Management gurus (can you say Michael Gerber) frequently implore business owners to "systematize your business if you seek riches and freedom." What they are trying to tell you is that you need to know why and how you do the things you do in your business.
Today, I am going to list the systems we "experts" are referring to when we say to systematize your business. Your business' success hinges on the performance of the following six primary systems. You need to appreciate the impact the systems have on your success. Each of the systems listed below contains several subsystems.
- Financial Control
You need to be able to teach your employees how to perform each of the following subsystems. Once they can perform the subsystems for you, you have maximized the value of your company, freed yourself from the daily grind of the company, and positioned your business for explosive growth.
Let's look at each system and the subsystems that make it up.
The purpose of your marketing system is to produce a flood of qualified sales leads. You need systems for:
- Generating leads from new customers.
- Generating leads from existing customers.
- Prodding referrals from existing customers.
- Collecting testimonials.
- Staying in touch with your customers.
- Publicizing your business.
- Developing new advertising pieces.
The purpose of your selling system (and you need to think of selling as a system) is to get commitments from buyers to hire you. The selling subsystems are a combination of sales tasks, motivation, and development. You need systems for:
- Assigning and prioritizing leads.
- Qualifying leads.
- Following up with prospects.
- Creating proposals and presentations.
- Processing orders.
- Following up with customers after their project is finished.
- Motivating the pursuit and procurement of profitable sales.
- Improving salesmen's selling skills.
- Strengthening your customer relationships.
The purpose of your staffing system is to get the right people in your company and get them placed in the right jobs so that they are successful individually and as a group. You need systems for:
- Advertising job openings.
- Creating and updating job descriptions.
- Communicating performance expectations.
- Monitoring market wage rates.
- Dismissing non-performers.
- Developing employees' skills
- Rewarding good performance.
- Selecting the right people for promotion.
The purpose of your planning systems is to eliminate negative surprises by proactively addressing problems before they arise. You need systems for:
- Determining which markets you are going to pursue.
- Creating your annual budget.
- Creating a cash flow budget.
- Increasing your bonding capacity.
- Planning project completion.
- Scheduling your work crews.
- Determining when to buy equipment.
The purpose of tracking systems is to make sure your business is performing as you need it to. Your tracking system should be monitoring the following items:
- Expenses vs budget (job and company)
- Revenue vs budget
- Gross profit vs budget (job and company)
- Labor productivity (job and company)
- Advertising effectiveness
- Selling effectiveness
- On-time completion
- Employee performance
- Equipment costs
- Labor time by primary tasks
- Receivables outstanding
- Sales backlog
- Safety efforts and lost time injuries
- Estimating accuracy
- Market-up success
FINANCIAL CONTROL SYSTEMS
The purpose of financial control systems is to make sure that your business is on solid financial ground. You need systems for:
- Developing relationships with bankers.
- Developing relationships with bond and insurance agents.
- Qualifying and evaluating your CPA.
- Getting the proper business licenses.
- Processing payroll.
- Making scheduled federal and state tax payments.
- Managing your cash.
- Verifying money is not being improperly removed from the company.
- Ensuring suppliers' bills are legitimate.
- Collecting late receivables.
- Paying bills are paid on time.
- Paying employees are paid appropriately.
- Filing liens and claims.
- Collecting employee information.
- Sending out 1099s.
- Getting the proper insurance coverage.
- Verifying lease terms and payments are proper.
- Building and managing your credit line.
Quite a list, eh? Heck, I'm sure I've left a few out. Nobody ever said running a business was easy. One final comment. You can't prevent problems if you don't have a system or process installed to prevent them.
If you have a problem in your business, check to see whether you have created the system that should be preventing it. If not, create the system, then test it to see whether it permanently resolves the problem. If it doesn't, improve your system.
About the author
Ron Roberts, The Contractor's Business Coach, provides business guidance to contractors. To receive a free copy of Ron's report, "The 10 Biggest Mistakes Contractors Make" visit www.FilthyRichContractor.com or contact him at Ron@filthyrichcontractor.com.