MDUDUZI LUTHULI: It’s all systems go if you want your business to grow
Without systems you don’t own a business — you are the business. That means if you want to double revenue, you need to double the hours you work. Because you only have so many hours in a day, that limits how fast and how big you can grow.
Fortunately, there’s a better way to do things — it’s called automation. By automating, delegating and systemising you gain leverage, which is the key to creating and scaling a high-growth business. Even if you are just starting out, you need to get into a systems mindset long before you hire your first employee or subcontractor. It’s the key difference between being self-employed and being an entrepreneur.
It builds an asset — It’s nice if your business gives you a great cash flow to fund your lifestyle. But wouldn’t it be fabulous if one day when you’ve decided it was time, you could sell your business and have the biggest payday 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. You can replicate your business in other geographic areas yourself or by franchising or licensing the rights to your business system. Many fortunes have been made this way.
Consistency — Consistency is one of the keys to delivering an excellent customer experience. You may not like the food at McDonald’s but one thing you can say about them is that wherever you go they deliver a consistent experience.
Lower labour costs — When you and your staff don’t have to waste time and effort to reinvent the wheel each time, this improves your efficiency and reduces your labour costs.
Creating a system
Here are a few steps I use when developing a business system that helps me work faster and smarter:
Identify your activities — To help you add more structure to your systems, categorise your activities in terms of your business functions.
- Operations — daily back end admin clients don’t see
- Sales and marketing — what you do to attract and convert customers
- Finance — how to allocate revenue generated
Break it down- Once you have a list of activities your business needs to function, break down each activity according to the process, tools, people and strategies needed to complete it from start to finish.
- Process — the step-by-step sequence of actions
- Tools — the required devices, apps, or software
- People — the person/s in charge of each step of the process
- Strategies — the tactics, tips, or techniques you use
Track and test — Identify measurable factors to determine whether your system is working well or not. This could include your revenue, expenses, profit margins, sales conversions, other financial ratios, and so on. Did you earn more profit? Did your process take too long to complete? Were there any bottlenecks, glitches or hiccups? What was the reaction of your customers? What about your employees?
Evaluate your systems — After tracking and testing your theories, take time to evaluate your system. You can evaluate the system as a whole or each of the four components (process, tools, people and strategies) separately.
Did your systems solve a problem or reach a goal? If so, what change is responsible for the improvement? Can you replicate it easily? How much improvement did you see exactly? If it did not, what was the cause? How can you remedy the situation or go back to the way things were?
Creating business systems is a never-ending process. The system should be reviewed and revised on a regular basis to make sure it continues to function properly and delivers information that is valid and valuable, especially as business conditions change. Remember that technology changes, your customers’ needs change and the size of your business changes, so your business systems need to evolve along with the other aspects of your operations.
• Luthuli is an independent financial adviser and founder of Luthuli Capital