The Highest Form of Process

The hallmark of a good process is that it makes work easier.

Your goal as a small business operator in developing systems is to create consistency and capture it in processes which can be optimized. Gurus who preach system development often encourage that you document everything. However, this can result in over-developed systems that work against consistency. If you have standard operating procedures with thirty different steps, layed out in detail, it’s likely you have a standard procedure that few people use.

Though we’re pursuing consistency, it’s important to keep in mind that the processes will be used again and again by people. People who don’t want to walk step-by-step through a manual of documentation again and again and who won’t watch a training video more than once.

The most effective systems lean on tools. Tools capture the nuanced lessons learned by process authors in a format that creates predictable outcomes. And they’re more likely to be used because they make work easier. Tools come in many forms, but the two most common are templates and checklists.

When you can create a process that is just five steps and two of the steps use a template and one a checklist, you have something that will be remembered and followed.

When you’re improving a process or creating a brand new one, your guiding question should be, “How can we make this as easy as possible?”

Balancing Consistency & Agency

The fewest steps possible in a process makes for a more productive overall system.

There’s a temptation to build processes that are complex, that address every possible eventuality, that create a polished, perfect outcome. We believe that if we capture lessons learned that they will persist over time and our business system will become increasingly effective. However, the more complex a process becomes, the less likely it will actually create value.

Many years ago, after reading books like the E-Myth and Work the System, I tried to document every aspect of our business. My goal was to expose the workings so that I could improve them and make them consistent. Since then, our team has iterated several times on our processes. On several of these occasions, we’ve blown the dust off of a long process that was painstakingly created and abandoned shortly thereafter.

In developing our business systems, what I’ve learned is:

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What You Don’t Do

“The essence of strategy is choosing what not to do.” – Michael Porter

This week, in my Toastmasters club, we shrunk our meeting time from an hour-and-a-half to an hour. Covid caused the loss of almost 70% of the members and, in the years since, we haven’t been able to rebuild the membership. However, the club has still operated as if it were at its pre-Covid size. This has resulted in loyal members doing double duty with meeting and club roles for an extended period. Shrinking the meeting to an hour makes it easier to run with a smaller group. It’s the right size for where the club is at today.

The same thing happens with how businesses interact with the market. Because the owner wants to grow or is trying to survive a financial dip, they’ll take on projects that stretch the business too wide. For example, a small service business will try to look like a larger business by offering the same breadth of services as a larger firm. The further they reach, the more over-extended the team becomes, and the less productive the business becomes. Doing more makes things harder, not better.

This happens within a business too. I run a tiny business with just a few full time employees. Like many small business owner-operators, I wear multiple hats: marketing, sales, CEO, strategy, account management, HR, bookeeper, and etc. They’re mostly small slices of time, a few hours here and there, but there’s a limit on what I can do well. Because of this, I’m continually seeking the essence of what works for each of these roles and limiting the tasks I perform to that essence.

There is always more that you could do. There’s always more that your business could offer. But because your resources are so limited, it’s critical to be selective in what you do and, as important, what you don’t do.

What To Do In a Down Market

“I was taking home $50k in profit annually from that one customer and -poof- it’s gone,” a friend named Jack told me. Last week he lost his largest customer to his main contractor, who went behind his back to cut him out of the arrangement.

We’ve lost customers in the last six months too and many businesses in the agency and professional services industries had a tough 2023. The market is contracting. Companies, ours included, have been reevaluating their costs and leaning out their expenses to adjust for inflation and the ever-increasing competition. The catalyst for the situation with Jack losing his customer was actually a forensic accountant visiting his customer’s company to audit their expenses.

So what do you do in a bear market? When the winter returns again?

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A More Valuable Business

How do you make a business more valuable?

It seems like a simple question, with a simple answer: make it more profitable. Profit is a core measure of business health the same way your blood pressure is a core measure of your physical health.

