When John Warrilow, world-renown author and founder of The Value Builder System*, comments on something it’s worth taking notice.
In a recent presentation, John described Standard Operating Procedures as the foundation of a business that is built to sell. Amongst other things, they provide the following for a business-:
The secret to happy customers – by helping to provide your customers with a consistent experience
Minimise the owner’s time spent problem solving – SOPs allow owners to pre-empt most questions employees ask resulting in less staff interruptions therby freeing up much needed business owner time to tackle other challenges.
Help to train confident employees – SOPs give employees clear instructions on what main tasks make up their jobs.
Increase the value of the company – by giving an acquirer more confidence that the business will continue to survive without the owner.
So if documenting your Standard Operating Procedures really does;
increase the value of your business,
improve profitability from greater efficiencies and productivity and
give the owner much needed time to focus on other things,
then why do some owners not invest the time required to put these SOPs in place? From my experience, it comes down to two things, time and money, and fundamentally, knowing where and how to start.
Anecdotally there is enough evidence to support an argument that the documentation of key processes and procedures will increase productivity and efficiencies which in turn will flow through to improved profitability. It’s also clear that any time spent documenting key processes and procedures now will be rewarded threefold in the future. That takes care of the time and money obstacles.
As to how and where to start here are the Seven Secrets for creating Standard Operating Procedures that John Warrilow advises will stand the test of time in your business.
Use Video – If a picture says a 1000 words then a video is worth a million. By creating processes and training material in video format staff will enjoy the learning process and be more likely to retain the information. Such content can be supported by written documentation
Keep your SOPs short – show your employees how you want them to perform a specific task. If you need more than two minutes break your instructions up into shorter video clips.
One touch – the best SOPs are structured so that an individual only touches the process once.
No double data entry – if a SOP requires entering data make sure that a single piece of data or field is only populated once and by a single person.
Clear roles and responsibilities – when designing SOPs make sure it is clear who is responsible for each step.
Make SOPs available where employees need them the most – ideally your SOPs should be cloud based and appear where your employees do their work so they can access them just in time without having to sift through a massive Google drive or Dropbox folder.
Solicit help from Process experts: – just like Finance, Health and Safety and HR, SOPs are now an expertise in their own right. Experts from companies like New Zealand’s Bedrock provide guidance around templates, structures and frameworks which help make such an exercise less daunting
Increasingly I am hearing the message from business owners that they’re working too hard for fewer rewards. The more I research documenting SOPs the more I am convinced that if business owners invested the time they currently spend answering queries from their staff into documenting these processes, the quicker they would regain that lost time to use on more meaningful things in life The benefits of putting some extra effort over the next few months into starting this process will quickly become apparent, while the longer-term benefits will continue to accrue as these SOPs are developed and introduced.
*The Value Builder System is a cloud-based assessment tool that helps build the value of a company. It has helped more than 55,000 business owners improve their company’s value by up to 71 percent.
Economist Cameron Bagrie provided members with some keen insights into current operating conditions at our recent Tuesday Team Talk. Cameron’s theme was ‘Unlocking New Zealand’ and key takeaways included:
Auckland’s lockdown will disrupt usual seasonal cash flow patterns for businesses with pressure building as lockdown continues.
A move away from housing as a source of wealth creation is required in favour of the productive (business) sector. This change is hard to imagine at present but inevitable with housing testing economic and social boundaries.
With Covid’s impact constraining the supply of products and labour, expect annual inflation in NZ to remain sticky around 3% and become the new normal.
Credit conditions are at their lowest point ever with banks favouring housing loans.
Education is one of the keys to NZ’s future. Declining school achievement is a real concern.
Members had the chance to quiz Cameron on some of the points and discuss how, as business owners, they’ll be tackling some of the issues.
As we bubble along in this ongoing stew of uncertainty, business owners are finding operational challenges are heating up on several fronts, not least of which is the skills shortage.
Exacerbated by current immigration policies, there is no doubt whatsoever that it is harder and harder to retain staff. One company I know has lost seven staff in recent weeks – two changed professions entirely, three have gone to competing firms and two have gone overseas to be reunited with their loved ones. The company had done all it could to keep the staff but external pressures put paid to their efforts putting them back in the recruitment market looking at a rapidly evaporating pool of talent.
There are macro-economic needs that have to be addressed at government level in order to resolve this and other pressures but what can business owners do in the meantime?
