If you’re like most small business owners, you’re juggling a variety of tasks on a daily basis. From managing finances and marketing to customer service and operations, you’re probably wearing quite a few hats. This is where small business systems come in.
Studies show that on average, small businesses lose up to 30% in revenue each year due to inefficiencies.
By creating systems for your business, you can not only get more efficient but free up your time to focus on critical areas that need the most attention and will move the needle.
In this post, I’ll be walking through a step-by-step guide on how to create small business systems.
The goal? Make your everyday business life run smoother while making your business more attractive to potential investors.
What is a small business system?
Small business systems are processes and procedures that you put in place to help streamline your work, increase efficiency, and eliminate key person dependency risk.
Simply put: a system is a precisely documented process, broken into steps, and produces the same results – no matter who is doing the work.
Systems are important for a number of reasons, and can transform a struggling business.
As an example, if you have a system in place for handling customer questions, you can ensure that all inquiries are handled consistently and efficiently, regardless of who is handling the question.
We’ll get into examples later on but systems can be used for all sorts of purposes, such as streamlining internal processes, improving the quality of products or services, increasing customer satisfaction, and improving the overall efficiency and effectiveness of the business.
When a business has well-designed systems in place, it is able to operate smoothly and consistently, which can help you do more with less (often resulting in labor cost savings).
Systems are critical for selling your business
If you have any interest in exiting your business someday, systems are critical for raising your valuation – buyers will be willing to pay more for a company that is well-managed and likely to continue generating strong financial performance in the future.
When a potential buyer is considering purchasing a business, they will want to understand how the company operates and how it generates revenue.
By having clear and comprehensive systems in place, you can provide the buyer with a clear picture of the inner workings of the business, which can help to build confidence and facilitate the sale.
This means having detailed documentation of all processes and procedures so that anyone can pick up where you left off.
Nothing can be in your head and you don’t want to heavily rely on any one person. As an added bonus, well-documented and organized business systems can also make the process of selling a company much smoother.
I want to highlight a couple things that you’ll want to set up if you don’t already:
Well Defined Sales Process: Repeatable Way to Acquire Customers
One of the most important things you can do to increase your company’s value is to develop an entire process for acquiring customers that is reliable and predictable.
If you don’t have a repeatable or reliable way of acquiring customers, you will be penalized severely on price.
This should be a finely tuned process:
- How many leads/prospects does it take in your pipeline to turn into one sale?
- For each dollar spent on advertising, it results in __ customers and $__ ROI
Reliable and Consistent KPIs
Any prospective buyer will want to see core metrics and tracking for the following:
- How do you drive traffic?
- How do you attract new leads and build your prospect list?
- What is your conversion mechanism to drive sales?
- How do you ensure customers are happy?
- What is your systematic referral engine?
- How do you sell customers after the initial sale?
Examples of business systems
One of the common questions I get asked are which aspects of a business that can be systematized?
It’s often way more than people think. Here are a just a handful of examples where you can build systems:
- Marketing: consistent approach generating leads, nurturing those leads, and converting them into customers.
- Sales: you could implement a sales system to manage the full sales process, from initial contact with a potential customer to closing the sale and following up with the customer.
- Customer service: consistent way of handling customer inquiries, complaints, and requests for support.
- HR: a system can be set up for recruiting, hiring, and training employees, as well as managing employee performance and development.
- Financial management: often companies will create a new system for managing financial resources, including budgeting, forecasting, and tracking expenses.
- Product development: a system for developing and launching new products, including the ideation, design, and testing phases.
- Supply chain management: managing relationships with suppliers and ensuring that the necessary materials and resources are available.
- Operations: managing day-to-day operations, including production, logistics, and distribution.
- Quality control: ensuring the quality of products and services, including testing, inspection, and customer feedback.
What are the components of a business system?
The components of a business system may vary depending on the specific needs and goals of the business.
With that said, here are a handful of elements that are typically included within successful systems:
- Inputs: These are the raw materials, data, or other resources that are needed to operate the system. This could include software, equipment, and other tools that are used on a daily basis.
- Processes: the steps or activities that are performed to transform the inputs into the desired outputs. This is pretty straightforward – think about the steps and many tasks involved in completing a specific task or process. They should be clearly documented and followed by all team members to ensure consistency.