However, profit is an objective measure and value is not objective, it’s subjective. The fancy coffee I buy from a friend of mine is valuable to me, but you might be happy drinking tea (heathen). What we value differs.

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Do Less & Be More

There’s a yin and yang aspect of running a  business. If your only experience of yin and yang is seeing the symbol on a poster on a dorm room wall, a simplified explanation is that yin is a passive force and yang is an active force.

In the context of business:

  • Yang might be setting and pursuing goals, hustling for sales, and building marketing campaigns.
  • Yin might be noticing changes in the market, feeling tension from a particular member of your team, or working on a side project with no planned value.

Entrepreneurs tend to play heavy into the yang side of the balance. We’re driven, type-A, make things happen kinds of people. This is why the Yin side of business is an opportunity.

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Sensitive to Anomalies

Last Tuesday, at my Rotary Club, we had a speaker, Doug Garnett, who presented on complexity in business. He said that there is a common perspective in business that deconstructs the business system into parts and pieces (sales, marketing, ops, etc). The underlying assumption is that if you can get the parts healthy, the business will do well.

Doug disagreed with this approach because businesses are complex systems. One of the ramifications of being a complex system is that businesses produce synergistic effects (positive and negative). The whole is greater than the sum of the parts. Innocuous changes to the parts, like moving a weekly meeting to a different day, can have odd effects on how the entire system performs.

It’s an interesting perspective. What could it mean for your business though?

He said that you should still manage the parts of your business, but you should focus more on how the business operates as a whole. In particular, what you’re looking for is anomalies in profit (profit being the primary measure of the whole system.)

Changes may not have a clear rationale, like moving a meeting to a different day, but as long as your sensitive to the whole business system, you can still profit from them.

Revealing Sophistication

I’ve discovered something odd. If you have a meeting with four or more peers, you have to implement some form of discussion regulation. People need to raise their hands on Zoom or a talking stick needs to be passed around. If you don’t, a few people will take over the conversation and drive it off topic.

This tiny insight was gleaned from chairing my local Rotary membership committee the past nine months. Every two weeks we’ve met to discuss a membership related challenge. After having many of these meetings hijacked and trying a variety of solutions to keep them on track, I eventually landed on the hand raising method.

Leading a meeting is pretty simple. However, it’s interesting that there are deeper levels of sophistication in this simple task.

I’ve noticed the same hidden sophistication in many of the tactics that I employ in business. For example, I’ve used thought leadership and referral marketing this past year as our strategy to develop new business. Several times I’ve paused and intentionally iterated on improving these two marketing tactics. Each time I’ve done so, I’ve unearthed a deeper level of sophistication.

Focusing on just one area to improve and iterating on it, again and again, has a certain magic to it.

But the big question is what is deserving of that focus? And are you staying with that focus long enough to unlock its secrets?

Are Agencies Good Businesses?

“Are agencies good businesses,” I asked a small group of agency owners at an event recently.

“No,” one of them immediately replied, “They’re terrible.”

After a thoughtful pause, another owner said, “They can be.”

I’ve asked this question of most agency owners I encounter. It’s a question I’ve pondered for a long time. My general feeling is that agencies aren’t that good of a business model.

That evening, I spoke with someone with no agency experience who bought an agency. He told me that he purchased it based on its objective attributes. From his perspective a business is just a business. Whether you’re McDonalds or a small agency, your model can be reduced to financial documents and some attributes around how you create value (services vs products, inventory, recurring revenue, etc.) Any business can be exposed and evaluated apples-to-apples on a spreadsheet.

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The Three Amigos Compete

I know a guy who has returned to school to get certified in medical billing. He used to be a transcriptionist and software ate his job. I know another guy who dropped out to wander around the country in a van. He was an adult caregiver and is trying to support his van-life as a virtual assistant. More recently, I met another guy who runs a content marketing agency that’s been battered by ChatGPT, Claude, and the other AI’s.

What do these three guys all have in common?

They’re all trying to work at the bottom of the value spectrum, the area where value has the characteristics of a commodity or is one.

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