Introducing The Procedure People Boring Business Show

I can’t listen to any more interviews!!

I have POST INTERVIEW STRESS DISORDER.

Since Andrew Warner’s Mixergy.com has been so successful, many people have created their own business interview shows using a very similar format …

… they’re all 1 hour long …

… they’re all video based …

… and they’re all unedited.

How can I possibly find the time to listen to all this content?

I can’t, is the answer. I don’t have the time.

Do you?

Didn’t think so.

Another thing I’ve noticed is that there’s a very limited cross section of businesses that will get airplay on these types of interview shows, namely those with high profile consultants or VC funded companies, or companies with big exits or millions of users or hockey stick growth … aren’t there more businesses than this?

Well, that’s what this show is all about. I want to find guests, who run businesses that aren’t hyped up, over the top, don’t have BIG EXITS, don’t have BREAKOUT REVENUES or HOCKEY STICK GROWTH or lots of VC FUNDING.

I want to interview solo founders and consultants, people running factories that import aluminium piping, businesses that sell umbrellas in pharmacies, people that own dog cleaning franchises, that run businesses you would never normally hear about because they’re TOO BORING…

… except that they’re not really boring.

They’re just too REAL to publish on tech crunch or mashable.

In fact, these businesses, and the women and men that run them, are the lifeblood of society in many ways. They’re the businesses that make sure we have all the stuff we need to go about our every day lives. They toil away largely in obscurity so that you and I have chairs to sit on, cars to drive, petrol to put in the cars, food to eat, clean puppy dogs and well written text ads on Google …

… and I find them fascinating!

So it is with great pleasure that I introduce you to the very first episode of The Procedure People Boring Business Show: a monthly (hopefully) audio podcast which will:

  1. Interview businesses and entrepreneurs you would never normally hear about and;
  2. Deliver a full hour long interview in a 10 – 12 minute EDITED AUDIO podcast so you can get your fix and get on with your day

Sound good?

Good.

Here it is: our first guest is Kai Davis, an outreach and online marketing consultant from Portland, Oregon in the USA.

NB: You can also download the audio file from here

If you’d like to hear more then you can follow us on Twitter, Facebook, Soundcloud and sign up via email (a little popup will appear in the bottom right of the screen when you scroll down to leave a comment about HOW MUCH YOU LOVED OR LOATHED the show — added bonus: if you sign up for the email list you’ll also get 18 free business systemisation tips over the next 18 weeks absolutely free).

So, what did you think? Be brutal. Be honest. Be vocal. It’s indifference I can’t handle 😉

How we do checklists in Google Docs

Checklists are very important tools for controlling quality and reducing human error in highly manual processes. They are especially handy when managing lots of processes across different team members.

There are loads of software options out there aimed at helping you create and manage checklists, but there is a fundamental problem with using them. On the one hand, if it’s non-cloud based it’s not a good option for a distributed team, on the other hand if it is cloud-based, you become reliant on this external resource and don’t have total control over your own documents.

Your checklists form a vital part of your business’s policies and procedures.They represent knowledge that has built up over time and a huge investment in debugging and optimisation. Putting all that in some other business’s hands is a very risky proposition!

After playing around with a few different options, I found that the simple spreadsheet is an excellent tool for creating checklists, and that Google Sheets is a user friendly way to do that.

When you use Google Drive you can sync all of your spreadsheets to your hard drive. They convert to Excel format. This allows you to easily back them up, ensuring the safety of your documents. If Google ever disappeared (or locked you out of your account) you could still retrieve and work with all of your content.

Google Sheets are also accessible everywhere, work on any device and your spreadsheet can be easily edited by anyone on the team.

So how do you set up a functional check-list?

Today I’ll share with you my checklist template and take you through how you can use it in your own business.

THE TEMPLATE

Firstly, for the impatient, here is a link to our blank checklist template. It attempts to be self-describing. The first field has a link to a set of instructions on using the template.

https://docs.google.com/spreadsheets/d/1ZWdEz4n8AePpBc0cHOaw3XOlxOoc16XrfAgI7oKbsxdocslist_api0/edit?usp=

The template is modelled on the type of checklist you often see in restaurant bathrooms where staff have to write their name and the time as they check off required tasks. This makes sure everyone on the team can see what tasks (or procedures) need doing and they can sign off on each one as it is completed.

You can even use the Google Sheets revision history to ensure that the time the document was modified matches the times team members are noting down as having completed tasks.

SETTING UP THE CHECKLIST

The template is VIEW ONLY. Start off by making a copy of the template so you can edit the checklist to your own needs.

2014-06-04 at 6.11 PM

I have used the freeze columns/rows feature to ensure the instructions and procedures to run are always visible.

When adding a new run date insert a column to the left of the last run, this ensures the most recent run appears on the furthest left.

2014-06-04 at 6.04 PM

Put the date and your name in the header of the new column.

2014-06-04 at 6.06 PM

MAKING NEW PROCEDURES

In order to create a checklist using this format, just add your “requirement” and “detailed procedure” first by filling in the two columns on the far left of the spreadsheet.

2014-06-04 at 6.00 PM

For each of the procedures, you can write the *time* at which you checked it off.

2014-06-04 at 6.07 PM

You can add comments that can be emailed to the person who created the checklist by just right-clicking on the cell under your name and next to the appropriate procedure.

When the menu comes up select “insert comment”.

2014-06-04 at 6.08 PM

If your procedure descriptions or comments are too long to work in the spreadsheet format, that’s when SHORTLY comes in.

