Business Systems Create Profits and Value

Business Systems Create Profits and Value


We meet many business owners who are overwhelmed by the day to day fire drill they call a business and the thought of creating systems for their business is overwhelming to them. I always give the same advice:

 Start Small but START NOW!

You have to START…. 1 system no matter how small is better than no systems… 2 is better than get the idea.

But where to start? We recommend picking an important but relatively easy task or process that includes another person in your business. Work together, start with an outline and work down. Your objective at the end is to be able to create a simple checklist so that anyone can learn the process very quickly.

Here’s a sample of a simple process –  What happens when a check comes in the mail at your business?

1. Person opening mail gives Check to Mary

2. Mary stamps check for deposit only (stamp in Mary’s top right drawer)

3. Mary  makes 2 copies of check and puts 1 copy in daily check receipt file and the other in a/r process folder

4. Mary gives check to Joe.

There it is, Mary is done with the check. There would be another process written for Joe for what he does with the check and another process for Mary or whomever records what invoices the customer’s check paid.

Now name this system, it could be “Check Receipt Process” or whatever makes sense to you. Give Mary a copy and start a 2″ binder and put this system in the binder. There that’s a start and you probably got it done start-to-finish in 15mins.  Now when you or Mary have an idea on how to improve this system (do you really need 2 copies of check? ) you just mark-up the system in the binder quick in easy.

Wait a day or two then knock off another system in a few weeks you could have 8- 10 critical business systems in your binder. And why do you want the systems in your binder?

So if Mary doesn’t come to work for 2 weeks or Mary quits. All you have to do is hand the process to the new person who handles the checks and you’re off and running. No training, just have the person work the system.

Systems makes managing a business easier, improves customer service and accuracy and reduces the cost of training.

Here is the best book ever written for business systems.  It is an easy read and gives you a great context that will help you look differently at your business.

Remember Start Small but START NOW!   SSSN




Common Characteristics of Profitable Businesses

As a Business Broker I’ve had the opportunity to meet with and analyze more than 2,000 businesses. I have come to discover that there are 6 basic characteristics that are almost always found in profitable businesses.

6 Characteristics of Profitable Businesses:

  1. The business owner has an firm grip on reality. They understand the good and the bad of their industry and their business.
  2. The business owner spends the money to get good advice. They have an accountant, attorney and financial adviser that is competent in the specific industry and size business.
  3. The business owner makes a good faith effort to have systems and procedures in place so that their product or service experience is repeatable. The vast majority of activity is done the same way each time.
  4. The business owner is always trying to find ways to do #3 better.
  5. The business owner doesn’t blame his employees and his customers for his results. It is shocking to me how often this is the case in bad businesses.
  6. The business owner owns the business for a reason other than it’s just a way to make a living. The owner might want to sell the business to fund their retirement or next venture or pass the business on to their kids or create enough profit to fund a charitable cause important to them or operate a business to allow them enough free time and money to pursue an important cause.
Businesses and business owners with the above characteristics are much more likely to be profitable, more valuable and easier to operate than businesses without these characteristics.
Are there other characteristics that are important to you as a customer? Can you identify businesses with these 6 characteristics?


The 2% Solution for Disputes among Business Partners and Partnerships

Preparation Avoids Business Partnership Problems that could Kill a Business     

Many people start a business with friends, neighbors, relatives or spouses and it’s often a partnership 50/50 arrangement. Rarely is there a written business partnership agreement and this can be a big mistake. These arrangements often work well until there is a problem but then…the problem could be a big problem and the dispute can spin out of control quickly. It is not uncommon that these problems wreck a business and do significant, sometimes fatal, damage.

Small business partnerships should come with a warning label “Caution: Partnerships work best when the partners document the problem resolution methods before entering the partnership.”

There are many advantages of a partnership which can lead to business success far beyond what an individual might have accomplished on there own. However, the success of a partnership 50/50 agreement is often determined by the care taken when the partnership agreement is put in place. A good and well defined partnership in business agreement can serve as a tool to help you run your business professionally and increase your chances of getting outside investors.
I’ve seen what appear to be small issues to outsiders become big issues to business partners. A simple and very effective solution is available to business partners who have the foresight to set up a system to break impasses should they arise. A business partnership dissolution doesn’t have to be a financial catastrophe for the business or it’s owners if there is a well documented and thought out business partnership agreement.

I have seen businesses fail because the owners were stuck on issues that most of you would say “oh, that would never happen to us” but you are rolling the dice. What happens if your business partner is involved in a divorce and suddenly there is a new spouse in the picture who thinks 50/50 means opportunity?

I saw a situation a few years back (I know you’re thinking I’m making this up but I’m not) where one partner put out a contract on the other. The partner got out on bail and showed back up at the business! He was a 50/50 owner and the other partner couldn’t do a thing about it without resulting in a lawsuit and a request for an injunction and restraining order through the court system.
Another benefit of going through these “what if” scenarios with your soon to be business partner is it will help you understand how they think and how they might react in a business crisis which will surely present itself in one form or another.
The 2% Solution
This is elegant, simple and highly practical. In your LLC partnership or operating agreement put in a provision that grants a third party, agreed to by the partners, a 2% voting interest. Each partner would have 49% voting rights each. That way if the partners agree they have 98% vote and they can do what they want. But if the partners disagree, they take their problem to their 2% voting partner and whichever position the 2% takes means there is 51% of the votes and that’s the decision.
Some attorneys may prefer to have a separate business partnership document or member agreement to govern this issue, certainly get legal advice from a business attorney.
Remember, the only time the 2% vote is required is if the partners can’t agree on an issue. As long as the partners agree then the 2% vote doesn’t effect anything. And that’s exactly the purpose of this partnership agreement, to have a mechanism to resolve issues when the partners can’t agree.
The important part of this strategy is to do it long before there are any disputes. It will be much easier to select who the 2% voter is if there aren’t any pressing disputes at hand.
Here’s an excellent guide to forming a good partnership. Setting up your business partnership correctly at the beginning is the key to resolving inevitable problems in a manner that doesn’t destroy the partnership or the business.