Are you Creating a Business System or just a Business?In order to really utilize the power of leverage, you must have a system that works. In business, you must have a profitable, replicable system that works every time, in order to expand and be sustainable. Growth does not have to mean your company dominates the world. It could mean that you start with one store in southern California, and expand it to three stores, one in Santa Monica, one in San Francisco, and one in Seattle, Washington. While your chain of stores is small, each store follows the system that you have created. The system follows these three, easy to recognize traits. They are:
In order to understand these three traits better, let’s focus on each of these three traits. It is important to understand each one individually, and how they relate to one another. A company may be profitable, but is unable to be replicated because the owner does all of the work. In other words, the owner is the system! Having one or two of these traits will not work in the long run. The system that you are creating for your company must have all three and they must all be in sync with each other. The System is ProfitableMany small businesses are able to be profitable, yet they cannot identify what it is that makes them profitable. In fact, the only reason they may be profitable is because the owners themselves do the majority of the work. In this case, expanding the company and opening more locations will not be an option. It does not meet the requirements of creating a business system- it cannot be replicated and does not work every time.To better understand how a system is profitable and profitable every time, let’s look at another example of a company who has a powerful system. The Starbucks Corporation has a system that works every time. When you order a drink, they know exactly what the cost to make the drink is, and what they charge you for it. To make a “Grande, White Mocha” it costs approximately 10 cents. Starbucks charges you $3.70 for the drink- every time. Every time someone around the world order this drink, a “Grande White Mocha,” Starbucks is making $3.60 in profit- every time. That is an example of a system at work. If you provide a service, think of the experience you are providing. Each time you see a client, you provide that same experience, and each time you make a profit of $x number of dollars. Or do you? It may be necessary to think of your services as a product and to figure out how much profit you make for each “experience” you sell. This will help you in the process of creating a profitable, able to be replicated, works-every-time business system. The System is able to be ReplicatedOnce you have figured out how your company is profitable through its offerings of products and services, how can you replicate that success? If you were to take your company and repeat it throughout the world, would it work at each location, exactly how it worked in the original location? If not, it is not ready to be replicated.You know that your products and services are profitable. That is step one in the business system. Now, the next step is to replace your self with employees who will sell the products and perform the services that the company provides. This is the main aspect of a business system being replicated. If the business owner cannot allow others to work for them, performing the tasks that they once performed, then it is not able to be replicated. The other part of replicating the company is the look, feel, and experience that the company provides to its clients and customers. It must adapt to fit the culture of the country or even sub-culture of the city it is, as well as maintain its brand and provide the experience that clients and customers are comfortable with. Great examples of this are again, McDonald’s and Starbucks. While they are mega-brands, the system they have each created works every time, any where in the world. McDonald’s maintains its colors, brand, and characters while adapting some of its menu items to fit in with the culture of China. Starbucks provides a variety of pasties along with its famous coffee. However, in communities where the majority of the population is African American, Starbucks has changed its pastries to fit the culture of the neighborhood it is in, recognizing the culture and adapting to it. While its menu may change, the look, feel, and overall experience of Starbucks stays the same. Figure out how you want your company’s brand and experience to look and feel like, and then figure out how to replicate it. Take note of the different cultures and countries that you may expand into and how your company should adapt in order to make sure your clients and customers are comfortable and continue to trust the company and its brand. For those who want to keep a tighter control on operations and continuing to work in the company along with working on the company, it is even more important to make sure that you create a business system that works every time. Why? When you get close to retiring, you can start to plan on selling the business. Your incentive to buyers is that you have created a system that works- it is profitable, can be replicated, and works every time. A potential buyer can envision expanding the brand you worked so hard to create, using your system to do it! While you personally may not want expansion, a potential buyer may. And in order to sell your business, that is a huge incentive. The system works every timeThis is as equally critical as the other two components to a business system that works. Creating a system allows you to measure your results. When the system doesn’t work, you can go back and check the components to figure out what went wrong. Companies who are run by the seat of the entrepreneur’s pants have no objective, measurable data to fall back on when a problem arises.For a small business, it may seem like doing all this work is for not. Yet, doing all this work will help you realize the freedom that you can have by operating a small business. When you create a system that works every time, you can virtually ‘plug and play.’ You can substitute yourself for an employee to perform those same tasks. This frees you up to work on other projects for the company, do media events and interviews, or take a vacation, knowing that the employees are working within a system that has been proven and works every time. A Final ThoughtIf for any reason, creating a business system will provide you with less stress on yourself. When you don’t know what went wrong in the process, you have nothing to test. You have to test everything. When you have a system and one component fails, you work to improve that component and to get the system running smoothly again. See how you have shifted the dependence of the company’s success from your shoulders to the system? Doesn’t that seem like the logical thing to do?Except many small businesses never get that far. Don’t be another failing statistic. Work to create a system that works every time, and manage that system. Continue to modify and improve the system and you will have a self-sustaining company that can run whether you are in the office or across the world relaxing on an exotic beach. The point is that you have created a business system utilizing three main components:
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