USING SHORTLY TO STORE LONG FORM CONTENT

Spreadsheets are really great for making lists of things, but terrible for storing big chunks of text. Fortunately, there is a pretty easy solution to this problem and it’s a little web application called Shortly, created by Luca Spiller https://github.com/lucaspiller/shortly

You can use the link in the template to “create a new note”. Here is a shot of the screen you will see.

-Xh60fxw4ozVlJqCisY45ztTVPe31wc8wZ03trT05CM

The empty box is where you can type as much information as you like about the procedure on hand. Once the detail has been filled out simply hit the blue “SAVE AS URL” button.

http://york.workingsoftware.com.au/shortly/#C8nILFYAosQ8hdSKxNyCnFQ9Lq4QD89gBSByVAhxDQ7hAgoAKU8/dwVDHQUEx0gHyE4tLsnMS1cwVlRUVOACAA==6

This encodes everything you wrote in the box and stores that information in the URL itself. When you hit SAVE AS URL the address or (URL) updates as well.

You now need to copy the new URL and paste it in the cell that related to your project.

2014-06-04 at 6.02 PM2014-06-04 at 6.02 PM (1)

Not only does this app allow you to put long detailed descriptions in the spreadsheet, it also ensures the information is stored safely within the spreadsheet without relying on an external service.

If the URL on which you were using shortly were to become unavailable, you could simply set it up again somewhere else and change the domain in the URL to see your data.

Note that because all the content in here is saved in the URL, if you update the content you not only have to click “Save as URL” below, but you also have to copy the URL and paste it back into the document again.

USING REVISION HISTORY TO VERIFY PROCESSES ARE BEING RUN

One of the challenges in creating checklists is in ensuring that they are being followed.

All Google Drive apps (Docs, Sheets,  etc.) store a permanent revision history so you can see not only what old versions looked like but when each change was made.

Since we ask people to fill in the time they ran each process, we can check 2 things:

  • Does Google’s revision history match with what the person wrote?
  • Did they take long enough to complete the list?

For each item I will often record an acceptable time frame within which the checklist item should be completed. If someone is taking too long, or going through the list too quickly we can tell something is wrong.

I have someone in my business whose job it is to randomly check recent checklist runs to determine if they are being followed correctly.

If something goes wrong (for example a software bug makes it into production) our checklists provide us with valuable insight into why it happened, who was responsible and how we can avoid it in future.

Staff get one warning for not correctly filling out their checklists, which I think is reasonable given the importance and simplicity of the task.

CONCLUSION

I realise that this may seem pretty complex at first but go through the steps a few times and you will see it doesn’t take much work to get used to.

From my experience, this template is a great alternative to using a software product that locks you in and makes your business documentation completely dependent on an external service.

Productising a service business part four: the bit you can sell

This is the 4th article in a series on productising service businesses. If you haven’t already, check out Part One, Part Two and Part Three.

The big payoff that comes as a result of creating a fully productised business is the ability to sell it for more money.

When I have this conversation with business owners they say things like, “Oh I’m not thinking of selling my business”, but until you can sell your business, it’s not truly an asset.

The reality is that things change and life can throw unexpected curve balls. Wouldn’t you like to know that you could sell your business if you had to?

When you sell your business, you typically negotiate a price based on some multiple of revenues. Each industry has “standard multiples” that provide a starting point for negotiations, but you can dramatically increase the multiple you’re able to sell for by reducing the risks presented to potential buyers.

WHAT ARE THE RISKS?

One of the least discussed but frequently problematic risks when selling a business is the merging of different work cultures. These issues arise when one established work culture meets another and the two are forced to work together – there is bound to be friction, just as there is bound to be some level of friction between existing and new staff members.

Potential buyers need to evaluate their position from both a financial and non-financial perspective. Financial risks are generally on the forefront of people’s minds – how much am I personally investing? What if I overpay? What fees are involved? And while these are all risks to consider, one can never underestimate the non-financial risks involved in buying a business – how much time will this new venture take up? Will it negatively affect my personal relationships? How much stress could it potentially cause? (Keep in mind the number one reason people sell a business is because of personal exhaustion.)

Perhaps the biggest risk of all is the one that a buyer can never prepare for – unexpected problems. Equipment in urgent need of repair, a manager suddenly walking out. To guard against these types of risks, potential buyers will reserve working capital and discount the purchase price accordingly.

HOW DOES PRODUCTISATION HELP MITIGATE THESE RISKS?

The reason I’m using the term “productisation” here rather than “systemisation” is to make a distinction between businesses that simply have operational procedures written down, and those that have documented processes for finding leads, closing sales and delivering services.

Imagine how difficult it would be to sell a car if there were no petrol stations. That’s what it’s like when you try to sell a business without a clear strategy for finding new clients and growing the business.

Additionally, when you sell a business you need to be able to provide clear instructions on how the person buying it will run the business without you. This is sometimes solved by requiring that the founder of the business stay on for an “earn out” period – that is, you sell the business and work for the acquiring company as an employee for some period of time to smooth the transition.

Can you imagine anything worse?

Not only is this widely reported as being a totally horrible experience, but it also doesn’t help if you’re selling the business because you can no longer work (for example, due to injury or change in circumstances).

This doesn’t just stop with the business owner: quite often there are “key employees” without whom the business would be essentially valueless.

If you’re going to sell your business, will your staff stick around? Will the new owner be able to cope with the impact of negative cultural clash by hiring new people or training existing staff to run the processes of the new business? A thoroughly productised and documented business doesn’t necessarily protect a potential buyer from cultural mismatches occurring, but goes a long way to insulating them from the negative consequences by having clear hiring and training procedures that don’t rely on keeping the same “superstars” employed.

