Why Businesses Often Fail When They Expand

"If they don’t fail outright, most businesses fail to fully achieve their potential. That’s because the person who owns the business doesn’t truly know how to build a ompany that works without him or her...which is the key." - Michael Gerber

Other than the very obvious problems of stretching themselves too thin, both from a cash flow and talent point of view, the number-one reason that causes second locations to fail is simply the lack of business systems. When an owner opens up a second store, he or she naturally assumes that the second store will be run just like the first. The only problem is they forget that you can’t be in two places at once.

Business methods and protocol that the owner takes for granted are not followed at the second store, or if the owner opens the second store, they soon go by the wayside at the first location. With systems, this cannot happen.

There is a general misconception about what is involved in creating a business system. Many business owners have some of the components but few manage to put them together and, to be honest, it’s not easy. The upside is that once you have systems in place, running your business becomes ridiculously easy and expansion becomes possible. Without systems, expansion becomes a nightmare sooner or later.

A system must have:

1. a set of specific MEASURABLE results

2. a list of the tasks involved to attain the results

3. an orchestration of tasks so that they are done in the correct order

4. scripts

5. training

6. reporting

For example, let’s take the mundane task of cleaning your business. First I will ask you the $64,000 question: What is clean? Your idea of clean and my idea of clean may be very different, so, first of all, we must define clean.
For example:

• windows have no 5-year-old paw prints

• business smells like a new car, not a high school gym locker

• all trash receptacles are empty

• no cobwebs or dust

• all chairs and equipment are in designated places, etc.

How specific should this list be to QUALIFY as a real system? Well imagine for a moment that you left your Hyatt hotel room for the day and came back at night. How would you know the room had been cleaned? How many things can you identify? 10? 20?

Okay, the beds have been made, there are fresh towels in the bathroom, and if it’s a ritzy place, you might have a candy on the bed. That’s three, how many more can you name?

The fact of the matter is, there are 127 different things that a maid in a Hyatt Hotel has to complete in order for the room to be defined as CLEAN! Imagine 127 different checks to make sure your room is clean—and I bet you didn’t get past 20.

The remote must be in the right place. The Bible must be in the bedside table. The phone book, free soap, visitors’ guides, and phones MUST ALL be in their designated places. Otherwise there would be inconsistency, and inconsistency creates more problems.

The first step to designing systems is to take every task in your business and DEFINE the outcome. Once the outcome has been made clear, a list of tasks can be assembled to accomplish the outcome, followed by an orchestration of those tasks so that they happen in the right order (like dusting before you vacuum, not afterwards). Scripts can be put in place where needed, and training must be established so that everyone follows the system to the letter.

Finally, reporting must be put in place in the simplest form possible so every task is checked off. In the systems I designed for my business, the check boxes are just big enough for a yes or no, which means they are not big enough to write in an excuse.

McDonald’s was so successful in expanding because every little detail was built into a system.
You NEED written systems to expand your business successfully.

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