Starting from the basics, we could say that a business is created with a purpose and goal to be profitable. And by profit we mean, to put it simply, the difference between income and expenses. Revenue is all income and expenses are what the business spends in order to be able to offer to the market its products or services.
The situation now
Now, most businesses, depending on the phase in their life cycle and the economy in which they operate, give more or less weight to revenues and accordingly more or less importance to expenses. Thus, in times of growth, a business usually pays more attention to how it will increase its revenue/sales and less importance to the structure and form of its expenses. Given this, we have increased advertising, more people or investment in fixed assets such as machines. We see here that the business is more anxious to increase the side of the equation that is revenue by paying less attention to how much this will cost them.
In another era, for example in times of crisis or market contraction, the company gives more weight to its expenses. Thus, we have limited or terminated advertising, dismissals of personnel and/or sale/decommissioning of machinery.
So far so good. Everyone knows how to lay off someone and how to cut costs when they have a problem, and even more easily one can increase advertising, hire people and buy machines when everything goes well. Of course, there arises the eternal problem of HOW we know how much to reduce or increase advertising, who to hire or let go, what to buy or sell, but that is a story for another article.
Why procedures
Our issue here is not the income or expenses but the processes of a business, an area where very few entrepreneurs give the necessary importance but which affects the company itself, its staff, its customers, sales, a lot more than you can even imagine.
In order to have sales, we have procedures followed by the sales staff, procedures for customer service, procedures for the promotion of the business, and procedures for the orders. On the expense side, we have procedures for the recruitment and dismissal of staff, production procedures, support staff procedures such as the accounting department, and procedures for the general operation of the business and offices, factories, shops.
All these processes can have a big impact on the overall operation of the business, on attracting or deterring customers and staff, on increasing or decreasing costs, and on increasing or reducing the processing time of an order or product production. These processes are so important but are also so easily overlooked in importance. They become a big headache for entrepreneurs and most likely the businessman ends up developing bureaucratic structures to control and quantify them, entering a vicious circle of missed opportunities, lost time, lost sales, lost customers, lost profitability, angry employees, gone associates and suppliers.
For the expenses side, the procedures must be studied, analyzed, developed, implemented and checked regularly in order to improve the time of actual production of the personnel, the reduction of the staff in the necessary numbers, the reduction of the production time, the reduction of losses and mistakes, the encouragement and reward of initiatives. For the sales side, the processes should also help in the quick and easy sale, in the proper allocation of sales personnel, in the selection and implementation of the right advertising framework by our partners, in the training of staff, in the reduction of effort and time needed by customers.
In a World where services have the leading role in an economy with sectors such as lawyers, accountants, banks, retail, offshore companies, shipping, import, trade, retail, and so on, where production cannot be stored but must be disposed of immediately, the right processes that these businesses operate based on are sometimes more important than just another customer or the reduction of a minor expense.
The purpose
The purpose of the right procedures is to improve the overall customer experience in order to be satisfied and to propose us to another customer, to reduce the time needed by someone from our staff so that he can carry out more tasks in the same time with better results, to reduce the unnecessary control by the owner/entrepreneur so that he can devote useful time to new activities, reduce mistakes and complaints, increase productivity, with the ultimate goal, in the end, to reduce expenses and increase revenues. In other words, if we do not have an increase in profitability when we implement certain procedures, everything else is unnecessary, bureaucratic, unneeded and wrong. And in order to correctly evaluate every new or existing procedure, you have to involve in its development or adjustment (in one way or another, early on or in a later stage) your employees, suppliers, and clients.
If your business is creating procedures just ask some simple questions before implementing them:
- Will our clients benefit from this?
- Will our employees like them and implement them?
- Can this improve customers satisfaction over time?
- Can this help us increase sales long-term?
- Can this assist us in reducing expenses long-term?
If procedures are designed because ‘the business owner said so’, your company is in trouble.