If you can show clearly how much time running your business takes, how and why it will grow as well as providing clear documentation about what you sell and who does the work (and how to hire them!) you’re dramatically reducing the “unknowns” – the risks – and the amount of money that must be held “in reserve” to guard against them. This money then ends up in your pocket.

If we consider the analogy of selling a car again, you want to sell a car that most people will know how to drive without any special training, and which will be easily serviceable by a wide range of local mechanics.

If we put these factors together we need to have a business that can be sold so that:

  • Anyone reasonably competent can find out how to run it with the minimum of training
  • There is a clearly defined and scalable growth strategy and;
  • It can be staffed by people who are readily available in the job market rather than relying on a couple of “superstar” employees and complex earn-out contracts

THE 2-ENTRY POINTS METHOD

So how do we do this?

I’d like to share with you my simple strategy for creating documentation that satisfies all these conditions.

First, your documentation needs two entry points:

  1. The first is for the new business owner. This page should quickly answer two questions: what do we sell, and who does the work?
  2. The second is for new employees. When the business owner hires someone, they should be able to send them a single page which describes in detail everything they need to know in order to do their job

This is where the “structure” of your documentation becomes really important.

It’s quite easy to write out a bunch of operating procedures and put them in word documents on a shared network drive, but that’s not enough to create a sellable asset.

What we do is separate our documentation into two main areas:

  • Products: these are things that produce an outcome; they can be “internal” (meaning that our own business is the “client”) or they can be “external” (meaning they’re things that get sold to other people)
  • Roles: these are things that people do. More than one person can perform the same role, and the same person may fulfill multiple roles.

Since we discussed roles in detail in the previous article in the series, the rest of this article will focus on the concept of “products”.

So the “front page” of our documentation lists our products and our roles:

2014-10-07 at 2.42 PM

As the business owner, I can quickly see which parts of my business are systemised (and which ones aren’t!) Each “external” product includes information on how we find leads, close sales, set up clients and deliver the services.

Each product page also lists the roles that are responsible for work in that area, as well as roles which have recurring processes. In general, products are a good way of “grouping” processes and connecting them to Roles from a “top down” view (as opposed to each individual role’s induction page, which tells one person everything they need to know about doing their job).

Here’s an example of our “Web Application Development” product page:

2014-10-07 at 2.47 PM

So when it comes time for us to sell our business, we’ll be able to supply a new business owner with a single, self-documenting page that gives them all the information they need in one place on how to connect to customers and deliver services.

When they hire people they simply send them a link to their “team member page”, as outlined in our previous article on how to define roles in the business.

How does your business documentation measure up to this standard? Do you have a single page that you could provide to a new business owner that would tell them everything they need to know to run the business?

Our Procedure for Hiring on oDesk

I’ve been posting some pretty strategic content about business policies and procedures, and recently received a message from VideoFruit’s Bryan Harris on Twitter wanting to see something a bit more “tactical”:

So here it is. This post details our procedure for hiring on oDesk.

HOW WE HIRE

At a high level, this is how we hire people:

  1. We have a generic hiring procedure for any given channel (eg. oDesk, hiremymum.com.au, Domestika, zip.lv, seek.com.au)
  2. Each general hiring procedure requests specific “parameters” which will differ depending on which role we’re hiring for
  3. Once the hiring process is complete, we induct each team member by sending them a link to our online documentation

We hire everyone remotely and minimise real time communication. In some cases we restrict the hiring to a given time zone, but for the most part our systems are set up to cope with asynchronous collaboration between team members.

THE GENERIC HIRING PROCEDURE FOR ODESK

Here is is our doc for hiring through oDesk in step-by-step screenshots.

2014-10-06 10_55_44-2014-10-06 10_55_07-Hiring through Odesk - Working Software Business Owners Manu
Once a person has logged in, the first thing step is looking at job postings and searching for potential candidates.

So the first few steps are to login to oDesk and setup the job posting. Note that the process refers to the job title and description provided in the specific parameters attached to the role you’re hiring for.

We then use the “search parameters” required for the given role to get a shortlist of potential candidates, then send an initial hiring message to each of them.

A follow up “hiring message” is sent out to potential candidates, their emails are forwarded, and further instructions are provided.
A follow up “hiring message” is sent out to potential candidates, their emails are forwarded, and further instructions are provided.

Anyone who replies to the initial hiring message, receives a follow up hiring message. The text of the message is provided in the “parameters” documentation for this specific role. All replies to this follow up hiring message are forwarded onto a hiring manager.

THE PARAMETERS FOR HIRING A BACKEND WEB DEVELOPER

This document provides the “parameters” for the backend web developer role. So where the “generic hiring procedure” requests, for example, the job title, description and follow up hiring message for the role that’s being hired, the hiring assistant will refer to this document to get the specific text to be used.

The first page lists the job title and description in full, plus specific details on search parameters.
The first page lists the job title and description in full, plus specific details on search parameters.

Again, note the step-by-step instructions. These are integral to our hiring strategy as they ensure everything is laid out plainly.

Step one explains the manual process for sending out the initial hiring message.
Step one explains the manual process for sending out the initial hiring message.

This step includes the message itself as well as notes to ensure it is sent out correctly (like inserting your own name and the job post link).

Steps 2 and 3 again look at follow up messages and forwarding.
Steps 2 and 3 again look at follow up messages and forwarding.

The most important thing to notice above is that I’m asking for an opinion, and it’s on a reasonably esoteric topic.

