Success in any business depends a great deal on how well you manage the details. I like to say the "dollars are in the details." However, many business owners and managers are overwhelmed by the minutiae of daily business life. They haven't discovered where to focus attention to accomplish the most good for the least amount of time, effort and cost.
So, what details in your business operation are most critical to success? The simple answer: those that propel you to achieve your business goals and those that obstruct you from reaching your business goals. Let's focus on the latter.
Most operational details causing frustration and hindering results are not obvious; if they were, you could quickly fix them. So how do you uncover the obstacles, weak links, bottlenecks, waste and delay buried in your daily business processes? More importantly, how can you spend your valuable time solving the most important problems—the ones with the greatest impact on customer satisfaction and your bottom-line profit?
The Root Cause
With business problems, we often tend to focus on symptoms such as excessive product returns or unproductive of employees, and fail to discover the true source of the problem—the "root cause."
By definition, A root cause "is the most basic cause that can reasonably be identified, and that management has control to fix. The fix will prevent (or significantly reduce the likelihood of) the problem’s recurrence" (Mark Paradies, TapRoot).
In a business setting, the job of the Systems Thinker is to drill-down and pinpoint the exact step within a business process that is under-performing and preventing expected results. Drilling-down is like looking through a microscope to examine the details and discover the underlying cause.
Keep in mind, however, that a symptom may have more than one cause. For example, lack of sales conversions from a website (symptom) may be from an overpriced product, a confusing sales message, or too many "hoops" for the customer to jump through in the buying process (causes). In addition, a single cause can create more than one symptom. An untrained worker could cause customer complaints and frustrated co-workers.
Finding the root cause of business problems is a skill that must be mastered by all business owners and managers. Understanding the Theory of Constraints will help you do just that. Once the true cause—the root cause—of a business problem is identified and fixed, all other dependent systems and processes are simultaneously improved.
Vital Few vs Trivial Many
When picking business improvement projects, it is important to prioritize and focus efforts where they will do the best good and help you achieve fast results. A few targeted improvements can be leveraged to create significant benefits to your organization.
In their book, "Six Sigma for Dummies," the authors write:
"The law of the 'vital few versus the trivial many' comes from the work of early 20th century Italian sociologist and economist Vilfredo Pareto. You may also know his law as the 80-20 Rule, where twenty percent of the inputs in any system account for eighty percent of the influence on that system.
"Pareto determined mathematically that, while a great number of factors are connected to a given outcome, only a few carry the weight to change that outcome in a significant way. In a business, system, or process, a few key variables are the cause of most performance problems. When you look for leverage in business, you search for the minority of variables that provide the majority of power in solving problems in manufacturing, assembly, distribution, accounting, finance, customer service and so on.
"There are more factors, contingencies, and dynamics to manage than possible when trying to break through to new levels of performance and success. The natural tendency is to try and manage and control every detail, but this is a slippery slope. The trivial many will bury you in a pile of unnecessary cost, trouble, worries, wasted energy and valueless action. No one, and no company, has the luxury or reason to manage all the details. Instead, the right path is to manage only those that are critical to producing the outcomes you desire. Focus on the inputs that really matter. All the rest, leave alone unless they become significant" (Craig Gygi, Neil DeCarlo, Bruce Williams, 39).
Getting to Work
Focus on the vital few details that will give you the biggest bang for your buck. What systems and processes can you improve that will help you reach company goals? What can you fix to eliminate road blocks, waste and inefficiency? What improvements will provide the largest financial payoff? How can you reduce frustration for customers or employees? What tweaks can you make quickly and inexpensively?
Once you pinpoint the vital few areas to focus on—your priorities—the best way to drill down to the root cause is by asking the right questions to the right people—a 5-Whys Analysis.
And please don't forget, The Box Theory™ Way—software and methodology—is also the best tool around to help you identify the root cause of problems and elevate your business systems and processes for high-performance results.
The Next Step...
Every businessperson with a vision of where they are going, and specific goals to get there, will face obstacles or barriers that hinder them from achieving success. Frequently, when confronted with solving problems or making improvements, business owners or managers feel overwhelmed. They lack the time, money, or resources to correct the problems they are experiencing. They often feel like their hands are tied and don't know where to begin.
You can start by confronting the brutal facts about your business operations—the problems that are staring you in the face. For example: from customer or employee complaints, discouraging financial or performance reports, or just plain gut-level frustration, you have a general idea of your weaknesses and challenges. As discussed earlier, these symptoms are the result of unhealthy and under-performing systems.
In 1984, Dr. Eliyahu M. Goldratt, in his book The Goal, introduced the Theory of Constraints (TOC) as a management philosophy based upon the application of logic and scientific principles to help organizations achieve their goals. The principles of TOC will provide you the shortest distance between two points—where you currently are, and where you want to go.
Theory of Constraints (TOC)
The Theory of Constraints is based upon the assertion that: “Every real system, such as a business, must have within it at least one constraint (limiting factor). If this were not the case then the system could produce unlimited amounts of whatever it was striving for, profit in the case of a business . . ." (Dr. Eli Goldratt).
In other words, every business operation has something inhibiting it from reaching its full potential. Some condition exists that limits sales or production output. This limit or constraint determines the maximum capacity of the system. By removing or improving the single constraint, the system is elevated to a higher level of performance.
