Tag: procedures

Plan Do Check Act Wheel

Dr. Williams Edwards Deming (1900-1993), who was a management consultant and statistician that used his methods and philosophy to help Japan recover after the second world war, developed the concept of Plan Do Check Act (PDCA). The PDCA is a methodology for achieving continuous improvement through a closed loop system.

 

PDCA

A brief summary of Plan, Do, Check, Act

Plan

Think of where you are now (Current State) and where you want to be (Future State), then plan the change, which can include but not limited to the following:

  • Scope of the change – Goals and Objectives
  • How you will monitor the progress of the change
  • How you will measure the effectiveness of the change
  • Check any legal requirements

Do

This is where the plan is put into implementation and activities organised. These may include but not limited to the following:

  • Identify the biggest risks
  • Good communication so that everyone is clear on what is required
  • Provide adequate resources
  • Provide the right tools and methodology to do the job
  • Provide training where it is needed
  • Create procedures
  • Follow procedures
  • Walk the process

Check

Once the changes have been implemented compare the future state with the old current state and consider the following:

  • Is the new process more efficient?
  • Is the new solution working?
  • Have you met your goals, objectives or targets?
  • Do you have the data that corroborates what you are measuring?

Act

Your new process has now become the baseline (current state) from which you will now try to improve. This may mean:

  • looking at an individual part of the process
  • automating the process
  • using new software
  • updating procedures
  • creating policies

You can repeat the PDCA process as many times as needed until you are certain that the process is as efficient as possible.

The benefits of the PDCA process

No matter what business you are in you will have competitors so the quest for excellence must be constant so that your business stands out. The PDCA process gives you a method for continuous improvement, therefore, ensuring that errors can be corrected. The efficiency and effectiveness of your business will also be improved allowing for better strategy development and planning. PDCA can be used in a variety of businesses for project management, change management, product/service development, etc. therefore, making the PDCA process versatile, simple and powerful.

 

Systems & Procedures

According to the Oxford English Dictionary a system is:

  1. A set of things working together as parts of a mechanism or an interconnecting network; a complex whole.
  2. A set of principles or procedures according to which something is done; an organized scheme or method.

Many people say that they have a system in place for their property business but when you ask questions about their systems and dig down it turns out what they really have are processes and tools that help them carry out things like analysis of an area or a deal, so it becomes a bit of a shock when you tell them that these are not systems. To understand this, here is a simple definition of a process and a system:

  • Taking an egg and converting it to an omelette is a process
  • A system is a series of processes where the output of one process becomes the input of the next process. An example of this is baking a cake, where you have equipment, correct ingredients, following an exact recipe, applying the method, utilisation of the equipment, transformation into a cake, adding value by adding a filling, presentation.

So why do we need systems?

Well if you want to be successful then you need systems and procedures as this will allow you to work on your business and not in your business. Some of you may be thinking that you got out of the corporate world because you were restricted by all of the red tape of systems; after all you are an entrepreneur. However the reality is whether you’re a one man/woman company or employ fifty people plus, you will need systems and procedures to free up your time and make you money.

Some of you may be thinking that you are just starting out and therefore until you get going you will just wing it for the moment. That would be a big mistake, it is in fact far easier to put systems and procedures in place at the start of your journey rather than leave it until later as it will take you a lot longer to do and in the meantime will have lost time, energy and potentially money, so take heed.

From a business point of you what do we mean by systems and procedures? The short version would be a step guide to perform any function within your business. Examples of this may include but is not limited to the following:

  1. What do you do/say when you are contacted by a vendor?
  2. What are the steps do you take when screening a potential tenant?
  3. What are the roles and responsibilities of your team?
  4. How do you get paid?
  5. How do you pay your suppliers?
  6. How do you run the back office? (Administration, Accounts, etc.)
  7. How do you draw up a contract with your suppliers? (Architect, planners, builders, etc.)
  8. What are your “Opening” and “Closed” hours and what happens when “Out of Hours” is required?
  9. What are your policy and procedures for joint ventures?
  10. What is your strategy and how do you communicate this to your team, joint venture partner, Angel investor etc.?
  11. What are your objectives?