When you ask for someone’s opinion you get to see a lot about them by how they respond. 95% of the responses are complete garbage, and it’s therefore a very quick and efficient way to separate the wheat from the chaff.

Here we also show how using “the personal touch” is integral to how we work. We obviously can’t send out dozens of personal emails to potential candidates, but we can ensure our communication with them feels personal even when using generic emails.

Steps 4 and 5 outline the basic hiring procedure, again in step-by-step format.
Steps 4 and 5 outline the basic hiring procedure, again in step-by-step format.

As you can see we provide a trial task, but the most important fact about our trial task is not shown here because you can’t see the full trial task instructions: we don’t ask them to COMPLETE the task, we ask them to spend UP TO 6 HOURS on the task.

By time-boxing how long people spend on the task, we firstly pay people fairly for their time, and secondly we get to see their relative efficiency.

If you give the same trial task to 3 people, and 2 of them return stellar work in 3 hours, and one of them doesn’t get it finished in 6, then you know there’s a problem with that 3rd candidate.

THE INDUCTION PROCESS

This is completely specific to our own internal systems. We use Basecamp, we use MediaWiki, we use Google Docs etc. so I’m not sure how useful this will be specifically to anyone else, but for completeness I want to include this here so everyone can see how our hiring process works.

The process details give step-by-step instructions on inducting new staff members.
The process details give step-by-step instructions on inducting new staff members.

The information here shows how to move into induction, and all the information needed to give applicants. The process outlined forms a major part of how we function – hiring people to hire themselves, as seen in the next steps:

Continued process details
Continued process details

Note that in the email new employees are responsible for updating their information and creating accounts. Everything is outlined clearly so they can complete the induction process unassisted.

CONCLUSION

The most important thing about this process is that the new person we’re hiring gets everything they need to know in order to do their job from their “team member page”.

This means that our policies and procedures are woven into the fabric of everything we do. There is virtually no communication within the organisation outside of the procedures as specified.

It’s also a good litmus test of new hires: if they can’t make it through the induction process they’re probably not the right person for the job. As the business owner, I’ve gotten to the point now where I can just request that my executive assistant hire a new role, optionally in a given time zone and with virtually no input from me, and that person will show up in Basecamp ready to work.

It feels truly incredible!

Productising a service business part three: the secret ingredient is Roles

In the first 2 installments in this series (Separating Products from Capabilities and Systemising the Sales Process), we have looked at some strategies that will help you turn your services into products.

From this post onwards, we’re going to be looking at some specific tactics around documenting business processes that will help you execute those strategies.

When people want to start documenting their business processes, they typically start by… *drum roll* … documenting their business processes!

Seems sensible, right? In fact it is sensible and is how I recommend people begin.

But it quickly gets hairy. Having a bunch of stuff written down is not enough to systemise your business because it ignores the most important factor: all these tasks need to be done by people.

And not just any people: these need to be people that:

  • Are not yourself
  • Can be hired and trained quickly and;
  • Can be hired at a rate that keeps your business profitable

Roles are your secret weapon when it comes to systemisation (and ultimately productisation)

There’s a management theory called Holocracy that got a lot of exposure when Zappos declared they were going to “eschew hierarchy” and implement a holocratic organisational structure by the end of 2014.

Although I think Holocracy reeks of bullshit management speak and is way too inaccessible to be used with any degree of practicality by small businesses, there is one aspect of holocratic organisational theory that I have unwittingly embraced in my own business, and that’s the importance of Roles.

The most important thing about roles is that they are not necessarily job descriptions (although they can be); the same role can be fulfilled by more than one person, and one person can fulfill more than one role.

The second most important thing about roles is that, even if you haven’t acknowledged them, they already exist.

In fact, if we take the simplest business in the world (ie. the “solopreneur”) and analyse it in terms of roles, this is what it looks like:

The Solopreneur Roles Diagram

In other words, solo founders/business owners do everything. Usually this activity is “reactive”, meaning that they get a call from a client wanting to buy something and in that instant they turn into the sales assistant; or they get a call from a client saying the website is down and in that instant they turn into the systems administrator, etc.

In reality, what you find is that in many cases these roles can be broken down even further so that, for example, rather than hiring one person as a “project manager” you might have several components of the project management process separated out into distinct roles.

To give you an indication of what this looks like in a real world scenario, here is a screenshot of the list of roles I’ve defined in my own organisation (across my three brands):

2014-09-24 at 1.26 PM

There are 21 roles, currently fulfilled by 18 different people. I fulfill 4 of those roles currently and about 17% of the total hours worked in the business are my own (out of about 7,000 total man hours per year).

What does a Role consist of?

The first step to creating roles in your business is to give the stuff you do a name. It helps to have written that stuff down before you try and name it (which is why I recommend you start by just getting something written down and hiring someone else to do it for you).

Each role contains 3 things:

  1. A process for hiring someone to fulfill that role and;
  2. An induction page that tells your new hire everything they need to know in order to do the job
  3. A list of people who currently fulfill that role

Because a role’s induction page contains everything that a new hire will need to know in order to do their job, a Role can act as a “collection of related procedures”.

So for example, I have a role called “Bookkeeping Assistant” which links through to several documents that give a new hire general info about how to do their job (accessing various tools etc.) as well as links to specific procedures that need to be done according to a fixed schedule:

2014-09-24 at 1.51 PM

 

In a later post, we’ll cover how to organise your procedures into “Products & Roles” but for now you can just use each Role as a way of grouping related procedures together.

How Roles will help you productise

As I stated above, Roles are not necessarily job descriptions, although they can be.