Below are six types of constraints that can hold back an organization. The solution to your problems can be found in any or all of them; some may overlap.
- A Logical Constraint - Faulty thinking or assumptions can block success (e.g., believing people are the problem when ineffective systems—hiring, training, and so forth—are the real problem).
- A Process Constraint – The output of work processes is reduced by a weak-link or bottleneck in the process (e.g., work piled up in an in-basket; inventory waiting to be processed).
- A Physical Constraint – Physical components of a process often have limitations (e.g., capacity of a machine; available space or time; capability of a person; physical obstacles such as clutter or travel distance, and so forth).
- A Self-inflicted Constraint – A company's culture, rules, or policies can have a detrimental effect on results (e.g., lack of accountability, not hiring older people; sticking with the "sacred cows" of work practices).
- A Personal Constraint – Personal traits of an owner or manager can hinder performance (e.g., disorganization, procrastination, perfectionism, indecision, fear, incompetence, lack of time, or failure to face problems. Do you have any beliefs or behaviors that are holding back your business?)
- An External/Market Constraint – Obstacles can exist that you have no control over (e.g., market size; customer attitudes; competition; the economy). You can often adapt to these these external constraints over time by adjusting your business strategy.
As with a medical diagnosis, the symptoms of a business problem don't always point directly to the cause of the problem. In fact, most of the time, the problems you experience are not the real constraint. Just as a cough is only a symptom of an unhealthy system within the body, the pain or frustration you feel about your business may only be the effect of a deeper problem. Physical constraints are more apparent than logic constraints.
Consider this: While there can be a variety of problems within a system, only one step of the process at a time is the constraint on the whole system—the weak link and true cause of restricted output.
You can only improve the results or output of that system by eliminating the weak link or elevating its performance. Time, effort and money spent to strengthen the other links in the chain—the other steps in the process—will not improve the system output. The weak link governs the performance of the entire system!
(Answers: Step 4; 14 per hour)
Once you have strengthened or elevated the weak link, another link or step in the process becomes the weakest and may deserve your attention. Thus, by always focusing efforts on the weakest part of the system, you get the maximum benefit from your business improvement efforts.
Because only a few core systems drive your business results, and each has just one constraint at a time, you can now focus your energy on the few problems that really matter the most. Improve, grow, stabilize, and then tackle a new constraint. Watch your business take off!
Theory of Constraints: Performance = Full Potential – Constraints
The Theory of Constraints assumes that a system has a single productivity goal. The challenge is to increase the output, or "throughput" of the system by managing the constraint that blocks your ability to reach the goal.
For example, the throughput of a marketing and sales process is measured by the dollar value of orders written. The throughput of a production system is the dollar value of products shipped. For a business system as a whole, the measurement of throughput is the cash collected from the sale of its products or services.
Many company owners mistakenly think they need to optimize all of their business systems and processes (logic constraint). They often measure individual processes and reward performance independent of overall business results.
Surprisingly, the improvements of quality or efficiency, as important as they are, do not always lead to a corresponding improvement in throughput. In fact, an optimized system can create a negative effect on the next system by overwhelming it with inputs.
Improving any but the weakest step within a process creates excess output that piles up in front of the weak step, often called a bottleneck. Bad things happen when work piles up, when you overfeed a process. Don't create any more inventory or work-in-process than is necessary to maximize throughput!
Remember: The key is not just to eliminate the bottleneck of a particular system, but to elevate any system in the chain that constrains the throughput of the entire business. All of your core business systems must work in synchronization to achieve the best result. While efficiency and cost cutting are important, the best measurement of real improvement is increased throughput—revenue and profit.
In my experience with small businesses, insufficient sales are usually the major constraint on the throughput of the business. No matter how efficient the operation, without a steady flow of sales into the pipeline, the output is always disappointing.
By the way, your cost of goods plus overhead expenses create a monthly sales break-even point for your business. Throughput should cover those costs as early in the month as possible. You only make a profit on orders shipped after you reach the break-even point!
TOC in Action
Kid's Korner manufactures and distributes a unique line of children's furniture and accessories through five retail stores located in shopping malls. Owners want to double annual sales from three to six million dollars without the cost of adding more stores. They also want to preserve the margin in their product by staying in the retail market. They decide to put their resources into Internet marketing.
The first constraint the owners face is that not enough people visit their sorry website. They hire a person skilled at search engine optimization (SEO) and Google Adwords to improve online traffic. With more people coming to the site, their constraint is now the low percentage of visitors who become paying customers.
The owners hire a professional copywriter to improve their message and add an irresistible offer of free shipping. To their surprise and excitement, product sales start to take off! Sales throughput, however, does not increase as expected. They soon discover the next constraint, their inability to fulfill all of the orders on a timely basis. They add a person to the shipping department, and the problem is solved; throughput goes up.
The results from the website continue to exceed the owner's expectations, but now they can't keep all of their products in stock—a new constraint to overcome. For example, they have a line of lamps that come in twelve different styles. Production is hampered because they have to break down and set up the production line for each style.
A review of sales data shows that four lamp models account for 75% of their lamp revenue (see Pareto Principle). They make a difficult decision to trim the models to four. A miracle occurs! While they lose a few sales, production is much more efficient and the throughput on lamps dramatically increases—overall business throughput also jumps.
