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What’s the Big Deal About “Systems”?

If you've been in business for any significant length of time, you've probably heard and read it over and over - you have to have "systems" in your business. Systems for sales, and marketing, and service delivery. Systems for finances, and hiring, and team management. 

What you may not realize is regardless if you have all these things documented in a fancy manual, you already HAVE systems for each of these. As Mike Michalowicz writes in "Fix This Next", these systems are "In many cases...simply the routines you and your colleagues follow."

The question then becomes "Are the routines we are following efficient and predictable, leading to reliable outcomes?"

If so, the work becomes documenting those systems. You can write them in a manual, take screenshots, do video screen captures of the task being performed, or all of the above. The important thing is that the system is documented and able to followed by anyone.

On the other hand if your systems aren't working, the job becomes to find out why and work on improving it. 

The goal here is not to take hours and hours to write fancy manuals that nobody ever looks at and are hard to understand. 

The goal of creating (if necessary) and documenting systems is to help you Achieve Organizational Order.  

And not coincidentally, that is Level 3 on the Fix This Next "Business Hierarchy of Needs" (BHN). 

The way we define "Order" in this context is important. Order is not only about efficiency, productivity, and getting stuff done faster.

It's about creating a company that is not dependent on any one individual. Including you. Maybe especially you. 

A business that achieves organizational order is a business that runs smoothly when you take a vacation, or your admin is sick, or a key employee has to rush out of town on an emergency.

Here's a challenge for you. The next time you walk into a Starbucks, or Dunkin Donuts, or whatever your favorite place to get coffee is, ask to speak with the owner. Chances are, the team member standing at the counter won't even know who that is, never mind run out to the back to get them. How is that possible? Because these businesses run on systems, not on any one person. That is organizational order.

As we discovered on the Sales and Profit levels of the BHN, there are 5 key questions and needs on the "Order" level as well. Over the next few weeks we will cover each one in, you guessed it, Order.

See you then!

Cash Reserves for the Business Win

Cash reserves in your business are what will not only keep you afloat but also ensure that you have what you need to prevent an inevitable crisis should…I don’t know, a pandemic hit.

It’s something we need to…we must talk about.

If you have a copy of “Fix This Next,” go to page 115 and read (or re-read) that section. In fact it is so powerful that I am going to include the first paragraph here:

“Desperate people do desperate things. This is not a position you want to be in. Cash will help you avoid it, and generally speaking, more cash will help you avoid it more. An adequate reserve of money enables you to navigate unforeseen circumstances with confidence. To allow business operations to continue unabated, or to take advantage of an unexpected opportunity, your business needs two to six months of your average monthly revenue reserved in a VAULT account.”

The last question on the Profit level of the Business Hierarchy of Needs is:

“Does the business have enough cash reserves to cover all expenses for three months or longer?”

Most businesses we start working with would have to answer “no,” even before the present crisis hit.

For many business owners, these are desperate times. And while we can’t change the past, we can learn some lessons in order to help us prepare better next time.

And keep the ensuing panic at bay a bit.

Trust us, there will be a next time. It may not be pandemic level, but even the normal business cycle can cause a cash crunch on our businesses. And we can’t and shouldn’t count on the government to bail us out every time.

The good news is implementing the Profit First cash management system systematically and reliably starts building this long term savings (VAULT) account, month-by-month, by creating the good cash habits your business needs. The initial goal is to be able to cover three months of Operating Expenses, and then three months of Sales Income, into that account.

You may be thinking “no way can I do that,” and frankly you need to check that thinking at the door. Instead, start thinking how life would be different if you had been working on this before 2020.

I’ll wait while you think that through.

It’s not all negative, either. Your VAULT account has two primary functions: to cover expenses in case of unexpected business disruption and to take advantage of an unexpected opportunity. Imagine having the amazing property you have had your eye on forever come up for sale cheap, and you could pay cash for it, or even just put a huge down payment on it. Or paying cash when a closing business has a fire sale on their equipment. It’s a great feeling and so worth the effort.

Now that we have had THIS talk, give me a call and let’s talk about how to set it up in your business. Click here to tell us a little about your business and schedule an appointment.

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