At the time of writing, New Zealand is at the start of Mental Health Awareness Week and the internet and social channels are abuzz with ways to help others – and yourself – manage your mental health. For employers, employee wellbeing has moved to centre stage. As we all deal with the challenges of prolonged lockdowns and restrictions, for some households significantly reduced incomes, home schooling, distance-caring and a host of other concerns, our employees’ wellbeing is paramount. We have to consider how workload can be managed, communication maintained and skills improved in a radically altered operating environment. Money is no longer the only motivator – employees are looking for genuine consideration and a purpose-driven employer – which means wellbeing policies have to be developed and implemented. And not only policies develop – in recent years the management of wellbeing has become a job in itself, with larger companies introducing the role of ‘chief wellbeing officer’ or ‘employee wellbeing director’.
The other great motivator is personal development – which is the cue for all business owners to get training today. Find the right people to sit in the right seats undertaking work they are suited for – trying to ‘fill the job’ with the wrong person will only make things worse. Training and development from within will help you grow your people along with your vision. If you are not sure about the qualities and strengths needed for a role, run a skills audit and identify what’s needed and, if you still find yourself struggling, ask for help – this is one of the many areas where a peer board or business mentoring can be invaluable.
The skills shortage will be with us for some time – building a reputation as an employer of choice with genuine concern for employees is one way to tackle the challenge.
A question that business owners often ask, is: ” What will work best for me, a business coach or business mentor?” The difference between the two can be confusing, so let’s clear it up as best as we can.
Both coaches and mentors are experienced business owners, consultants or leaders who have been successful in their careers and can bring an objective view to your business, which will help you improve your performance. While the aim of both coaching and mentoring is to help you achieve better outcomes from your business, the method of getting there – the journey – is quite different.
The Role of a Business Mentor
The defining factor of a business mentor’s role is that they have experience in your specific industry. Accordingly, they will help you understand the business norms and best practices in your industry. A mentor will also give you direction on what path they think is the best one when you are making key decisions. An important point to note here is that because a mentor knows more than you do, they will give clear recommendations, which you will be expected to take.
This works well in corporates and large businesses, where those with more experience mentor those with less experience, particularly when you, as the client, are new to a role or function, and where the mentor truly does understand the industry and business better than you do.
As a business owner, however, identifying the best approach for you: business mentor or coach, can be refined down to one question: how directive would you like this person to be? If you want someone who will tell you what to do, choose a mentor, for they will provide specific solutions to problems you are having, and recommend their preferred route when you are faced with choices.
If you decide to go with a business mentor, however, make sure you choose the right mentor for you – one that has experience in your industry and, if possible, in your industry niche.
The Role of a Business Coach
Where a business mentor coaches through telling, a business coach believes in your inherent wisdom and ability to make the choice that is best for you. They are aware that your personal goals and style of leading will result in you making a unique set of decisions that reflect what matters to you. Let’s face it if you own a kitchen design business, you know if you want to:
be the biggest supplier of kitchens in the country,
supply a smaller range of kitchens, at the highest possible margin, or
want to be known for beautifully designed kitchens that utilise sustainably sourced products.
We all have our own way of looking at the world and the choices we make reflect this.
Coaches inherently respect this – and support you to choose the path that is best for you, believing that you need to be the author of your own life.
For this reason, a business coach will support you to set clear goals and identify strategies and a set of concrete actions that will enable you to achieve your goals. They will then walk beside you as you take this path, and challenge you if you start to veer off the path. They will also hold your feet to the fire if you put off decisions or actions that you need to make to achieve your goals.
But they will not tell you what to do.
They will be there for the long haul, acting as a sounding board when you need to bounce ideas around or help you stay motivated and connected to your vision when you start to lose sight of where you are going.
It’s surprisingly easy to get started. To get results, a coach will sit down with you to define your goals and create a strategic plan. They will then meet with you regularly to review where you are at, and whether the actions you are taking are achieving the results you need, so you can revise and update the plan as necessary.
Once you are clear about where you want to go, they will ask questions that will help you get a bigger perspective on the issues and opportunities in front of you. In this way, they support you to make the best decisions you can – and help you to achieve what you are capable of as a business leader.
They will also help you to develop clarity on the strengths and weaknesses of your business, and what you need to do differently to strengthen the foundation of your business so that over time its performance constantly improves. Read more on business coaching here.
There’s no doubt about it – things are tough. Several weeks of lockdown have done nothing to ease the mounting pressures on businesses and we can all see the business blues are creeping in.