Lamp production has improved enough that sales again become the constraint for this item. The owners decide to take advantage of the productivity and warehouse the excess inventory. This proves to be a costly decision. It ties up needed cash. Demand drops drastically on one of the stocked lamps, and a production flaw, not caught during the inventory buildup, causes a significant amount of rejects and waste.
The owners revise their strategy and begin to pace lamp production with sales—no inventory buildup of potentially obsolete items, no cash sitting on shelves, no hidden production flaws. They discover that more profit is made when sales and production flow through an evenly paced system.
By applying the Theory of Constraints, the owners focused on the critical systems that would increase throughput and help them reach their six million dollar goal. While you may have a different business model, these principles also pertain to your company.
Now, go find the contraints—weaklinks, bottlenecks, obstacles—that are hindering the throughput of your business! (Check out the "Elevating Constraints" section to learn five ways to eliminate bottlenecks.)
The Next Step...
With some people (like owners and managers), everything seems to be urgent, pressing, dire, critical, serious, or top-priority. With others—employees who are laid-back, casual, carefree, lackadaisical, or even unconcerned—nothing is urgent.
In business, a general sense of urgency is a good thing, but it usually doesn’t happen automatically.
My mother recently fell and broke her pelvic bone. She is recovering in a rehab facility. Never-ending patient demands at the care center keep the staff on-the-run all day long. Urgency, and the resulting productivity, is built into the culture. The business owner just smiles as he watches people scurry around getting their work done.
You may not be so lucky. Most owners and managers have to be more creative to infuse their company culture with a sense of urgency. If done successfully, however, the payoff includes motivated employees, happy customers, lower costs, and greater profit.
An Example of Urgency
When I was a young man going to college, I worked for a company that had a “hot product.” We were three weeks behind in production and shipping. Customers were constantly calling to have us trace their order, thinking it must be lost. A picture hung on the wall with a chimpanzee dressed as a shipping clerk. To a customer over the telephone, the chimp declared, “Trace it! We haven’t even shipped it yet.” That was our story.
Every shipment was urgent to prevent orders from being canceled. One day, I decided to pack an extra twenty cases of product and process a few more orders after my regular shift was over. It took me another twenty minutes. Continuing each day, I packed an additional hundred cases in the week and about 450 cases in the month. My shipping buddy decided to join in, and we completed nearly a thousand extra cases in the month for our employer. It was urgency that drove us to it. (And truthfully, we wanted to avoid being yelled at by angry customers or a grumpy-pants boss.)
Bad Urgency vs. Good Urgency
Urgency that comes from “putting out fires” is not good. It is the result of poor planning and execution of business operations. This kind of urgency is very stressful and a real downer for everyone.
However, when the energy is properly harnessed, urgency can elevate business performance and produce amazing results (motivated employees, happy customers, lower costs, and greater profit).
Simply put, urgency will increase productivity and accelerate the sale of goods and services. Employees are motivated by a sense of accomplishment (and sometimes incentive pay). Customers love to receive products fast. Higher sales-throughput enables a company to reach its break-even point earlier in the month, and that sends profits soaring. Everyone wins!
Dos and Don’ts
Before you try to introduce urgency into your business operation, keep in mind there is a RIGHT WAY and a WRONG WAY to go about it.
Here are three things you don’t want to do to add the element of urgency:
- Don’t set goals to motivate people that are unrealistic. Goals that are too hard to reach kill motivation and cause resentment (especially when there is a financial incentive involved).
- Don’t skip steps in a proven business process. Skipping steps such as a preparation step or a quality-control step for the sake of urgency will create problems that nullify any gains.
- Don’t turn up the speed on the conveyor belt. People can only work so fast and still maintain quality. Efficiency is better achieved by eliminating speed bumps and system busters than by pushing people beyond a reasonable work pace.
Now, here are four legitimate things you can do to create a sense of urgency:
- Let customer expectations drive the urgency. Tell customers you have next-day shipping or one-week lead time, or a specified completion date. Employees will do what it takes to fulfill the company promise.
- Set daily, weekly and/or monthly goals. Speed and urgency naturally increase as people get closer to a deadline. For example, employee productivity accelerates to meet a shipping goal by the end of the week (e.g., number of boxes, orders, or dollars). It is a good idea to post results and hold people accountable for achieving the stated goal.
- Create financial or other incentives. Self-interest is highly motivating for most people. A good incentive system—financial or otherwise—will lift employees, speed processes, and drive down unit costs.
- Declare an emergency. This infusion of urgency can only be used once in a while and should be substantially true (e.g., you may lose an order). Proclaiming an “emergency” too often is an indication of weak management. Declaring emergencies that are not real is like the boy who cried, “Wolf.” The plea for help will eventually be ignored.
Keep in mind: A high-level of urgency cannot be sustained. People have peaks and valleys of energy and productivity. They can’t stay in top-form all day, every day. You have to accept that. However, you can have higher and longer-lasting peaks and shorter-shallower valleys by adding one or more of the urgency triggers described above.
Where Do You Start?
Infuse the power of urgency into the weakest of your core processes for selling and delivering products and/or services. Watch as surrounding workers and processes catch the fever. Keep an eye out for the physical bottlenecks that may be holding people back, and elevate those constraints.
