Startups Made Simple Step Five: Manage It – The Right Plan, Process, and Best Practices

Below is an excerpt from our book Startups Made Simple: How to Start, Grow and Systemize Your Dream Business. Learn more about the book here.

“Management is doing things right; leadership is doing the right things.”  – Peter F. Drucker 

Once you’ve figured out how to make at least “ramen money” and sales start rolling in, things may start to get a bit chaotic simply because of all the moving parts (many of which will be newly invented or made up on the fly,) and if you are new to startups, this may be challenging. Remember, you need to grow this machine, but this is where things can get complex, so try to keep them simple. Your goal should be growing sales while minimizing or even eliminating complexity. 

Most startups and small businesses are notoriously poorly managed, almost a joke. If you do the basics here, then you’ll be well ahead of the game with, again, just a few hours of planning. The purpose of this chapter is to provide a framework for some order and direction in your company so you can navigate the complexity of what will likely be an almost constantly changing environment and create your management system. If you already have a company that needs a better management system, then this chapter (and the next) will help as well.

I want to emphasize that your focus will likely be making sales at this point and not optimizing the management of things prematurely. There’s little purpose in optimizing a business with few or no sales (unless you have plenty of time or are planning for an expected sales explosion). However, there’s no harm in getting the basics of small business management down and being prepared for the moment when you need to start scaling things. Certainly it is better to organize things before the company’s growth and complexity get out of control.

While I do recommend some basic planning which will save you a ton of time later, one thing I tell founders, especially types who are very well organized, there is going to be some chaos, waste and inefficiencies at first. This is all very natural in a startup, so please don’t think you can organize all this chaos all the time. Just keep a list of things you need to fix and revisit them when you can. 

Do the best you can and get a “nicely managed chaos” going until you have the time to set up some proper systems. Keep the Founder Superpowers in mind, get the big things done, and make sure that you schedule time to work on building your management system. The purpose of the next chapter, Step 6: Systemize it, is to bring everything we go over in this chapter together in a beautifully well-run system (and what I call “The Manual”) but realize that may take a while as you figure out and build out all the working parts. 

For example, once you start making sales you may have no organized invoicing or sales process. You might find that you need to make a hire and have no idea where to start or your existing hires are not doing well. Or you may start to notice that things in customer service are starting to get sloppy or confused, and you feel you need to write things down to stay organized. 

Whatever the trigger, there are some pretty simple and clear solutions to a lot of this chaos, and I put them in these five categories that I call The Five Competencies:

1. The Right Plan. You’ll make a simple one-page plan so that you and everyone else knows the company purpose, strategy, and goals, and are aligned and rowing in the same direction. This will not only clarify your thinking but also give much-needed direction to your team because many employees have no idea what the company purpose or strategy is or how they fit in it. 
2. The Right Process. A business is mostly just a system of process and procedures that delivers an end result (the product or service). These procedures can be listed, organized by function, assigned an accountable person, optimized, and documented into simple, repeatable, easily-trainable written procedures. This is critical to systemizing your company and ultimately gaining freedom from chaos and being stuck in day-to-day management. 
3. The Right People. The key to making everything work is hiring and training the right people. Most small businesses are terrible at this, and I will show you how to greatly improve your business with some simple hiring, training, and performance management best practices that work. 
4. The Right Tools. The tools and systems you need to create or acquire to solve problems, make everything work together, and further streamline how you work. 
5. The Right Routines. The regular meetings to solve problems and improve your strategy, process, people, and tools. The work routines you need to master to continuously deliver excellent service to your customers. Routines prevent entropy in your organization and keep everything aligned. 

Here are some ground rules for working on your management system:

• If you’re starting up, write things down or otherwise organize things in a central place (the same document or folders) and clean them up based on the structure I provide. For example, as you learn new procedures like invoicing or running payroll, write things down and centralize your information (or if it’s a manual, print it out and put in a folder, or my preferred method: scan documents into a digital folder), put it all in the same place for “Procedures” for easy reference and organize it as you go. 
• Focus on one of The Five Competencies at a time if possible, usually the one that needs the most improvement first. If you’re just starting out, focus on The Right Plan. 
• If you have an existing company that needs to be cleaned up, focus on one of the areas per week or even per month and make sure your team understands and “buys in” to the value in making things easier for everyone (including themselves and your customers). If you try to do all these things at once and without team buy-in, then you will have a hard time and only frustrate people.
• Remember that creating your management system is extremely valuable work and will ultimately lead to your freedom. 

The Right Plan

“Strategy is not a lengthy action plan. It is the evolution of a central idea through continually changing circumstances.” – Jack Welch

It’s hard to overstate how important having a simple, clear strategic plan is, not only for your clarity of mind, but to get your team to understand where the company is supposed to go. Most small businesses have no clear strategy or goals besides the whim of the founder at that time. The founder may have a vision with no clear goals or action items, which will get you nowhere fast. Some founders have plenty of goals with no vision to guide them, which can actually be counterproductive (“chasing squirrels”). 