The fundamental problem that systemisation solves is that for some of the day, the business owner is working on tasks that are only worth, say, $5/hour because they could potentially hire someone on oDesk to do that job for $5/hour.

Some of the day they’re working on tasks that are only worth $30/hour, and then some of the day they’re working on tasks that are worth $200/hour.

The challenge is that each of these little tasks might only take 10 – 15 minutes, and so it can seem utterly impossible to separate them out and hire someone to do each one.

The process for productising your business (especially if you’re currently a solo founder) will consist of gradually defining Roles and hiring people to do them.

As such, it helps to define roles that constitute each component of overall service delivery even for roles you currently fulfill. This allows you to price each of those components appropriately.

By defining Roles that group together related procedures, you can start by hiring one person that might fulfill several of these Roles (other than yourself), hence allowing you to give them an appreciable amount of work each week (rather than, say, only giving them 15 minutes of work per day which means you’re probably not going to be much of a priority for them).

As your business grows, you can hire individuals who *only* fulfill one of those roles that were previously covered by a single person.

Gradually, more and more of your time is spent doing only the highest value tasks.

Even though, when you first start out, the business will not have a high enough volume to justify hiring someone who is worth $200/hour to replace yourself, by the time your business is big enough to do that, those roles which are worth $200/hour will be so clearly defined that you will be able to hire someone to replace yourself.

You will also be able to see clearly whether or not your service delivery model is truly profitable. There is a stupid term coined by Paul Graham “Ramen Profitable”, which isn’t actually profitable at all. It’s perfectly acceptable for you, as the founder, to take a hit on your salary in order to allow you to get a business started, but when the time comes to replace yourself in the process you want to be sure that you will be able to hire someone to do what you do, at a price that will not cause the business to lose money.

Roles help you do this by identifying exactly which bits of a given product’s delivery are performed by people who cost different amounts, and then determine whether or not the price you’re charging for the service is sufficient.

In the next article we’ll talk about how to create an “entry strategy” for your business.

If you’d like to hear more please subscribe via email by downloading our free “3 mistakes that will doom your policies & procedures manual to failure“, or follow us via RSS, on twitter.com/procedurepeople or like us at facebook.com/procedurepeople

Productising a service business part two: systemising the sales process

In the last article Productising a service business part one: separating capabilities from products, we discussed the difference between capabilities and products. The first step was to start by writing down some of the existing processes for delivering your services.

If you started doing that, what you probably found was that in their current form your services are too complex to be considered as “products”, and as a result you may be thinking “this systemisation stuff just doesn’t work for my business!”

But take heart …

In this article we’re going to talk about how to systemise the sales process in order to create a product from a service.

WHAT A REAL SALES PROCESS LOOKS LIKE

I’m a huge fan of Justin Roff-Marsh and his book The Machine (which is still in production, but much of which is already available online).

It’s a pretty big read and a lot to digest, but fortunately there’s a shortcut for the rest of us to see just what a highly productised sales funnel looks like. All you have to do is open a savings account at your local bank.

Quite often, banks will have an introductory offer which rewards customers for opening a standard savings account. This is the most commoditised product that a bank can offer: everyone needs a savings account these days, they rarely offer any interest and banks usually compete on things like monthly and transaction fees.

Even though a savings account is referred to by the bank as “product”, if you look closely it’s really just a very clearly defined service. It’s a service that has a target market, an easy way to access that market, well defined setup procedures (many of which are automated through custom made technology) and well defined service delivery processes (again supported by custom technology).

Once you’re a customer, banks then have your audience to up-sell all sorts of additional products: personal and business financing options, insurance, term deposits, investment vehicles – the list goes on.

If you look at it closely, the standard savings account is not actually the bank’s main “cash cow”, but it is the way most of their customers are introduced to the bank.

So where does the bulk of bank revenue come from?

A quick look at the figures[1] below shows that the bulk of bank revenue comes from net interest income, which accounts for 65 percent of all revenue.

Bank Revenue Percentages
Bank Revenue Percentages

Broadly speaking, “banks basically make money by lending money at rates higher than the cost of the money they lend.”[2]

This means that for a bank, day-to-day savings accounts with low balances and from which cash can be deducted at any time, are not the ideal account for people to hold.

But these accounts represent most peoples’ first interaction with a bank and they make further revenue possible.

WHAT YOU CAN LEARN FROM BANKS

The key lesson to take away from looking at the sales funnel of a bank is that the first product they sell is not the product that they really want to sell.

Another key characteristic of this initial sell is that it is a low risk product from the consumer’s perspective. Personal savings accounts do not cost money to open and they don’t come with a contract. There is little or no investment on behalf of the consumer when opening one of these accounts.

Additionally, the process of opening one of these accounts can be done by a bank employee with no special training. Whereas more sophisticated products may need to be sold by bank employees with more specialised skills, opening a standard personal savings account can be done over the counter by any teller.

The personal savings account is something that everyone needs, that everyone is actively looking for at some point in time, and which enables the bank to establish a trusting relationship with the consumer as a platform for up-selling future products (or cross-promoting products from partners).

So to summarise, the key characteristics of the initial product you sell are:

  1. Well defined and easily addressable target market that is actively looking for the product
  2. Well defined and easy to describe service that can be delivered by virtually anyone with little training (including being fully automated)
  3. Low risk, low commitment purchase
  4. Establishes a trusting relationship with the customer that can then be used as a platform to sell more complex, higher margin product offerings

HOW THIS WORKS IN PRACTICE

When it comes time to take this theory and put it into practice it can often be difficult to make the conceptual leap from “capability” (what you CAN do) to “product” (what you WILL do).