Oh, and one more thing: Kick your business into high gear fast with Box Theory™ products.
The Next Step...
We can't learn too much about our customers—who they are, where they hang out, how they think, and what they want. Most of us don't have enough customers and would like to get more.
Stating the obvious: Happy customers translate to more sales. Increased sales enable your business to hit the break-even point earlier in the month. After reaching the sales break-even point, profit margins go up dramatically. With more profit, everything gets better, and you have a prosperous enterprise.
Are your customers as happy as they could be? Do you have "killer customer care?"
Four Things Customers Want
Customers all want the same thing—the best deal they can get on products and services. They want high-quality. They want it fast or on time. They want it at a good price. And they want a pleasurable buying experience.
Learn from the Experts
Many lessons have been learned over the years about how to serve customers well. The slideshow below will provide you some great insights. These profound statements are from people who truly understand the principles of customer care:
Sam Walton (Wal-Mart)
Ray Kroc (McDonald's)
J. C. Penny
John F. Kennedy
Your Customer Care System
Keep in mind, the informative statements you are about to read won't help your business one bit unless you incorporate them into a business system or processes. There is no other way!
Review the slideshow. Make notes. Then, go apply some of these principles to elevate your customer-service systems today.
The Next Step...
Starting a new business is both exhilarating and downright scary. Every new business owner has a story to tell about the early days.
When I was a young man, my father sadly passed away of cancer at age forty-on. He had a life-insurance policy of $30,000. My mother felt that he would want my brother and me to have this money for a new business venture we were considering. Craig and I were pretty naïve back then and did not realize how likely it was we would lose it all. Fortunately, our startup manufacturing business landed a big customer and was able to leverage that income to get the ball rolling.
However, Craig and I were not only youthful and naive about the perils of starting a new business, but we were clueless about how to create a fully-functioning and profitable business operation. We jumped in, started making and shipping products, and enjoyed a short honeymoon. Then the harsh day-to-day business realities began to settle in.
The Game of Business
We discovered it was not so easy to keep customers, employees, vendors, bankers and landlords happy all the time. We realized that the more we sold, the more our accounts receivable and inventory grew, keeping us cash-poor. We learned that we needed to make a high-quality product every time and all the time, and that we had to watch every penny in the process. Given the many variables, unexpected costs, and things that can and do go wrong, making a profit turned out to be a tricky proposition. At the end of the month, we took home a meager paycheck and wondered, “Where has all the profit gone?”
Craig and I didn’t understand the importance of creating business systems, or the underlying principles for making them efficient and effective (8 Characteristics of Good Business Systems). We spent our day putting out fires and stumbling around to improve the operation. Eventually, some rudimentary systems emerged, and we began to learn how to play the “game of business” (see Grade Your Business Systems).
As a new enterprise—one that expects to add people, products and processes—you must give attention to creating fundamental business systems and processes such as those described below. Some should be developed before the business rollout, while others can be created and refined during the first year.
- Systems to Acquire New Customers: marketing, lead generation/advertising, sales, website/SEO/social media
- Systems to Get Good Workers and Teams: hiring, training, compensation/incentives, safety, employee policies, performance evaluations/recognition
- Systems to Make and Deliver Products and Services: production, order fulfillment, shipping and receiving, customer service, inventory management
- Systems to Manage Money: accounting, payroll, purchasing, credit/collections, tax/compliance, cash management
- Systems to Support the Above Systems: facilities management, computers (IT), housekeeping, security, maintenance, office management
- Systems to Improve the Business: product/service development, business systems development, business improvement workshops.
Good Business Systems Make All the Difference
Getting off to a good start with effective business systems and processes will produce consistency, confidence, and accelerated sales growth; it will put you on the fast-track to earning your first profit.
New Customers Will Love You Because Good Systems:
- Help you meet and exceed their expectations
- Provide a great buying experience
- Give customers the “best deal”
- Increase consistency, quality, speed and reliability
- Help you become a standout in your target market
(Customers see will you as organized, credible, and professional.)
Employees Will Thank You Because Good Systems:
- Make job expectations clear
- Reduce training and supervision
- Improve productivity, quality, safety and cleanliness
- Elevate job satisfaction
- Reduce employee turnover
(Employees will see you as a great company to work for.)
Your Business Will Reward You Because Good Systems:
- Maximize your income and ROI to make a profit sooner
- Eliminate chronic frustration and excessive costs
- Reduce dependency on people who come and go
- Build long-term value into your business
- Enable you to eventually sell, replicate, or have others run it for you
(Stakeholders will have confidence in your Leadership.)
Don't Do What I Did
Starting and running a new business is high-risk. You have to work on the business as much as you work in the business (Michel Gerber, “E-Myth Revisited”). That means creating effective, efficient and even exceptional business systems and processes.
Don’t do it like I did. Do it right, and right from the beginning.
Quite frankly, the Box Theory™ Way—the methodology and software—is the best tool available for business startups. It will get you organized, develop your Systems Thinking skills, and help you learn the Master Skill for creating growth-producing, customer-pleasing, waste-removing, profit-boosting business systems and processes. And it will pay for itself almost immediately!
Please take a minute and check out the Box Theory™ Products. It may be the most important thing you do today.