As can be seen by the above examples systems and procedures are required to handle these sorts of questions. Do not be deterred by thinking that you need to write a massive manual documenting everything. Keep it simple and easy to follow, use pictures, diagrams, screenshots etc. if this helps to describe your processes. Where there are regulations that needs to be understood within a procedure e.g. HMO requirements, break it down and strip out all of the things that are not necessary and bullet point those that are needed so it is easy to read.

Advantages of Systems & Procedures

The advantages of having systems and procedures in place are as follows:

  1. Productivity will increase as you will not have to re-invent the wheel every time you do something.
  2. It can give you a perspective as now you can have an overview of your business, and the competition so now you can make informed decisions.
  3. There will be consistency in your work as things will be done exactly the same way each time.
  4. Reduced risks as you will have agreements etc. in place that spells out exactly what is expected.
  5. Quality will increase as you will have a framework in place to deal with builders, vendors, tenants etc.
  6. Growth can take place as you can use your systems and procedures to train people.
  7. You will have continuity because if someone is away on holiday, ill, or leaves then you are not reliant on that person as the systems and procedures will kick in.
  8. You will find freedom as now you can work on your business and not in your business, also it will allow you to be away from the business as it will run without you.

Take action now and put systems and procedures in place, once done these will just need to be kept updated as your business evolves.

 

Recommended Reading:

The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It. By Michael E. Gerber

Scaling Up. By Verne Harnish

Right First Time Property Investing. By John A Foster

Exit Strategy – Selling your Business

When starting a business always look at what your end game is and keep this in mind. You may decide that you want to build a legacy, therefore, you will be passing it on to your heirs. But you should still look at setting up the business with a mind to selling it, as you may find that you could make more money by selling and so you can give more money to your heirs, or you may find that your possible heirs may not want the business as they have no interest in it or they are not capable of running it.

Your business must be able to run without you, if your business cannot run without you then it will die with you, therefore before you even think about selling or passing on your business make sure that you have processes, systems, manuals and procedures in place. This must be your number one priority above anything else, if you do not know how to set these up get help, as it is worth paying someone to put these in place for you, remember this adds value to your business so don’t cut corners or skimp on the price for the consultancy, so think of it as a short-term loss for a long-term gain.

When selling your business, it is critical that you understand the processes involved. After all, unlike other business decisions, this will only be made once!

So here are a few questions that might help you in the process.

Why are you selling? Are you selling because the business has reached its full potential, or do you want to get out because you have had enough? It’s important to have a reason for the sale as you will get asked this question from all potential purchasers.

Is your property on a lease? If a buyer is looking at your business, your buyer will want to see a long-term lease in place. Negotiate with your landlord an extension to your lease and make sure that you have a clause in there which allows you to transfer the lease to the new buyer.

When did you last value your assets? This is especially important when it comes to property as prices are constantly changing and you might get a very pleasant surprise.

Do you want to sell just the goodwill and still own the property? Often when selling a business, it is possible to keep the property and lease it to the new buyer. If you do not need the full proceeds it is often wise not to sell the property as long term it will be an appreciating asset. Make sure though that you get a full repair and renewal lease put in place with the buyer.

Are you the one hundred percent owner? If not, what do the other shareholders think about you leaving? One of the easiest ways to get out is to sell your stake to the other shareholders.

Do you want to protect some workers in your business once the sale has gone through? You might have members of the family or close friends who work in the business and they might need some security after you have left. One way to do this is to provide them with decent employment contracts prior to the sale.

Is the timing, right? The best time to sell the business is just after you have had a good year of trading. Even economists disagree about what the future may bring so try not to predict how the trading environment will change but get out when profits are high.

Prime the business for sale. Just as a house will achieve more with a lick of paint and the garden in top condition so a business will need as many loose ends tied up as possible so that it is easier for a new buyer to walk in. Get rid of all the dead stock and dispose of all old and useless machinery and equipment.

Tidy the place up. Make it look as attractive as possible and make sure all the light switches and bulbs work. Make sure the place is as bright as possible by using higher power bulbs than normal.

Get professional help. If you have a small business all you need are the services of a good accountant and solicitor. If the business is more complicated a decent business broker might be required to get the maximum price for your business.

The easier you make it for the buyer to move in and start running the business from day one the higher the price you will achieve for the sale.