- Outputs: the results or products that are produced by the system. A good system produces the exact result you intended like clockwork, each and every time.
- Controls: the mechanisms that are used to monitor and regulate the system to ensure that it is functioning as intended. Which result is it responsible for improving? What’s the intended result?
- Feedback: information that is collected about the performance of the system, which can be used to make adjustments or improvements. This involves measuring progress and soliciting feedback from team members using it to make continuous improvements.
- Goals: the objectives or targets that the system is designed to deliver. Make sure you’re clear about what success looks like.
How to create systems for your business
Now that we’ve covered the basics, let’s walk through some steps you can follow to create systems for your business:
1. Identify the areas that need improvement
Start by evaluating the different tasks and processes in your business and identifying the ones that are causing you the most headaches or taking up the most time.
Do you have tasks that are repetitive, time-consuming, or prone to errors? These are the areas where a system can have the biggest impact.
This could be anything from invoicing and billing to social media management or employee onboarding. Once you know where you need help, you can start creating systems to streamline these processes.
2. Document your current business processes
Once you have identified the areas that need improvement, it’s time to document your current processes. By documenting your processes, you’ll be able to see where there are bottlenecks or inefficiencies, and you’ll have a roadmap for creating your new systems.
Write down all of the steps involved in completing each task, from start to finish. This will help you understand where there are bottlenecks or inefficiencies in your current processes and identify opportunities for improvement.
Have your team capture every task they do consistently (exactly what to do at every step). You want to have extreme detail into how every workflow happens to remove any sort of key person dependency risk.
3. Define the purpose and goals of a business system
While this might sound basic, it’s important to be clear on the purpose of the system so that you can design it in a way that aligns with your overall goals.
- What problem does the system aim to solve?
- Which result is it responsible for improving?
- What’s the intended result? What does success look like?
4. Identify the key components of the system
These could include people, processes, technology, and data. Think about what resources are necessary for the system to function effectively and how they will work together.
Think about establishing measurements and metrics – how will you know it worked?
5. Design the system’s processes and procedures
This involves mapping out the steps that need to be taken in order to achieve the desired outcomes.
Each business process step should be very simple and tells the user exactly what to do – often down to the keystroke.
This does not have to be fancy and can be done in a process map, checklist or diagram. Make sure to think about the necessary decision points and hand-off points to ensure that the system runs smoothly.
To goal is to create a consistent way of doing things that everyone in your organization can follow. This will help to reduce errors and ensure that everyone is working towards the same goals.
6. Test the system
I’d recommend testing the system with a small group of people before rolling it out to the entire organization. This will help you identify any potential issues and make improvements before rolling it out to the entire organization.
Remember that any system should be unambiguous and crystal clear – anyone should be to be able to pick this up and execute the result.
You can also solicit feedback from the people who are testing the system to get their thoughts on how it could be improved.
7. Train your team and rollout
Once you’ve tested the system and made any necessary adjustments, it’s time to train your team on how to use them.
Take the time to communicate the changes to all relevant stakeholders and ensure that everyone understands their role in the new system.
This will ensure that everyone understands the processes and knows how to follow them to create consistent results.
8. Test and tweak
This will help you identify any errors or areas of improvement so that you can tweak the process as needed and ensure that it works for all involved.
Any new process likely has some kinks, so it’s important to review and update your systems on a regular basis.
At this stage, think about soliciting feedback from team members and making necessary adjustments based on their suggestions.
9. Look for improvements and automation opportunities
As with most things in business, there is always room for improvements. After you rollout a system, brainstorm ways that tasks can be improved – can they be automated using technology or software?
This could be anything from using a CRM to manage customer interactions to using project management software to keep track of your team’s progress.
Next Steps: Building Systems in Your Business
As a business owner, you want to make sure your company is running as efficiently and effectively as possible.
Developing business systems are an essential tool to get there and allow you to streamline work, increase productivity, and improve efficiency.
Remember that any business system is better than a random, ad hoc approach. By creating and documenting systems and processes that produce reliable results, you can objectively analyze and improve it over time.
Hopefully by now I’ve made a case why it’s so important to systemize your business. There is no one “right place” to start, so don’t wait for things to be perfect – just begin wherever you are and make improvements as you go.
Good luck!
