To build a real business is probably among the hardest thing to do in this life. The reason is that a real business is only achieved after certain steps are taken and executed properly. This article will explore the ways you can build a real business.
Most small business entrepreneurs start off on their own or with their spouse and do everything at heart. They wear many hats, from marketing to finance to cleaner and errand personnel for their business. In this stage of being an entrepreneur, the business owns the entrepreneur. Entrepreneurs at this stage would have quit their jobs already and so at this stage, they have simply employed themselves to their small business. They work long hours (much more than their previous job) and find themselves almost burning out. The average business owner works 72 hours a week on their business.
Fortunately, their perseverance pays off, and they plod on until they improve sales and get profitable. They can hire some people to help them out but they still make the key decisions, and they are the rainmakers still. The business would die a quick death if the owners stopped working. This level is still not considered to be a real business yet. This is because the business still owns the entrepreneur. The owner if absent or gets sick for a long time will cause their business to fail at this stage.
Yes, the entrepreneur has a business, but it cannot be considered a real business until the business no longer owns the entrepreneur.
Below are some necessary ingredients to building a real business.
To build a real business, you have to create systems. This means documenting all the processes in your operations and optimizing them to ensure efficiency and effectiveness. Your task at the start of the running of your business is to document and make sure the system that you have developed can be done by others once the systems in your business have been taught to your team.
So how can you document your business and build systems? Here are some ideas you can use to create systems for the different processes in your business.
Step by Step instructions
Spreadsheets with built-in formulas
The idea is to be able to show and teach these documents to your employees so that they will be the ones to do these tasks and free yourself from your business so you can finally be a business owner and not just self-employed.
For example, finances can be systematized through spreadsheets with built-in formulas. Your staff has to simply fill in certain figures like sales and expenses. The spreadsheets will automatically calculate profit and other important ratios that you as the owner should be aware of.
Templates can be created so that many processes in your business such as hiring, cleaning, ordering of supplies and raw materials will be systematic and easy to track using the templates you have developed while you were still running the business on your own or with some employee assistance.
Other System Tools
FAQs are excellent documents for your customer service staff. They can easily familiarize themselves with the common questions that customers have regarding your product or service.
Step by step instructions is perfect for routines and procedures in your company, e.g. from how to avail of leave, to how to use certain machines or tools in your company.
The tools mentioned above are excellent ways to document and systematize your business while you are still heavily invested in your business. Once you have perfected and optimized these tools, you will be able to franchise your business in the future because the systems are in place. Franchises are a popular way to expand because all the costs and most of the risks are taken upon by the franchisee. So if you wish to expand quickly and at the same time loosen up the grip of your business on your time and effort, you need to systemize as soon as possible the different processes in your business.
Creating an effective team
To build a real business means to form an effective team. This is not just finding extra hands to help you with time-consuming tasks. This step involves getting key personnel aligned with your vision that will help run the key departments and processes of your business. Here are some tips in forming your super team that will allow you to own a business, instead of being tied to running it on a day to day basis.
- Hire people better than you
- Hire for attitude, as you can train for skills but not for positive attitude
- Empower your team members. Allow them to eventually make the big decisions. Start with empowering them with smaller decisions and once they have proven themselves, delegate and empowered them more.
- Make sure they are well oriented, and there is a regular evaluation so you can give them timely and empowering feedback.
Integrate Controls to build a real business
The idea of placing controls inside your business is for them to work automatically so that they control your business rather than you controlling everything and needing to make these decisions. Controls ensure that things are going well and that no fraudulent activities are happening. These controls also empower your team to make the right decisions when unforeseen or negative things happen during business operations.
One of the key controls you must embed in your business is financial controls because cash is the lifeblood of your business. This includes having more than one person involved in any one cycle of money. This could mean having two or three people sign off on all cash inflows and outflows. This lessens the risk of fraud or theft.
For those who will handle your finances, it would be useful to impose a financial control of doing a criminal, credit and employment history check on those so that you lessen the risk of hiring criminals.
Don’t allow your business to have too much liquid cash on hand because this creates the temptation for people to take small amounts that can get unnoticed easily. So ensure that you have a proper accounting system in play so that cash amounts can be monitored accurately. Have your finance staff deposit the excess cash at the end of the day. Just keep a little cash in the store or office for petty cash expenses.
More financial controls
Set limits on financial expenditure. For example, if the payment is less than $100, no authorization is required. But beyond that, various signatures are needed before payment is released. These kinds of financial controls will allow a real business to thrive because things are systematic and automatic.
Create a system wherein if the financial ratios of the business do not look typical, your finance manager will be informed immediately. Ratio analysis is useful only when acted upon, so set triggers that will alert key personnel to investigate and take action as soon as possible. These financial controls will allow you to own a real business.
This entails setting up system procedures on your day to day activities such as making sure costs and expenditures meet the budgets sets beforehand for them. If you are running some production, operational controls would mean production schedules and checklists of deliverables so that shipments and deliveries are done on time. At the same time, you should also monitor client satisfaction by conducting operational controls like follow-up surveys and informal interviews.
To build a real business, you should also set up marketing controls so that your marketing personnel can track the effectiveness of your marketing efforts through scorecards that you create that track key marketing metrics such as net revenue per lead.