So here is a suggested process for identifying what capabilities you have that can be turned into easily sellable products:

1. Brainstorm your capabilities then put them in as keywords in the Google AdWords Keyword Planner. If you’d like to see exactly how I use the Google AdWords Keyword Planner you can buy my AdWords eBook, but there are also umpteen free tutorials available on how to use it.

2. Identify an information product you can create based on what search terms have sufficient volume at a price you can afford to “fail while you learn”. For most businesses I’ve found that aiming for about $2/click and 10 clicks per day (i.e. around $600 per month) is an acceptable risk level.

3. Create a landing page for that information product and create a first version of it. Don’t invest too heavily in creating the product before you’ve tested whether or not it will sell. Use email lead generation and drip campaigns to nurture leads into sales.

4. Establish follow up procedures to up-sell prospects to higher margin products. Initially these will still be very service-like offerings, but as you go you can systemise more and more of your services into an ascending sales funnel of highly productised services, hiring more and more skilled people to do the work.

Inevitably, productising your services involves restricting what services you provide to those which can be delivered in a scalable, repeatable fashion.

Productisation is much more than just creating “package pricing” – if you can’t hire people to do all aspects of finding, closing and fulfilling sales, then you’re only doing half the job (or, more correctly THEY are only doing half the job).

In the next article we’re going to look at how you can start to separate the different aspects of product delivery into distinct roles, and start building resilience and scalability into your business.

If you’d like to hear more please subscribe via email by downloading our free “3 mistakes that will doom your policies & procedures manual to failure“, or follow us via RSS, on twitter.com/procedurepeople or like us at facebook.com/procedurepeople

REFERENCES

1. Image chart taken from NationMaster

2. The Banking System: Commercial Banking – How Banks Make Money By Stephen D. Simpson, CFA

A Basic Framework for Creating Your First Procedure

Here is my basic framework for getting someone off the endless treadmill of operational responsibility:

  1. Find something you do every day that is very simple to write down. Even if it only takes you 15 minutes to do. Start small. Start simple.
  2. Next time you do it, write it down, or record it in a screencast. Don’t agonise over every possible contingency, or try to make it clear. Just do it as quickly as you can.
  3. Determine some way you can tell if it’s been done correctly (for example some simple way that activity can be reported) and make that reporting part of the process
  4. Now go to oDesk, hiremymum.com.au or hiremymom.com (in the US) and hire someone to do it for you (NB: if hiring someone is too daunting, you should read my tips on hiring here).
  5. Your new hire will go through and ask questions about anything that is unclear. It’s their job to improve the documentation as you answer those questions
  6. Now hire someone else to do the same thing, only this time instead of asking you questions they should ask the first person you hired questions. Again, documentation is updated as questions are asked

You now have a pretty good process and you know that you can easily find people to do this for you.

The next step is to systemise your hiring process by defining roles within your organisation.

How I Hired a Woman to Hire Herself

This is a quick but valuable post.

For many small business owners, the prospect of outsourcing sensitive tasks to people overseas is a daunting and intimidating prospect. If an employee does something wrong in your own country you can report them to the police. How would this work if your employee was in a completely different country?

In the early days of hiring people, it can feel much more comfortable to hire people locally, however it’s also way more expensive and carries with it the burden of “red tape” associated with employing someone.

So I’m going to give you 2 quick tips that you can put into action today in order to start the process of hiring people no matter how small your business is.

Hire through hiremymum.com.au

This is an Australian website for stay at home mums to get work with flexible conditions. You can typically find someone competent to help you with a range of simple yet time consuming business tasks in the $20 – $30/hour range.

Although I hire lots of people overseas, I currently employ 3 women who I hired through hiremymum.com.au here in Australia. There are certain tasks (such as bookkeeping and client account management) that I think are better performed by people in Australia.

Even for tasks that I will eventually be comfortable outsourcing to people overseas, it can be an excellent “stepping stone” to start with someone local and in your timezone who you can easily chat with on the phone.

Some tips for hiring successfully on hiremymum.com.au:

  • Get the premium listing: it doesn’t cost much, it keeps you on the homepage for longer and it supports the site
  • Hire remotely and put your job in the “work from home” category: you will get way more applicants of a higher calibre at a lower hourly rate if you allow people to work from anywhere and set their own hours. Also, by hiring from anywhere you don’t restrict yourself to only candidates within a specific area; you can get the best person Australia wide to work with you.
  • Put “work from anywhere, hourly pay, set your own hours” in the headline: a tremendous amount of jobs on hiremymum.com.au (particularly in the work from home category) are things like commission only sales or network/multi-level marketing “opportunities” masquerading as jobs. You help differentiate yourself from these shitty advertisers by stating up front that you’re paying a fixed hourly rate.

Their first job is to hire themselves

This was quite an epiphany.

When I was going to hire someone in Australia (after outsourcing through oDesk for quite a while) I was faced with the prospect of filling out forms for the ATO, figuring out PAYG, super and work cover. Yech. I hate that stuff. It was enough to dissuade from me from actually taking action UNTIL …

I realised that I could hire someone and make it their first task to figure all that stuff out. After all, it’s all there on the ATO website, and if you have any questions you can just call the ATO. All the information is freely available I just didn’t have the time to deal with it all.

So that’s what I did: I hired someone as an executive assistant and made it their first task to figure out the details of their own employment.

Red tape: ZERO.

Happy hiring!

Productising a service business part one: separating capabilities from products

I have long heard the mantra that service businesses don’t scale.

People who are running consultancies often cite their frustrations with growth and trouble hiring as reasons behind wanting to build a product business.

