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




Business Partnerships – The good, the bad and the ugly…

In my line of work we run into business partnerships every day and we are often the ones trying to figure out how to resolve the myriad issues, problems and crisis that revolve around the small business partnership dynamics. A wise person once said famously,

Choose your business partner twice as carefully as you choose a spouse..because your spouse can only take half of what you have.”


Business partnerships can be a wonderful thing, especially in the early stages in the life of a small business start-up. The sense of mission and teamwork can be addictive. But what we often see is that the business partners didn’t really agree to anything before they become partners.


Often the partnership conversation goes like this:


Mary, “Bill, I have a great idea. I’m going to make ice skates that have training wheels.”


Bill, “Cool, I have some free time, I can help. Want to be partners?”


Mary, “Sure 50/50”


Bill, “Awesome, let’s go to Starbucks and noodle out a plan.”


There you have it, you now have your business partner and, as long as the business doesn’t succeed or fail things will likely be o.k. However, every business, over time, does exactly one or the other. It either succeeds of it fails.


Good Business Partnership Agreements are All About the “What ifs?”

When you are thinking about a business partner you need to consider many things. Below is a list of outcomes and issues you might want to consider. We’ll go through these issues using Mary and Bill as the potential business partners. To make things easy we’ll assume both are married but not to each other. The issues below are a very short list and the list doesn’t cover all the possible issues. The idea here is for the partners to sit down and talk about ALL of the possible outcomes and what they want to do in those circumstances. Also, just as a point of interest, every item below I have seen (and more than once) in real businesses involving real people:


Issue: Mary and Bill love being business partners, but what happens if, against her wishes, Mary ends up with a business partner that isn’t Bill? How could that happen? What if Bill get’s a divorce and as part of the divorce settlement Bill’s wife Jane get’s Bill’s interest in Skate Blades & Wheels LLC? And then Jane decides her new boyfriend Bubba needs a job and Bubba starts “reporting to work” with Mary every day?


Solution: Have an agreement in the Limited Liability Companyagreement that specifically defines how/if partners can transfer ownership to other parties. You can be very restrictive.


Issue: Mary and Bill get the business plan done and they need to buy $1,000 worth of skates that they can modify as prototypes. But, Mary doesn’t have her $500 and Bill doesn’t either but Bill has $750 open on his credit card and Mary has $250. Who puts in how much? If they are 50/50 partners what do they do?


Solution: The Limited Liability Company (here’s a Hub on LLCs) operating agreement can have a provision whereby the capital would go in as loans and the partners can get their loans paid back before any profits are shared.


Issue: Mary and Bill have been working on this idea for 100 hours per week for 6 months. Things look promising but it will take 100 hours a week for 3 more months to get where they want to be. Bill decides he has to get a job and will only be able to devote 10 hours a week to the business, Mary will have to pull the load across the finish line almost all by herself.


Solution: The operating agreement can state that the additional labor contributed by a partner can be reimbursed to that partner, at an agreed on rate, prior to any profit sharing from the partners.


Issue: It’s 3 years later, the business is wildly successful, Bill and Mary are happy as clams. The have a Christmas party with the employees but driving home some guy falls asleep at the wheel, crosses the center line and crashes into Mary’s car. Mary is in coma and, if she ever recovers, she will be unable to work in the business again. Because of the medical costs the family needs money fast and the family wants to sell Mary’s interest in the business. Bill would like to help but neither he nor the business has the cash to buy out the value of Mary’s interest and Bill doesn’t want Mary’s interest sold to someone else.


Solution: Businesses can buy insurance that will “buyout” the other partners interest in circumstances like this. This type of insurance is commonly called business buyout insurance. Talk to your commercial insurance broker for your options. It is important to have a mechanism in the LLC that states HOW the business value will be determined so that adequate insurance can be purchased. You don’t need to know the value at the time of the partnership agreement if you have a formula to determine the value if the need for a forced buyout occurs.


I could go on forever but the above 4 issues are examples of things to think through. I’m sure you can think of more as well. A good business attorney will also be helpful. You need to take the time to go through the issues and consider the solutions long before you have the problems.


If you have any business partnership concerns or issues please feel free to drop me a question in the comment section and I’ll take a shot at providing a possible solution.


Business Owners and the Personal Guarantee

Often when people go into business or start a small business they really don’t think through the details of what they are doing day-to-day as it relates to the long term health of the business or their personal financial health.

A classic example is the Personal Guarantee. When you go into business you will need to make financial commitments to various parties like landlords, vendors, etc. Most of these commitments are promises to pay. The real question is “Who is promising to pay?” Is it your company that is promising to pay or is it you personally that is promising to pay…or is it BOTH.

When you go into business did you form a corporation? LLC? Hopefully you did because those things can give you some legal protections that, if something goes wrong, you’ll wish you had.

A personal guarantee from the small business owner is often requested/demanded by vendors and landlords when new start-up business gets started or even with established businesses. The idea is the the landlord or vendor doesn’t want to rely solely on your business (corporation or LLC) to pay a debt. If the business fails they want the business owner, YOU, to be personally on the hook for the obligation.

Before you sign a personal guarantee make sure you understand what that means and consult with an attorney, these things can be tricky. I would also recommend that as a business owner you avoid a personal guarantee whenever you can. Nearly all vendors/landlords say that the personal guarantee is required and standard but believe me…they are not always required.

If you have signed a personal guarantee you may have the opportunity to withdraw it after you have some experience with the vendor or when the time comes for a lease renewal. Keep track of any and all personal guarantees you sign. You don’t want an obligation you forgot about to bite you somewhere down the road.

Don’t just automatically sign a personal guarantee, push back and avoid it if possible.

Also, keep track of every personal guarantee you sign because someday you may need to cancel or withdraw it.

Finally, seek advice from an business attorney before signing any material contracts or personal guarantees.

Additional Resources

Here’s an article you might find useful regarding business partners:

Small Business Management and Help

Every couple of years I re-read this book and every time I’m glad I did. I bet I’ve read it at least 7 times.

This year I’m buying a bunch to give out to business owners that seems especially receptive to the idea of creating a great business.

On a side note the Kindle price for this book is higher than the paperback version, does that seem right to you? Not to me.

Anyway, here’s a link for it and yes, if you order it thru this link I’ll make about 2cents, so thank you in advance, if you do.

Learning from is part of running and changing is needed to be successful over time. Here’s a post on old school simple sales and marketing lessons I’ve learned though experience.

Either way, get your hands on this book if you run a business or should I say if your business is running you. Also, take a look at this article “Can Owning a Small Business make you Wealthy?”

For other interesting blogs from interesting people visit TheHub click here