Another form of marketing control is having a master marketing calendar. This would make it easy for your marketing team to meet deadlines for marketing activities and for them to create key reports that will summarize the results of their marketing efforts.
Creating Scorecards or Metrics
To build a real business, it needs to be measured. Key statistics must be collected so that you and your team know if the business is on track or not.
Since you are the one who started the business, you know right at the onset what metrics matter to your business. For example, if you run a small bakery, your daily scorecard could include the amount of bread sold per hour or amount of bread left at the end of the day. These numbers are then compared to your typical or normal statistics which you have collected since the early days of your business.
The idea behind making a scorecard is that it allows your team to focus on the essentials. Your carefully chosen information in the scorecard reflects its importance, and therefore you should have step by step procedures in place already should there be problematic numbers in your scorecard.
Build a strong and effective culture
To build a real business means you have a solid culture to rely on when the systems in place are not able to answer novel or unforeseen situation. As such, implementing culture is a core requirement to build a real business.
The culture of a business refers to the values that they live up to and practice. Culture also refers to the aura or “feel” of your organization. A strong culture can easily be felt by outsiders when they interact with your business. So strive to build a positive and strong culture.
For example, if you have excellence as one of your core company values, then in every situation that comes up, excellence has to be portrayed. Let’s say your customer approached you with an interesting proposition or use for your product that you have never thought before. So that situation has never been documented because it is novel. As such, the culture will drive the response to these kinds of situations. Excellence would demand that you probe deeper into the idea of the customer and see what is viable and then if it is viable, it should be considered and applied.
Here are some tips to create an effective culture within your company.
- Be very clear at the onset what you want your company’s culture to be. During the business planning stage, you should know the values you want every person in your company to apply consistently, both during work as well as in their personal lives.
After you determined these values, how would these reflect in their behavior? How would it be observed? Create a list of observable behaviors you want to be exhibited at work so that you can model it initially and eventually create opportunities for these to be applied.
- Celebrate and reinforce the behaviors that align with your core values and highlight immediately. If you can highlight it in real-time, even better. If not, then as soon as possible via email or during a meeting. Give a standing ovation as necessary.
Reinforcement of Behavior
The idea is to reinforce the behaviors that you want to be consistently repeated so that it becomes part of your company culture. New employees will also be quick to observe the things the things that the company values and the actions that will lead to commendations and possible promotions for them.
- Show through hard decisions that your company values are truly sacred. For example, not taking in a potentially lucrative customer because they run counter to what you value. Alternatively, firing one of your employees does not live up the values you want to integrate into the company despite the many chances you have offered. Always remember that you are the model of the company’s culture. The buck starts and ends with you.
- Get serious in your company’s entire recruitment process (hiring, selection, and orientation). You can invite some of your current employees to join the interview and selection process. They can help gauge whether the person would fit the company culture. Then, a group decision can be done as to whether to hire the person.
Focus on Sustainability
To build a real business, it has to be sustainable. This means focusing on getting your first few batches of clients and being profitable. Your mission here to solidify your business model so that you can counter major flaws in the way you are targeting your customers. Don’t focus on perfecting your product or service at this point. Figure out the best ways to get people to buy what you are offering so that your business becomes profitable. As such, your priority at this point is to execute the marketing and sales plans and tactics that you have drawn out at the business plan stage.
Here are some sales and marketing tactics that you can use to boost sales and reach profitability.
- Generate a list of prospective customers or top prospects. Know as much as you can about them so that you can close the deal with them. Don’t forget to know who the decision makers are. Find ways to get in front of them so you can talk to them about your offering.
- Start networking
- Be active online in discussion groups and social media to spread the message about your business.
- Try some guerilla marketing tactics by tapping on your creativity as an entrepreneur
Don’t make complex systems
When you start running your business, it is important for you to create systems. However, don’t make them complicated. Focus on simple systems and structures that guide the operations of your business. Make sure there is enough time to market your business to generate sales and become profitable.
Making systems is an iterative process. You keep improving it as you go along. If you sit down and build them all at one go, there is no assurance it will work and be useful for your staff. Keeping it flexible allows you to adapt as you grow in experience in running your business.
Plus, keeping your systems simple and flexible allows you to have time to strengthen the financial position of your business. The idea is that you build these operating systems while you generate sales and ensure customer satisfaction.
Start building your team to build a real business
Once your business gains some financial strength and you have simple systems in place, you can slowly build your team. Train them and free up your time for higher value activities like getting more clients and corporate strategy.
In the beginning, this could mean taking on more office staff, finding part-time bookkeeper and sales staff. This is the first stage of building a team, which is finding employees for the lower-value tiered tasks. You know you are on the way to build a real business when you start hiring for leadership roles for core processes in your business like marketing and operations.
At this point when you begin hiring, start documenting and create a system for them to use. It can be modified along the way with your input and your employee’s inputs. Also, remember to hire only when cash flow comes in. Don’t hire all your needs at the start as you do not have the cash flow sustainability to ensure payment for their services.
The ideas mentioned above will help you transition from a self-employed entrepreneur to a real owner of a business.
These controls will take time, money and effort to familiarize with but it is worth every second and cent invested. These controls will streamline your entire operations.
Finally, the gift at the end of all of this is true freedom. This is when you are not tied to being always with the business. It is the art of letting go, similar to raising kids. May your business thrive to allow you to become a real entrepreneur and not just self-employed.