Using SOPs to Scale Your Business
According to the U.S. Bureau of Labor Statistics, roughly 20% of new businesses fail in their first two years; 45% in their first five; and 65% in their first 10. Only 25% of new businesses make it to 15 years or more.
Assuming they sell a viable product or service, it’s usually one of two reasons: 1) they run out of money, or 2) they manage employees poorly.
Of the businesses that do survive the 5-, 10- or 15-year mark, many never grow to the size that generates lucrative owner salaries and profits.
Why?
Most businesses never create and execute the repeatable processes necessary to support recurring revenue.
It’s a bit of a buzz word these days, but recurring revenue is undoubtedly the lifeblood of business. It allows an organization to get out of the chaos of day-to-day survival, and actually plan for the future.
Standard Operating Procedures (SOPs) are clearly defined, documented, repeatable processes that align teams’ and entire organizations’ output.
A few examples include brand messaging guidelines, a training curriculum, or even the way in which team members resolve conflict with customers and with each other.
The benefits of using SOPs are essentially limitless.
They make it possible for a business to grow in employee count, in revenue, and in profitability by providing clarity on how it will happen. Just like a business needs recurring revenue to scale, it needs repeatable internal processes to deliver its product or service with consistency and integrity.
That’s right. SOPs empower you to maintain the integrity of your product, your customer service, and your company culture as your business changes. How so?
SOPS PROMOTE SELF-EMPOWERMENT; NOT MICROMANAGEMENT.
According to McKinsey, employees spend over 100 minutes each work day just looking for the information they need to do their job. That’s over 20% of their time! The end result is wasted time, decreased productivity, and mounting frustration.
However, when employees are empowered by having the information they need right at their fingertips, their employee experience improves — as well as their productivity.
Rather than hunting down all those pesky steps required to post the latest open position, your hiring manager knows exactly where to start. And instead of waiting for a manager to help pacify an angry customer, your customer service representative has the tools to take care of it herself.
The best way to manage people is to equip them to manage themselves.
SOPS CREATE OPPORTUNITIES FOR BUILDING; NOT MAINTAINING.
Only when your operations are running smoothly can you begin to think about launching a new line of business, opening a new retail location, or adding to your team. Through creating consistency and reducing errors, SOPs ensure the excellence and integrity you need to take your business to that coveted “next level.”
How did Starbucks go from a single coffee shop in 1971 to a global empire just a few decades later? By ensuring that Grande, Fat-Free Vanilla Latte With Almond Milk tastes the same in Tokyo as it does in Idaho, and equipping their employees to make that happen.
SOPs take the guesswork out of daily operations that keep a business running, so that valuable, finite mental energy can be focused on innovation instead.
SOPS SUPPORT AGILITY; NOT ORGANIZATIONAL DRAG.
Remember the last time it took six months to find a great candidate for that open position, another three months for your team to decide to make an offer, then another three months to get him onboarded and trained?
That’s just one example of what’s called organizational drag, and far too many businesses are drowning in it.
Hiring and training initiatives thrive when processes are made easy to repeat. Why? Because the processes themselves require consistency, yet they often happen infrequently. So the specific steps used to make that great hire last year are far too easily forgotten when a need for the next one comes around.
By applying SOPs, everyone knows their role; and when the time comes, they can spring into action.
WHY DON’T MORE BUSINESS OWNERS IMPLEMENT SOPS?
So if SOPs provide so much structure and productivity to organizations, why don’t more people use them?
In Eisenhower’s Urgent-Important matrix, SOPs are generally considered important, but not urgent. And when you’re already on the hamster wheel...well, you know.
Creating and using SOPs demands proactivity. They simply can’t be pulled out of thin air when needed. They’re also fairly time-intensive to create. Many organizations spend weeks or even months documenting SOPs when they first decide to start. That’s hard to do when you’re also running all the other ins and outs of a business. The good news is that once your SOPs are defined, documented, and shared, keeping them updated is a much lighter lift.
Despite the effort it takes to craft and implement SOPs, the return on the investment is astronomical. Want a little help getting started?
