Setting Up a Business That Can Run Without You
John Sanders runs a successful cruise business, Premier Christian Cruises, with more than $6 million annual revenue. And after five years in business, Sanders and the other two owners of Premier Christian Cruises still have a hand in nearly every business transaction. They book the entertainment acts, answer the phones, and do the accounting. And this is limiting their ability to grow the company.
While it is common for many owners of small and medium-sized businesses to remain close to the day-to-day operations of the company, that involvement takes away from the owner’s ability to focus on other aspects of the business, such as refining the company strategy, and looking at product development and new markets. Without a formalized system that automates key business processes, and thereby allows for proper delegation of business tasks to employees, the owners of Premier Christian Cruises don’t have enough time for the strategic roles that require their attention.
Business advisor David Finkel, who helped to transform Premier Christian Cruises as part of the AllBusiness special Big Business Contest, feels one of the biggest limiting factors of the company is the lack of scalable systems that can free up time for the three owners to “work ON the business versus IN the business.” By implementing a carefully planned business organization system with processes that guide business functions, Premier Christian Cruises can free up the time needed to focus on more important tasks.
Yet delegating important tasks can be difficult for business owners. For Premier Christian Cruises, handing off duties such as booking the creative talent for the cruises will be difficult.
“Booking talent can be quite a chore, require lots of communication with agents, and is very important to our cruises, so it can be very hard to delegate this kind of thing,” says Sanders. “It involves a lot of trust in your staff.”
Yet in order to free up time to grow Premier Christian Cruises, Sanders and his partners need to establish processes so the business runs efficiently and fluidly without him.
The first step, according to Finkel, is to free up a 5 to 10 hour window each week to be spent on creating business systems that will standardize business tasks like booking creative talent. One key way to free up more time is to apply Paretto’s principle, often referred as the “80/20 principle.” Using this principle, owners concentrate on the most important business activities. It is those 20 percent of activities, or “A-level” activities as Finkel calls them, that need to be put on the top of the priority list, while the “D-level” activities should get low priority.
“My goal for Premier Christian Cruises is to help them clarify A- and D-level activities, to identify the things they do where a small percentage of input produces great results and then… look at things that are pure D-level activities, that don’t return much at all and how do they create a system to eliminate, differ, delegate, hand off,” Finkel says. Such D-level tasks as responding to phone calls and e-mail inquiries will be the first to be delegated to company employees.
“We feel that in any good business you reply to all e-mails and phone calls,” Sanders said. “We just can’t be the ones doing all the responding.”
Once a business’s activities are prioritized and D-level activities are delegated, Finkel will help Premier Christian Cruises create a master system guide, which clearly defines employee and owner responsibilities. Finkel suggests that business owners first draw an outline of a naming structure to label files and folders for all the company’s key business processes. A standard file naming convention across all business functions makes searching for important documents easier. Next, he recommends creating a table of contents with a list of business processes to include in this file management system. Finally, identify the most important two or three business processes to organize first.
Premier Christian Cruises has identified five key areas to be outlined in their Ultimate Business System (UBS): executive leadership, sales and marketing, accounting and finances, human resources, and business infrastructure. The UBS will be a software program that will house all the company’s files, including a master system guide, on one server with different access levels, so the owners can quickly search and find files easily.
Once the UBS is established and primary business processes are being delegated, a business owner should create key metrics that measure the performance of employees at any given moment. For example, the business owners should be able to measure leads generated by the marketing department to keep tabs on whether appropriate progress is being made. At Premier Christian Cruises, a lack of metrics has forced the owners to spend extra time ensuring everything is done the correct way, Finkel said.
Yet, says Finkel, owners should be careful here. They should not rush into the process of delegating and creating these systems. Finkel gives the analogy of a light switch. In an attempt to free themselves of everyday business tasks, some business owners immediately switch or dump the business onto employees and the results can be disastrous. Instead of an all-at-once switch, use the "dimmer" approach. Plan strategically, and then make incremental changes that measure employee and business performance. The result will be a systems-dependent company instead of an owner-dependent company.