And One More Thing: Don’t become one of the dismal statistics that describes the failure of most business startups. Even good business systems and processes won’t save a company with low market demand, insufficient working capital or profit margins, superior competition, an undifferentiated strategy or value proposition, difficulty reaching the target market, or ineffective management. These conditions—if not remedied—can kill a new business, so proceed with caution!
The Next Step...
At the root of all business problems is some form of waste, either defects in products or services, or time-wasting delay. This is what causes customers to go to competitors. This is what raises cost and erodes profit. This is what ultimately drives owners out of business.
Every product, service or transaction-based business has two “factories” running simultaneously according to Jay Arthur, author of Small Business Guide to Six Sigma. The "Main Factory," where you focus most of your energy, produces goods and services for your customers.
The second factory is less noticeable. It is the "Fix-it Factory," which cleans up all the mistakes, rework, defects, breakage, returns, scrap and other problems of the Main Factory. This frustrating underbelly of the business primarily deals with waste and delay. Every business has a Fix-it Factory that requires people and financial resources. You might be surprised by the cost of running your Fix-it Factory!
Waste is Expensive
Most small-business owners do not face the brutal reality of waste in their business. However, experts estimate that the average small business has at least 3% waste (Jay Arthur). Many have more. Some have much more!
For a company with one million dollars in sales, 3% waste amounts to $30,000 in cost. This expense, however, is not paid out of revenue dollars, but is paid out of profit dollars! If the company’s net profit before taxes is expected to be 8%, or $80,000 dollars, 3% waste would reduce the profit to $50,000.
Stated another way, the company has to sell nearly $400,000 more to replace this $30,000 loss in order to achieve the desired profit level. (I don’t want to depress you, but it actually gets worse because there are additional costs in handling the waste.)
Do you realize what I just said? All wasted time and material come directly off the bottom line. In this example, waste of 3% of sales translates to nearly 40% in lost profit!
Mistakes are Prevalent
How often have you purchased a product or service and had something in the transaction go wrong? For the last ten years, I have been telling my wife that it seems like half of our purchases have one problem or another.
For example, several years ago our financial services company was teaching workshops to educate our customers on the development of effective business systems. In putting together our little workshop facility, I had to buy a variety of equipment, furniture and accessories. Here's what happened:
I purchased eight high-back chairs for the lobby that came with the wrong fabric. I had a wall-to-wall counter built that was one-eighth of an inch too long and had to be returned for trimming. Paint came off ceramic candy dishes when removing the price labels. I ordered new blinds for five windows. Four blinds arrived together, but the installer had to make a trip back to install the fifth blind. I bought special narrow conference room tables that came with the wrong style legs. The company graciously remade the tables, but this was particularly annoying because it delayed our kick-off date. In the second batch, one table had a large dent in the top. In addition, the skirting on the tables didn’t stay attached so we removed them altogether. The audio-visual person put the ceiling speakers in a different place than I requested. I didn't make him move them, but it always bugged me.
These common mistakes cost the vendors most or all the profit from my business. However, this is only part of the story. The Fix-it Factory erodes profit in another way. You see, I may never do business with some of these vendors again; they caused me too much pain. Worse yet, I may tell other people of my bad experience. You can see that the overall cost of 3% mistakes is enormous!
Walmart Gets It
Walmart is relentless at cutting waste from their business. For example, they have distribution centers as large as twenty-four football fields, with up to nineteen miles of conveyor belts. Many trucks are simultaneously loaded at the docks and dispatched to regional stores. Now get this! Wal-Mart measures the efficiency of their loading operation by how much space there is between boxes traveling down the conveyor belts. If the boxes are touching each other, the maximum number of boxes can be loaded. The space between the moving boxes is actually “waste” or inefficiency, and it increases the cost of every unit of product on the conveyor. This kind of attention to detail is what makes Wal-Mart so successful.
Waste and mistakes are a common occurrence. Every customer purchase has many choices, options and variables followed by a daunting trail of paperwork and computer processes. Consumer demand for new and improved products and services—change—puts pressure on maintaining quality. The turnover of people in the workforce reduces overall competence. Holy cow, no wonder so many mistakes are made! It’s not surprising that we go around frustrated with employees who we think have messed up, or mumble when customers take their business elsewhere.
Cut Waste to Survive and Prosper
The truth is that times have changed. To survive, the small-business owners of today must accomplish the seemingly impossible. They must squeeze out every possible defect and delay from their business. They must execute operations with exactness. Every part of their business must be systemized to reduce costs and eliminate customer dissatisfaction.
Here’s the deal. You—the business owner—are in control. It is up to you to create a “culture of discipline” (Jim Collins, Good-to-Great) and drive the waste out of your business. If it's not important to you, it won't be important to others. Make it a top priority!
Get started turning your business into a “house of order.” Develop effective business systems that will shut down the Fix-it Factory. Start working on the business and not just in the business (Michael Gerber, E-Myth Revisited). You can do it, and I am going to show you how!
The Next Step...
The essential task of every business owner or entrepreneur is to overcome daily problems, obstacles and challenges in the quest to serve customers better and make a profit. I want to discuss some of the specific challenges faced by small-business owners, and then drill down to the underlying causes of those problems. This will also lay a foundation for understanding the solutions offered by Box Theory™.
