So how do we actually go about putting together the procedures manual, or more simply, a guide as to “how we do it in this business”. Simplistic, but here are the steps:
- Make a list of every process that relates to the business. What are all the things that are done in the business?
- Each process involves one or more activities. Identify the sequence of activities required to complete the process and note the required inputs and the duration of the activity.
- Question why the process is done a certain way. Look for constraints to smooth process flow and ask the people at the coal face what can be done to improve the process.
- Finally, just document the system! The system will comprise a series of processes that will in turn consist of various activities. I would use the following headings: System, Process, Element, Process Owner, Outcomes & Objectives, Protocol, KPI’s.
Once all of these processes are documented and included in an operations manual, what is the payoff?
- You will gain a clear understanding of those processes that are critical to the success of your business.
- You will see an increase in profitability as productivity and efficiency increases in the business.
- Team member frustration will be reduced leading to improved morale and customer service.
- You will add value to your business.
- You will experience simple tasks being done much more quickly. Cycle times will decrease freeing up time for everyone in the organisation.
Sounds simple but yes it is difficult and requires discipline. But the payoff is certainly there and ultimately you need to think about getting your business ready for sale so that at any point you can extract maximum value from your life’s investment. Think systems and create a positive spiral in your business!