But there are two fantastic examples of massively scalable service businesses that I can think of: finance and insurance.

Boy are they big.

And they are definitely service businesses: they provide the service of taking money and figuring out how to keep as much of it as they can.

So what is the difference between them and you?

In this 8 part series I will be exploring the merits of creating a productised service business from your little slice of consulting hell rather than trying to build the now infamous product business.

WHY PRODUCTISE?

Companies like Basecamp (nee 37signals), which left the limitations of consultancy behind to enter the glittering world of monthly revenue from SaaS products, as well as consultants like Brennan Dunn and Amy Hoy have long been the poster children of successful productisation.

Their stories sound very attractive, but I believe that in looking to emulate that outcome, people have come to conflate scalability and recurring revenue with SaaS products (or physical products via ecommerce).

I also think it makes far more sense for a service business to package up their services as products than it does to try and launch a software product tangentially to their primary business.

The explanation for this is pretty simple: it’s cheaper and way less risky.

Whereas you can only begin to earn revenue from a product once it is built, you can start selling a productised service almost immediately once you conceive of it, and usually for much more money than people typically expect to pay for software products.

When you first start to sell a productised service, chances are that you will be doing most of the work. In fact, you are probably already selling productised services … you just haven’t acknowledged them for what they are.

From this point you can then gradually isolate aspects of that work to outsource, or hire people to do so for you. You can choose to either reduce the cost as you become more efficient or keep the cost high and pocket the extra margin.

THE MOST COMMON BARRIER TO PRODUCTISATION

Just because I think that productising a service business is less risky than investing in building a tangential product business doesn’t mean I think it’s easy.

I think the biggest mistake that service businesses make which prevents them from seeing their services as products is to sell their capabilities.

What I mean is that they try to sell what they can do. Since most service businesses in a particular industry can do many different things, this usually ends up as some sort of hideously long list of services under a “what we do” section on their website. Nowhere is this more apparent than in the world of website and digital marketing services.

Here are some examples of businesses that I think are selling “capabilities” rather than “products”:

46digital Marketing who provide web design and content for small businesses in the Sunshine Coast area of Australia:

46digital
Image captured from 46digital Marketing Services website

Dilate, Based in Western Australia, caters to “marketing and online presence”.

Image captured from Dilate
Image captured from Dilate website

Parachute Digital Marketing based in NSW, Australia provide “digital education” in order to generate online sales.

Image captured from Parachute Digital Marketing
Image captured from Parachute Digital Marketing

There are, of course examples of companies that have productised their service offerings, and many of those are in the SEO and PPC marketing space.

I’m sure we’ve all seen examples of pricing pages such as this one from 1st On the List who offer SEO and Pay Per Click marketing in Canada and the USA:

Pay Per Click Management Pricing [Note: due to length, only a portion of the pricing is shown]
Image captured from 1st on the List website: Pay Per Click Management Pricing [Note: due to length, only a portion of the pricing is shown]
As we’ll see below, though, having a product and pricing table that is so insanely complex that only people intimately familiar with your industry will understand it, only really does half the job.

Most of the time all I see from service businesses is capabilities masquerading as products, and there is a big difference.

HOW TO DISTILL PRODUCTS FROM CAPABILITIES

A good product has a few key characteristics:

  1. A well defined target market
  2. A simple way to access that market
  3. A simple way to explain how the product satisfies a need of that market
  4. Simple and predictable pricing
  5. A scalable production process

In the case of a productised service, the above can be achieved almost entirely by writing down how to provide an existing service.

By beginning to write down a set of policies and procedures that specify how to deliver a service – from finding and closing customers to setting them up and delivering the service – you start to realise just how narrowly defined your services need to be in order to be truly productised.

If every sales conversation is so specialised that only the founder can do it, you had better be closing million dollar deals … But more likely what you will start to realise is that there are subsets of your existing services that could be spun off into independent brands and delivered as productised services.

Also, don’t think that you can only create products that are related to your existing core services. Quite often you will find that you have developed capabilities in your organisation that can be used to deliver independent value to a target market, and that this can be used as a starting point for cross sells into more complex offerings.

Want an Example? You’re looking at it: The Procedure People is a new brand that I have started based on capabilities developed within my software company Working Software. I want to help small businesses that are having difficulty scaling to write down good policies and procedures to make their businesses more sellable. In the process I gain access to just the right target market for my software company and simplify the sales conversation around custom business automation software – yet another productised service offering we’re working on.

GETTING STARTED

So the action to take after reading this first installment is to look at both existing services you offer and other capabilities you have developed in your business, and start writing down details of how those are delivered.

In subsequent articles I’ll go through strategies for finding your target market and refining those initial documentation efforts into a highly productised and scalable service offering.

If you’d like to hear more please subscribe via email by downloading our free “3 mistakes that will doom your policies & procedures manual to failure“, or follow us via RSS, on twitter.com/procedurepeople or like us at facebook.com/procedurepeople

If you have any great examples of highly productised services I’d love to hear about them in the comments.

 

Could you franchise your Business?

For many first time entrepreneurs, buying a franchise is a popular choice when starting their business.

The popularity of franchises has been growing steadily in Australia over the years, as more and more people – from new entrepreneurs to seasoned business owners – realise the potential and profitability a successful franchise can bring. It is estimated that Australia had 1180 different franchises in 2012, and at least 90 percent of those were Australian owned. This is almost double the amount of franchises in 1998.