We know the hard hit sectors are hard hit once again and as much as possible is being done to help them through this current hiatus. Those sectors that have not been hard hit to date are also feeling the pinch as the problems that have been building over the last twelve months have compounded to create an operating environment that serves up one set of instabilities after another.
Supply chain interruptions have reached crisis point for many and with Auckland in extended lockdown even local supply chains have stalled.
Working capital is under pressure with businesses having to order stock far in advance – six months in advance is not uncommon – and, as well as ordering far ahead, owners are having to order more and carry more stock, clogging up cash flow, not least thanks to slower payments out of Auckland.
All things considered it is a much tougher environment and although many business eased into lockdown which, despite its sudden arrival was not a new experience for us, many appear to have hit a slump. Emails and phones are going unanswered and in some parts of the country it feels like some operations have ground to a halt as they wait for someone to press the restart button.
How then do we cope with all this? As business owners, how do we tackle the operational issues, the nationwide slow-down and, perhaps the biggest issue of all – our own motivation?
My first suggestion would be start with scenario planning. Forget about ‘best case’ scenario completely and work instead on ‘most likely’ and ‘worst case’. Those who are faring best at the moment took time out months ago to think ahead. They looked at the ‘most likely’ scenarios and realised that lockdowns and COVID problems would be with us for some time, so they adapted their business models and operations to allow for alert level disruptions. Interestingly, worst case for many isn’t an alert level change. It is bound up with the supply issues or working capital and that is certainly something that can be addressed through good scenario planning.
If you have slowed down, stop and restart. Take some time to look at where you are, how much you’ve achieved in the last 18 months simply by staying in business and then look forward. You will be staring uncertainty squarely in the eye and pushing on with ‘more of the same’ may seem daunting, sapping your motivation even further. And this is where my second suggestion comes in – focus on your good leadership habits and get some support. Don’t try to go it alone. Our peer boards have been invaluable for members throughout the pandemic as it brings business owners together to tackle the issues we are all facing right now. When you are the one everyone is relying on to get the business through, find the back-up you need – don’t struggle on trying to cope alone.
Beating the lockdown business blues isn’t easy – but talking with your business buddies on a peer board can certainly lighten the load.
When you start your business some of the language used to describe aspects of the financial operations can be mystifying to say the least. In this occasional series, our advisors explain some of the concepts – and language – that is used to give you a clearer understanding.
This week, Gordon Stuart gets to the bottom of working capital and what it means for a business owner.
Put simply, working capital is used to cover all a company’s short-term expenses, including inventory, payments on short-term debt and operating expenses such as wages, salaries, rent and other overheads. Working capital oils the wheels and is used to keep a business operating smoothly in order to meet all its financial obligations within the coming year.
Working Capital is defined as current assets minus current liabilities and, if a business cannot meet its short-term debt obligations, it is experiencing liquidity risk. Running out of cash is what kills any business first.
Liquidity describes the degree to which an asset or security can be quickly bought or sold in the market at a price reflecting its intrinsic value.
Cash is universally considered the most liquid asset, while tangible assets, such as real estate, fine art, and collectibles, are all considered relatively liquid.
Understanding your business’s working capital requirements and where your cash is absorbed is key to success when you approach a bank for support.
The first thing a bank looks at is:
The cause (where money has gone) and the purpose of your proposal.
What proportion is being provided by the bank, the business and other participants (e.g. second tier lenders, or asset financiers).
The intended use by the business e.g. to increase working capital to fund growth or to fund an acquisition.
Some questions you need to be able to answer include:
What is the length of your operating or cashflow conversion cycle? For example, an importing retailer needs to know how long it takes to get cash from retail sales from the time they source or pay for imports – often more than 3 months. Likewise many service providers do the work but don’t get paid for 30 – 60 days. More importantly do you know how to change the length of the operating cycle or identify ways to unlock cash to improve working capital or support growth?
What are your intra and inter month working capital requirements? Banks look at your daily and monthly highs and lows of your overdraft as an early warning signal of trouble.
How does productivity and seasonality impact your cashflows? For example – holidays and short months reduce labour productivity which usually has a negative cash impact, alternatively increasing production to build stock for the peak summer season absorbs cash.
How many months working capital do you have if you incur losses?
Do you have access to an injection of cash if needed?
If you are struggling to understand some of the principles or, like many business owners are learning as you go, don’t be afraid to ask for help – we’re here to do just that.