About the author: Robert Bray is a consultant at EMH Strategy, a strategy and management consulting firm based in New Orleans.
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Anyone that has worked in an entrepreneurial atmosphere understands that strict processes and procedures in a nascent company are not only relatively meaningless, but also hard to develop. If your company offers a service, chances are the product is highly customized for the client, and if you are creating a product, the inevitable “trial and error” phase is inherently experimental and unpredictable. This is especially true for embryonic ventures with only a handful of employees, as there is little incentive to remain diligent about following rules set only for a couple of people. Yet if you have any ambitions to grow your company substantially beyond a freelance or lifestyle business, it’s important to standardize your processes as much as possible early for three reasons.
Scalability
As your company grows, it is important to develop clear processes for the internal operations of your company. Whether it’s standardizing a small-scale production line for a product, or something as simple as developing a more defined vacation policy, it is critical to keep your operational expenses constant as your output expands. This will allow you to spread these costs over a wider range of output and achieve economies of scale within your company.
Streamlined Decision Making
Putting policies and criteria in place will allow management to make decisions based less on time-consuming subjectivity, and more on defined decision nodes. Of course, every strategic decision is unique, and no decision should be made based on a generic template. With that said, young companies should start simply by creating basic company-wide policies. For example, take the client acquisition process. If you are offering a service, like web development, set some criteria for determining if you think a client will be worth your time. Do they have the ability to pay? Do they have a clearly defined need? If you are able to develop an internal policy for decision making by creating a uniform set of questions that must be asked, you will generally avoid entering into a relationship that will cost more than it is worth to you.
Measure Performance and Progress
For any company, particularly those in infancy, it is critical to be able to track performance. For young, rapidly evolving companies, measuring this company performance goes beyond seeing how much cash in the checking account. How are your employees spending their time? How billable is each warm body? How much does it cost to service a client? Putting in place tracking methods for answering these questions will allow you not only to gage your own effectiveness and efficiency, but also to articulate this performance to potential investors.
Establishing policies, procedures and systems may not be much fun, and this isn’t generally what most folks think about when they imagine the life of an entrepreneur, but paying attention to these few simple steps can greatly improve your ability to scale, grow, and succeed.