Turning a New Business into an Enduring Company
As your business grows, you will need to build systems and processes and attempt to automate as much as you can. You’ll need to build distribution systems, inventory systems, marketing systems, follow-up systems, customer support systems, research and development systems, accounting systems, and hiring systems, among many others.
Always remember that investors do not like to invest in systems where the system goes home at night. If you can build proper systems so that your business will operate properly, whether or not you are there to oversee it, your business will grow faster and be much easier to sell. Although it takes longer to set up the system than to do it yourself, in the long run you can save a lot of your time and effort by setting up the system.
It’s More Than a Handbook
It’s best to outsource your payroll. Figuring out State, Social Security, Medicare, FICA, and Unemployment amounts and making sure exact payments are made on time can be quite a hassle if you choose to do it yourself. We use a company called Paychex to handle cutting checks for our employees and paying all applicable state and federal payroll taxes.
As an example, we can take a look at a recent client of mine in the nutraceuticals industry. This client sells various products that improve health and reduce pain. When I began working with the client, they were making a few dozen sales per day through their web site. When a sale would come in, they would have their shipping person type in the customer’s information into a label maker, print out postage on stamps.com, type in the address a second time, get a box from the closet, construct the box, find the proper product and put it in the box, find the proper literature and put it in the box, manually enter the address for the third time as well as the product, description, quantity, and cost into QuickBooks and print out an invoice, put the invoice in the box, tape the box up, apply the stamps.com postage, and then go to the post office to mail the package.
When they told me everything they did to ready an order, I was stunned at how inefficient and wasteful their process was. It took over 15 minutes to prepare a single order—whereas the nutraceuticals company I worked with in high school was able to complete a full order in less than 45 seconds on average.
After I consulted with them their system was much more efficient. Now, instead of typing in the label they download all the new order data from their database all at once and automatically mail-merge all the labels into a Microsoft Word file. The fulfillment person simply had to open Word, start the feed of the labels into the printer, and hit print. They could print ten labels in thirty seconds, instead of spending one minute on each. Next, I got rid of their need to use stamps.com for postage. I alerted them that instead, they could simply set up an account at their local post office, pay in advance with a check, and take all their packages in through the back door each afternoon. They’d just drop of the packages, tell the attendant which account they were from, and the USPS would handle applying the exact postage.
This knowledge saved another 2 minutes per package, as the fulfillment person no longer had to weigh the package, type in the company and delivery address, and print and apply the proper postage. The next thing we optimized was the packaging. Instead of using a hard to construct box, I told them about padded self-seal mailers. They were not only 1/4th the price of a box, but also required no construction or tape. Finally, I advised the company that there was no need to include an invoice with the product, as the customer received their invoice via email. This removed the need to re-enter all the data again into QuickBooks, print out the invoice, and put it in the box. This saved a full four minutes per order. They could now automatically importing the sales data into QuickBooks in a batch at the end of each week. It would take 30 seconds to import 1000 orders, instead of 30 hours.
By optimizing their shipping operations as such, we saved the company hundreds of dollars each week and increased the maximum capability per day from 45 orders to 450 orders. In your own company, there are likely numerous areas where an efficiency review would be helpful. See what efficiencies you can create and how much money you can save by focusing on automating and optimizing the operations of your business.
Properly navigate the process of creating systems, developing an employee handbook, dealing with payroll and HR, establishing an accounting process, and focusing on efficiency and you'll be well on your way to turning your new business into an enduring company.