Number of franchise businesses in Australia from 1998-2012
Number of franchise businesses in Australia from 1998-2012[1]

A successful franchise benefits both parties – the franchisor and the franchisee. Franchising offers an efficient and profitable way for small businesses to enjoy the benefits of “big business”. It’s little wonder, then that franchising has become one of the most popular ways to do business in Australia.

However, despite recent growth, franchising accounts for just 2.5% of businesses in Australia. This is a drop in the ocean compared to the 40% of businesses that franchises account for in the United States, which has had a healthy and interesting history with the sector:

Facts and figures on American franchises
Facts and figures on American franchises[2]

Although the United States has approximately 770,400 franchise units, the largest number of any country, they do not have the highest number of franchise brands – that honour falls to China, which has 4000 different brands (compared to 2500 in the United States).

THE BIG HEDGE

If you had a successful business, why wouldn’t you go out of your way to protect the secrets of that success?

For example, wouldn’t it make more sense for McDonald’s to just own 100% of all their stores and employ people to manage each one, rather than share the profits with their franchisees?

One of the primary benefits of franchising is that it enables companies to expand without the risk of debt, as Entrepreneur explains:

“Since franchisees provide the initial investment at the unit level, franchising allows for expansion with minimal capital investment on the part of the franchisor. In addition, since it’s the franchisee, and not the franchisor, who signs the lease and commits to various service contracts, franchising allows for expansion with virtually no contingent liability, thus greatly reducing a franchisor’s risk.”

Likewise, franchisees share similar benefits to franchisors. There are many advantages to buying a franchise business rather than starting your own business from scratch:

Benefits of Franchising in Australia
Benefits of Franchising in Australia[4]

There are many examples of successful franchises. Hilton Hotels & Resorts, Starbucks Coffee and Anytime Fitness are just three big-name businesses who have benefited from franchising: Hilton has over 530 hotels worldwide as of 2010, all either owned by, managed by, or franchised to independent operators. Starbucks is the largest coffee chain in the world, and has 23,187 stores in 64 countries. Anytime Fitness is currently the fastest growing health club franchise, with over 2500 gyms in 19 countries.

SO WHAT? I’M WAY TOO LITTLE TO THINK ABOUT FRANCHISING!

Looking at your business today, being able to franchise might seem like a complete impossibility.

But being able to franchise your business turns it into the ultimate asset. My friend Sean Collins from Shirlaws coaching likes to talk about having an “entry strategy” rather than an “exit strategy”. That is, rather than focusing on what it would take for you to get out of your business, think about what it would take for someone else to get into it.

The difference is subtle, but important; and when you think about it, isn’t this precisely what a franchise does?

If you’re creating a sellable business (something I argue we should all be trying to do all the time) it makes sense to prepare it to be franchised. Then you don’t just get to sell your business once, you get to sell it over and over again AND retain a share of the value created in the brand over time.

SO WHAT DOES IT TAKE TO FRANCHISE?

There are all sorts of businesses in every industry imaginable that have benefited from franchising.

So what do they have in common?

1. They have a product

It’s an oft repeated fallacy that service businesses can’t scale. I can think of at least two very good examples of service industries that have scaled to immense global proportions: finance and insurance. The difference between them and the beleaguered web development shop that can’t seem to escape the continual chase for the next client, is that their services have been organised into products.

Think about it: all an insurance company does is take your money and then do their best to avoid giving it back to you.

But they give each of their products names.

Each product consists solely of an agreement and a set of rules that you agree to.

All they’re selling is a contract,  but it’s so well defined that it’s no different from selling a car or a bottle of fizzy drink.

2. They have well defined tactics for selling their product

Whether it’s a matter of choosing the right location for a restaurant chain or setting up a solid pay per click lead generation campaign, franchises have a well defined and repeatable method for finding a prospect and converting them into a customer.

It’s not until you start trying to systemise your sales funnel (and grow beyond the stage of getting new work mostly through word of mouth and referrals) that you realise how important the process of defining your products is.

3. They have systems in place to hire and train people

Small businesses often have a heavy reliance on one or two key staff, and losing these key people can be catastrophic. Alternatively they find themselves incapable of growing because of excessive staff turnover and the inordinate amount of time it takes to hire and train good people.

Successful franchises have systems in place that allow them to hire and train staff from a large pool of potential candidates at breakneck speed.

4. They have an operations manual that can be easily taught to almost anyone

How successful do you think most franchises would be if they could only be operated by high level business experts?

When thinking about an “entry strategy” for your business, you stand the best chance of being able to sell if you can maximise the number of potential buyers.

You need to have an operations manual that can be learned by most people, and a product and business model that doesn’t rely on the ability to hire superstars in a given field.

Of course some roles will be more highly skilled than others, but if your strategy for success includes “hire the best people and have amazing, charismatic, expert leadership” then you’re dramatically limiting the number of people that will be able to buy and succeed with your business.

WHERE DOES IT ALL BEGIN?

Does this all sound completely unachievable? Well it is not. Starting on the journey towards a franchisable business is as simple as writing down what you are already doing and improving upon it over time.

Even if you never sell your business as a traditional franchise, you can do things like release training or info products based on your experiences, or create and sell software systems that will be useful to others in your industry.

Even if you never sell your business AT ALL, the process of thinking like this will create value and efficiency that helps you grow and get some freedom and independence from day to day operations.

REFERENCES

1. Franchising Australia 2012. Prepared by Lorelle Frazer, Scott Weaven and Kelli Bodey
2. 10 Random and Interesting Franchise Facts by Renee Bailey
3. Why Franchising Your Business Makes Sense via Franchise Beacon
4. Benefits of franchising in Australia via whichfranchise.au