Here’s a quick test to assess if you’re running a good business. All you have to do is ask yourself:
Would someone buy my business and run it without me?
The point of the questions is to see if your business functions and makes money even if you’re not there. The less a business depends on you, the more it worths because it’s robust and can be easily scaled.
If you (or your buyer) want to scale a business, that business needs to rely on processes instead of individuals. You have to answer these 3 questions :
- How can I get my business to work without me?
- How can I get my people to work without my input?
- How can I set up my business so it could be easily reproduced in unlimited quantities?
Keep in mind that some businesses are more processes-friendly, and as a result are easier to scale. For example, it’s much easier to grow a restaurant than a web development agency. This is because restaurant business is easier to standardize and find employees.
On the other hand, industries that rely on knowledge workers are more difficult to grow because it’s difficult to standardize the know-how and train new people. You can train someone to flip burgers in less than a day, but training someone to develop software according to your shop standard will take much longer.
Also, if your business depends on highly skilled people, you’re going to have a tough time growing, because highly skilled people are a premium in the marketplace. But even if you depend on highly skilled people, it doesn’t mean you can’t grow your business; it just means it’ll be more difficult.
For example, you may need developers to run a web development consultancy, but you don’t need brilliant developers. All you need is a right system that can make good-enough developers produce brilliant results.
The system will also prevent you from depending too much on the mood of your people to get things done.
It’s better to have extremely good processes and ok workers than ok processes and extremely good workers.
Businesses that rely on processes are stable while business that rely on superstars always have to worry “How to I keep my people motivated?” and “What if they leave?”.
When creating a system, start from the end goal. Imagine how your business should look like in 10 years and then change it in the present to match the vision. Start by imagining what market purpose the business fulfills and how it makes profit. Don’t go into details of how it works. The technician in you might be tempted to jump right to the nitty-gritties of delivering a product but it won’t help you set processes.
The point of the exercise is to figure out:
How can I give my customers results that are systems-dependent rather than people-dependent
It’s your job to design your business to work perfectly without you having to be there all the time. The business you design has to serve as a blueprint for a thousand more business just like it.
In order to do develop the prototype, you’ll have to go through the Innovate-Measure-Standardize cycle several times.
The Innovate-Measure-Standardize cycle consists of tweaking something in your business, measuring how it affects the business, and then standardizing the tweak by making it a part of how everyone works.
Start by documenting everything you do in a manual. Document it in such a way that you can give that manual to someone and they can perform the job like you just by following the instructions. Once you complete the manual, hire someone without experience and give them the manual.
As a new employee follows the manual, see where they make mistakes and update the manual. Before long, you’ll have a standardized processes for everything. Then you’ll be able to let go of technical work secure in the knowledge the work will always be up to the standard.
Think of yourself as a music composer. Your customers want music from you. As long as it’s good, they don’t care if it’s you playing it or someone else. Your job is not to play the music but create the notes and then move on to composing new music. Then it’s your manager’s job to be the conductor, to hire people, train them, and make sure they play the notes right.
Once you have processes in place, you can employ Kaizen, which is a process of continuous improvement. Because you won’t be the one doing the technical work anymore, you won’t be able to update the manual as work changes.
You need to empower your employees to keep the manual updated.
Encourage your employees to innovate and experiment. Once they come up with an idea, let them test it and measure the impact. If their innovation improves performance, encourage them to standardize the method and update the manual.
This is the best systematic way to improve your business because it’s system-dependent and not people-dependent.
While your business keeps getting more efficient thanks to the Innovate-Measure-Standardize cycle, you can work on strategy and make sure the business is moving in the right direction.
Other posts in the series on growing a business
- Part 1: Why entrepreneurs burn out
- Part 2: How to make sure your business can grow
- Part 3: How companies grow and die (Adizes lifecycle)
- Part 4: Setting up a self running business
- Part 5: Introducing processes
- Part 6: Staying relevant
- Part 7: Staying profitable
- Part 8: How management changes (Greiner's growth model)
- Part 9: When to hire first project manager
- Part 10: A practical approach to risk management
- Part 11: Identifying key players
- Part 12: What happens when a key player leaves
- Part 13: Leadership pipeline
- Part 14: When to hire first HR manager
- Part 15: Contractor vs full-time employee
- Part 16: Hiring process for growing businesses
- Part 17: How and where to find talented employees
- Part 17: Hiring advice for growing businesses
- Part 18: Systematic onboarding
- Part 19: Avoiding toxic workers
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Total Business Re-Configuration
Management and You
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