The Small Business Challenge
The Small Business Administration reports that over 500,000 businesses are born every year and about the same number die. The recent trend has more businesses closing than opening. Of startups, 33% are no longer in business after two years, and 50% are gone by four years. (Frequently Asked Questions).
The Box Theory™ Way can prevent you from becoming one of these dismal statistics, behind which are broken dreams and financial devastation.
As entrepreneurs, we all start with a similar vision. We want to be independent and earn more income than we might earn by working for others. We have an idea, talent or product we hope the marketplace will demand. Sometimes we borrow money from family, mortgage the house, or risk everything to “live the dream.” Then, like every other entrepreneur, we discover that owning a business requires all the intelligence, discipline and hard work we can muster. To start, grow and sustain a successful company is likely to be the most difficult thing we ever attempt.
From day one, unrelenting forces begin to work against us. We face slumping economies, cost increases from vendors, customers who pay slow or not at all, government regulations, increasing taxes, unproductive employees, stiff competition, insufficient sales, obsolete inventory, cash flow headaches, never-ending demand for new and better products, and many other challenges.
If you haven't had some of these brutal experiences yet, it's only a matter of time. They will come with changing market conditions, government leadership, and business cycles. So be prepared.
I believe it takes as much skill to be a business owner as it does to be a medical doctor. The difference is this: Doctors prepare for ten to twelve years before starting their medical practice. Most entrepreneurs learn on the fly, resulting in critical errors and frequent casualities. The requirements of continuous learning, self-discipline and long hours are no less for a budding entrepreneur than they are for a doctor. Are you willing to pay that kind of price?
Your Primary Purpose
A business enterprise is made up of of people, products and processes organized to profitably find and keep customers. Companies are in trouble from the get-go when they face superior competition, low market demand, undercapitalization, difficulty reaching their target market, undifferentiated strategy, ineffective management, or a weak revenue model. Assuming those things are in order, the most likely reason for failure is that owners do not create business systems and processes that effectively carry out the mission, strategy and goals of their organization.
As an entrepreneur, your primary purpose is not to sell, make products or provide a service, but to be the chief architect of your entire business enterprise.
On a typical day, you design, develop, oversee, monitor and evaluate the systems and processes that make your organization run efficiently, create value for customers, and produce a healthy profit. If you want to be an artist, machine operator, sales agent or technician, you should get a steady nine-to-five job. Building a business is a different vocation altogether. If you don't have the personality, skill-set, or desire to do this, you should get a partner or hire someone who does.
Your primary role is to get the best people you can on the team, create innovative products for your target market, and develop operational excellence (systems and processes) that will attract and keep customers. When you can do this profitably, you will have the foundation for a lasting company.
Customers buy from companies that serve them best. Without concern, they allow all others to fail. It is how the customer feels about your business as a whole that matters most. Everything about your operation—advertising, cleanliness, courtesy and knowledge of employees, return merchandise policy, product selection, location, delivery time, price, and so forth—is what they are choosing. As chief architect, your entire business is your product, and it must be exceptional throughout. When it is, you become the “best deal!” Creating effective business systems and processes will make your organization exceptional, and keep your customers coming back again and again!
Let's dig a little deeper. Do you run a perfect business? If not, what problems would you like to eliminate? What parts of your organization need to improve? What obstacles do you need to overcome? What is eating away at your profit or preventing you for reaching your full potential?
Your business weaknesses and problems will surface from three primary sources:
- Customer or worker feedback/complaints
- Financial reports and performance data/brutal facts
- Personal frustration/symptoms of deeper problems
You will experience frustration when there are recurring events over which you feel little or no control—problems that can often be eliminated by installing an effective system.
How many of the business problems, obstacles or frustrations below do you have?
Customer or Worker Dissatisfaction
* Our customers complain about quality or timely delivery.
* Our customer service is not as good as it could be.
* We don’t have customer loyalty or get the re-orders we expect.
* Our competitors are taking business from us.
* Orders are processed incorrectly; too many returns.
* We can’t seem to hire or keep good people.
* Our people aren’t productive or motivated.
* We don’t have accurate or timely financial information.
* We don’t know our true costs.
* Profit is lower than it should be.
* Accounts receivable collections are too slow.
* The company has missed filing deadlines or tax deposits.
* Cash flow is poor, hard to manage, and stressful.
* Labor costs are high.
* We don't have enough working capital for needed people, equipment or inventory.
* We don’t have enough sales.
* Our advertising isn't working.
* The business is unorganized and chaotic.
* I'm the only one who can do some of the work.
* There is too much waste and inefficiency.
Every day, these and other frustrating business problems take hard-earned money out of your pocket. Amazingly, they all reflect the same underlying problem—a problem that you can easily fix!
Start, Grow, Fix or Franchise
Each business is unique and at a different stage of development, with different goals. However, every business owner is either trying to start, grow, fix, or replicate their business. Effective business systems and processes play a major role in each of these endeavors. Box Theory™ methodology and software can also help you in the following ways.
When you start a new business, you build everything from the ground up. You create and organize all your business systems and processes to produce sales, deliver products and services, and accomplish your mission, strategy and goals. Box Theory™ is a unique "system" to help you lay that critical foundation and get results that will impress customers right from the start.
