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Formal and Informal Systems

All businesses have systems. They make the wheels of your business turn. Some systems are formal but many are informal.  Systems that are informal can keep your business wheels from turning smoothly when it comes to day-to-day operations such as closing sales and ultimately from easily selling or passing down your business to the next generation (succession planning).

By creating and maintaining formal systems you can avoid major accidents and breakdowns within your business.

A System is a Series of Processes

Many businesses are so busy with their day to day operations that systems are completely ignored.

A system is simply a series of processes. These processes are comprised of one or more activities that will involve some or all of the following:

  • Labor
  • Equipment/machines
  • Materials
  • Facility space
  • Vendors etc.

Efficient Systems Create a Better Experience for Customers

The business that will take the lead in the race for customers, is the business that has all of its systems integrated and working efficiently.  Ideally your systems create an experience for the customer that makes them want to be a repeat customer.

Think of it like this:

Owners:  Set the company’s vision – an aspirational description of what your business would like to achieve or accomplish in the mid-term or long-term future.

Managers:  Keep their eyes open, look for what will best serve customer needs and know how to achieve this outcome.

Team members:  Energize the customer-facing systems that grease daily operations.

Customers:  Drive demand for your products and services and therefore grow your business.

How to Improve Your Systems

Here are some tips to make sure your systems are up and running:

  • Make sure you have a monthly or annual schedule for reviewing your systems and processes. Take note of any inefficiencies and identify ways to resolve and improve.
  • Lead the pack. Do not follow.  Just because a system worked for one company does not mean it will work for your company.  Always consider your business and your customer needs first when looking at other business models.
  • Make sure that your systems have a number of people able to pick up and complete the process. Do not rely on one person.  People get sick, make mistakes and have emergencies. Whether it is sending the mail, ordering inventory or packaging your products, make sure that all systems have a back-up plan for day-to-day operations, technical failures and unexpected crises.
  • Listen to your team. Your team members may have more insight into your customers than you think. They are the ones most likely to be working with customers on a daily basis. Their judgment, insight and input into system development can be an invaluable resource.
  • It is imperative that all processes and systems are documented. Documenting how you do business, safeguards your business in emergencies, alleviates confusion on the part of your team members and can ultimately protect you in potential legal matters.

Consider how more appealing your business would be to a potential investor, lender or buyer if you were able to present a how-we-do-it-here guide.

Successful Businesses Virtually Operate on Their Own

Imagine if you were in the market to buy a business. Would you buy a business that can run on its own or would you buy one that could not run without the owner?

When a business has effective documented systems in place, it is more likely to:

  • Be nimble and able to manage changes in its industry climate
  • Be able to transition easily to new ownership
  • Increase its value and potentially sell off at a much higher price

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