17 May How To Grow: Understanding Your Business Systems
All systems and machines do what they are designed to do when they are in good working order. A machine, like a car, has many parts that work together to transport you from your current location to your destination. A car is designed to produce specific outcomes. A car will not produce the same outcomes as a transport truck even though it uses similar principles because a car is not designed to haul the weight of a trailer full of cargo. Similarly, a business will produce a certain amount of revenue, profit and a certain lifestyle for the owner and staff because it is designed to. You can not take any business and force it to produce significantly more revenue unless you change the design of the business systems and machinery. Since people and systems resist change, the best way to significantly change the results being produced is to add new pieces to the system or build a separate system that will produce added results. You can make a car go faster by adding a turbo charger and some other parts. However, you will not be able to convert your car into an F1 car. The exception to this is when a business is designed to be scalable, which will be covered in a future article. Your business is designed to produce a certain amount of revenue. You can increase that revenue to a certain extent. Beyond that, you will need to add new pieces such as new departments, new divisions, new products, new services, or a new business to keep growing.
Inside this concept of a business being a machine or system, the people are not the parts of the machine. We are not cogs. The parts of the system are jobs and infrastructure. The people move the parts of the machine to make the machine function.
When a part of the car is broken or missing, the car as a whole will either work less effectively, less efficiently, less reliably, or not work at all. To fix the car, we have a mechanic figure out what is wrong and repair or replace the necessary parts. Once the car is repaired, it works better and produces the desired result of transporting us to our destination. We hire a mechanic because they understand how the systems and machinery of cars work better than we do. If we tried to fix our cars ourselves without fully understanding how our cars worked, then we would not likely get it fixed because we do not really know what to fix. We might have guesses and assumptions. Businesses are similar. We need to understand how business and our business model work so that we can produce the results that we want. When a part of a business is broken it means that a particular job is not being done properly. When a part of a business is missing, it means that particular tasks are not being done. This could be due to there not being enough people to handle the volume of work resulting in tasks falling by the wayside or that a particular position is vacant. Sometimes it is due to not knowing that there is a part missing in the first place.
For a machine to work well, all of its parts need to move in a synchronized manner. If a part of a machine moves out of synch or on at an inconsistent rate, the machine does not work properly. For a car, all of the wheels need to rotate at the same speed for the car to move forward in a straight line. If the wheels are rotating at different speeds or in different directions, then the car will not move in the desired direction and desired speed. For a business to perform as designed, all of the jobs need to get done meaning that all of the tasks need to be done on a regular basis, like clockwork. Marketing needs to be done regularly, sales needs to be done regularly, paying bills needs to be done regularly, and so forth. The whole business needs to run on routines, consistently.
Once consistency has been achieved, it becomes about ensuring that the volume of actions are taken to produce the desired results. For example, a certain number of sales conversations with prospects need to happen, on average, to produce a certain number of sales, which produces a certain amount of revenue. This consistency allows a business to have regular and predictable revenue and cash flow. This makes running a business easier. The exceptions to this are seasonal trends and sudden changes in the economy. Those can be evened out with new products, new services, new markets, and new businesses.
If we want to succeed at consistently growing our business, we need to understand how our business works. We need to understand it at the level of which series of actions produces which results. We need to understand all of the routines and business processes in every aspect of our business:
- The marketing processes to produce prospects and leads.
- The sales processes to produce sales and revenue.
- The processes to retain customers to produce ongoing revenue and loyalty.
- The financial processes to manage the money.
- The delivery processes to deliver the products or services to the customers.
- The human resources processes to recruit and train people.
- The research and development processes to keep the business relevant in the market.
- The quality control processes to maintain the standards of the business.
- The administrative processes to ensure the business runs as designed.
- The communication processes to ensure everyone has the information they need to do their jobs properly.
- The management processes to keep the business running well.