If your company is growing, you face hazards of a different kind. Many organizations fail because they grow too fast. The primary problem is that existing systems and processes cannot meet the increasing demands. They begin to break down. Customers become unhappy. Cash flow dries up. Frustration begins to dominate daily life. An organization experiencing rapid growth can be at risk of collapse unless it re-orders itself to a higher level of performance. Box Theory™ enables you to elevate your systems and processes to accommodate the otherwise exciting increase in demand for your products or services.
The majority of business organizations have a great deal of hidden waste, most of which can be prevented. Half-baked business systems and processes rob business owners and stakeholders of thousands of dollars every year. Box Theory™ enables managers to fix broken or ineffective business systems, getting them to run smoothly and profitably.
Finally, if you have any ideas about franchising your business or replicating it in other markets, the most important thing you can do is systemize it like a McDonald's Restaurant. When you buy a franchise, you are primarily buying tested and proven business systems. Systemizing is the essential requirement to replicate any organization. Box Theory™ will enable you to create a business model that can be used repeatedly to multiply your financial opportunities.
By now, I hope the point is crystal clear. Business owners frequently fail because they do not create effective systems and processes that profitably find and keep customers. Additionally, most do not realize the underlying waste of time and materials that seriously erode profit and prevent them from meeting the high expectations of their customers.
By understanding that effective business processes are the essential building blocks of a successful and profitable organization, you can now embark upon a journey of systematic improvement.
The Box Theory™ Way will enable you to eliminate the most common problems that small and mid-size business owners face:
- Weak sales and growth
- Customer dissatisfaction
- Waste and inefficiencies
- Underperformance and turnover of people
- Poor cash flow
- Low profit
- Over-dependence on owners
Systems Thinking is a concept that will change the way you run your business. Effective business systems are the logical and practical solutions to your daily problems, and they are just waiting to be discovered!
The Next Step...
When I started my business career forty-five years ago, life was much simpler. The rules for running a successful company were also simpler. Customers were glad to get products and services and didn't fret the details too much. All of that has changed. Customers now have many choices and very high expectations. If companies do not execute with precision, the customer silently vanishes.
Today, you shouldn't start a business unless your you have fire in the belly, a drive to be the best at what you do, and a willingness to pay the price for success.
I retired from my accounting and consulting practice a few years ago—and truthfully—I just wanted to rest for a while. My entrepreneurial career left me with some battle fatigue and a diploma from the school of hard knocks.
However, in the last few years of my career, I stumbled onto something—something quite amazing—that now gets me out of my rocking chair each day.
I am somewhat of a quiet accountant type, not prone to a lot of hype. I like plain truth. In fact, I am a seeker of truth and have little patience for the bloated advertising and misinformation that fill our digital world. I wrote an ebook, Box Theory™: Double Your Profit with High-Performance Business Systems and Processes, that contains many truths that are little-known but essential for business owners to understand. I'm going to give it to you for free. Please keep reading.
IN THE BEGINNING
Several years ago, I began to teach my accounting clients how to use financial statements to pinpoint the under-performing areas of their business. This led to an interest in business systems and processes that grew into a passion. I eventually developed a two-day workshop that generated a lot of interest.
One evening while vacationing in Carlsbad, California, I watched a program on the Discovery Channel entitled, "String Theory—the Theory of Everything." I was intrigued to learn that scientists now believe that very tiny strings of energy, far beyond our ability to see through a microscope, are the foundation of all matter.
Do you remember from chemistry class that matter is made of molecules, molecules are made of atoms, and atoms are made of atomic particles (protons, electrons and neutrons)? Since I took chemistry, they have discovered quarks inside the atomic particles. Now, physicists have mathematically proven that these energy "strings" are the basis of everything in our universe.
It struck me that big things in our world contain important small things, which are made of even smaller things—all interdependent. If anything goes wrong with the smaller thing, the effect is felt all the way up the line. Cancer cells can destroy an organ. Organ failure will shut down a system within the body. And a system shutdown can cause the body to die.
The concept reminded me of a poem quoted by Benjamin Franklin in Poor Richard's Almanac.
For want of a nail, the shoe was lost,
For want of the shoe, the horse was lost,
For want of the horse, the rider was lost.
For want of the rider, the message was lost.
For want of the message, the battle was lost.
For want of the battle, the kingdom was lost.
And all for the want of a horseshoe nail.
Often, we don't realize the influence that seemingly small things have on events and outcomes in our lives. This includes our our business. Consider this:
For want of a minute, a phone call was lost,
For want of a call, a conversation was lost,
For want of a conversation, a relationship was lost,
For want of a relationship, an order was lost,
For want of an order, the revenue was lost,
For want of the revenue, a business was lost.
And all for the want of a minute to make a phone call.
This poem won't be published anytime soon, but you get the idea. In business, we must pay attention to the details—the small things that affect the important things.
Consider for a moment what you are reading right now. The alphabet is a system of twenty-six symbols or letters used for communication. By arranging the letters in a certain order, I create words with meaning. By grouping words together, I can form a sentence that expresses a complete thought. Several sentences form a paragraph. Linked paragraphs create a complete story. Letters are my building blocks for writing this course. If they get out of order, I will fail to communicate with you. How I arrange the letters is what sets me apart from all other writers.
Drilling down on a written document might look something like this:
The big idea from this is that we live in a world of systems, the components of which are smaller systems and subsystems, all working together for the good of the whole. Important activities are going on at every level down to minutest detail. To improve the outcome of a higher-level system (sentence), you must fix or improve the flaws of a lower-level system (words or letters).
One day in a business improvement workshop, I was flowcharting a system on the whiteboard—creating boxes for each step with the arrows between. In a momentary flash, I realized that an entire organization is made of flowchart boxes that are connected, and, which influence one another. In the days that followed, the concept of Box Theory™ emerged, a unique way of looking at the structure of any organization.
Box Theory™ has taken me on a journey of discovery far more important than I ever imagined. It has literally changed my life, not just my business career. I have a new and inspired view of the world—how things work together and affect each other—that makes it possible to see solutions to problems clearly and quickly, and how to improve any task or process for maximum results. It's really quite extraordinary!
My Gift To You
My purpose for writing the Box Theory™ ebook is to give business owners and organization leaders a new way to look at their business—in high-definition—that will enable them to compete in a crowded and unforgiving marketplace. Box Theory™ is not weird science, but natural and intuitive. It is not based on strange new techniques, but upon rock-solid and proven principles that are used every day by successful organizations (see more about Box Theory™).
Truthfully, Box Theory™ is the way you already do things, without realizing it. Now, your effort will be planned, systematic and far more effective. You will have a powerful "system" for creating your business systems.
The timeless truths that you learn in this course will provide the foundation for a life-long business career. Perhaps like me, you will see the application of Box Theory™ in every aspect of your life.
Now, as a gift to those who read this article—which is also the foreword to the ebook—I want to give you a free copy of Box Theory™: Double Your Profit with High-Performance Business Systems and Processes. It is on my website and sells every day for $24.95. If, after reading it, you have time to tell me what you think, I would greatly appreciate it.
All you have to do to get the ebook is sign up for my weekly newsletter (upper right column) and other free items for creating better business systems and processes. Then, shoot me an email—rcarroll@BoxTheoryGold.com—and tell me you want a copy of the free ebook. I will send you the link with no strings attached.
My only hope is that with this powerful information you will become a Box Theory™ enthusiast and practitioner, and can create a truly remarkable business enterprise!
The Next Step...
I'm a bit of an introvert. While I love teaching, I don't like giving business presentations. I always get the feeling it is "Custer's Last Stand" all over again.
(In 1876, Lieutenant Colonel George Armstrong Custer and more than 200 members of the U.S. 7th Cavalry were killed during "Custer's Last Stand" by a band of 3000 Lakota Sioux and Cheyenne warriors near the Little Bighorn River in Montana Territory.)
Make or Break a Career
According to Toasmaster's International:
"Every day, employees of various companies around the world find themselves in career-defining speaking situations. Presentations like these often involve high stakes and are presented to busy people with the power to influence careers.
"Business presentations can make or break your career. The technical briefing, a straightforward presentation to inform, can cause trouble if you lose your audience. For the proposal, you must advocate an idea, product or course of action, and convince others to agree. You may have to present complicated material to a nontechnical audience."
Your moment in the sun is a momnet of truth.
I've given presentations in my career where everything was on the line. After a sleepless night, and with tennis-ball mouth, I stood before an audience of skeptcal judges. Quietly, I prayed that the technology would work properly, I wouldn't say anything stupid, and the outcome would be favorable. But as they say, some days you get the bear, and some days the bear gets you."
Presentations are Business Systems
Like everything else, a business presentation is a "system." The quality of the presentation relies heavily on following correct principles for preparation and delivery.
When creating your business presentation system, you may appreciate a little help from the experts. Today I've included a slide presentation I think you will enjoy. In five minutes, you will learn the following, and more:
- 10 lessons from the world's most captivating presenters.
- How to give presentations that go from yawn inspiring to awe inspiring.
- Tips for creating presentations that get results.
- How much time to spend in preparation and practice.
Check Out these 10 Tips from the World's Best Presenters
The Next Step...
"10 Easy Steps to Grow the Perfect Business"
An Entrepreneur’s Guide
By Ron Carroll
Whether launching a business startup or running a mature company, every entrepreneur should become a student of business and continually strive to discover and apply proven principles for success. There are thousands of books written by business experts that can inform and inspire. This ebook is brief, but packed with many rock-solid principles derived from personal study and forty years of hands-on experience. If you take each chapter to heart and apply the principles discussed, you will become an exceptional business leader and grow a remarkable and prosperous organization!
Preface: Hats Off to the Entrepreneur
Step 1: Get Off the Treadmill and Into the “Zone”
Step 2: Blueprint Your Business
Step 3: Systemize Everything
Step 4: Manage by the Numbers
Step 5: Become an Obsessed Marketer
Step 6: Differentiate or Die
Step 7: Convert with “Killer Customer Care”
Step 8: Get the Right People
Step 9: Turn Your Business Into a Game and Keep Score
Step 10: Pay the Price (Plus a Recommended Step 11)
Optional Format: Download "10 Simple Steps to Grow the Perfect Business" as pdf file.
(Bookmarks to each chapter are available by clicking on "Bookmarks" icon in Adobe Reader.)
The Next Step...