The Founder Superpowers section of this book provides plenty of guidance on vision and execution, but the guiding light should be a simple one-page plan that organizes everything in one place and shows your team exactly where the company is going and what needs to get done. 

Elements of the Right Plan

You may not know some of these elements if you’re still trying to figure out your product, haven’t hired staff yet, or haven’t generated much revenue. The point is that it’s important to get a first version of the plan. It will always be a work in progress and needs to be known by everyone, reviewed and updated frequently as your company grows and changes, which we’ll go over when we discuss The Right Routines. 

• Vision. As discussed in chapters 2, 5 and 6, a clear vision that is well communicated puts the same picture in everyone’s head and can be extremely motivational and clarifying. This lets everyone know the future they’re working towards every day. 
• Purpose. Answer this question: Why do you wake up every day and work toward your vision? Who are you serving? Knowing your “why” is incredibly motivational if it inspires you to action. 
• Values and principles. What do you value and what do you stand for? Knowing this will help you differentiate between good and bad decisions. There’s more on this in Step 6. 
• One-sentence strategy. Closely related to the elevator pitch in Step 2, the one-sentence strategy is an easily-remembered, easily-communicated, broad summary of how you’re going to reach your vision. 
• Goals. Vision and purpose are great, but you need to have concrete, measurable goals, that you work toward, perhaps even a BHAG® as described in chapter 2. Definitely, you want goals for the year (broken down by quarter), and many great companies have 3, 5 or even 10-year goals for things like product, revenue, profit, etc. See chapter 2 for a summary of goals and how to break them down. 
• Scoreboard. Can I glance at the plan and know how we’re doing? A well-designed scoreboard (sometimes an electronic dashboard or even manually collected stats) will measure a handful of metrics (revenue, profit, number of leads, etc.) and let you know the status of your goals (usually green, yellow, or red). 

Take the time to create your first plan and get it in front of your whole team  then refer to it and keep improving it forever. You’ll be amazed how this simple one-page document can radically clarify what needs to get done and simplify how you operate your business. The Chapter Resources has a sample version for you to use. 

The Right Process

If there is a key to small business freedom (in addition to having enough sales to live comfortably), it’s getting control of and mastery over the processes and procedures inside your company. Every business is simply a collection of activities, most of which can be identified and documented. Once documented, it can be simplified and taught to others. 

Having others (either employees or contractors) take over working procedures is how you stop working in your business and start working on (improving) your business. Procedures free up your time to work on strategy, growing and systemizing your business further. The rich get richer because of this cycle; they delegate the little things and focus exclusively on the big things that generate huge returns. They then delegate the implementation of those bigger things and repeat. 

When I first started my company in 2001, there was very little information on how to properly structure process in a company (outside of some internal documents for very large companies). There was The E-Myth by Michael Gerber and some vague references in other books and articles, but nothing that showed exactly what I needed to do. I was hopelessly lost and overwhelmed. Now, there’s not only a lot of information online about “standard operating procedures (SOPs) but several good books and even software that will make systemizing your procedures much easier (which I will reference in the Chapter Resources). 

How to Get the Right Process 

First, some quick definitions:

• System: a set of principles or procedures to get a result
• Process: a series of actions or steps taken in order to achieve a particular result 
• Procedure: step-by-step instructions for doing a process or part of a process 
• Policy: a system of principles to guide decisions 

You will probably have about 5–10 big processes in your business, for example, your marketing process,  your hiring and training process, or your customer service process. Then, within each process, you will have specific step-by-step procedures. For example, within the marketing process, you may have “Writing a Blog Post” or “Managing our Google Adwords Account” as written procedures. Finally, you’ll have various policies dealing with things like employee time off, safety, customer service and more. 

Over the years, these are the steps and best practices I’ve learned to get process right in a business. 

1. List the procedures. Make a list of every recurring procedure that you do to run your business (daily, monthly, quarterly, yearly, etc.). You might want to track things for a few weeks and list them as you do them, including such tasks as invoicing clients, paying bills, paying taxes, ordering office supplies, customer support, maintaining machines, managing marketing activities (blogging, managing advertising accounts, etc.), and everything that you do to serve your customers, which will vary dramatically from business to business. 
2. Group the procedures. You will see that many procedures are closely related as a process and will probably fall into the categories of Admin (everything your company manages internally like paying bills, ordering supplies, payroll, taxes, hiring, etc.), Operations (everything your company does to deliver your product or service to your customers including providing customer service), and Marketing/Sales (everything your company does to identify, attract and convert leads into sales), or some other similar grouping (Operations may be split between Operations and Customer Service, for example). It’s up to you if you want to have these as formal departments at this point and note that some processes go across departments (for example, hiring and training). 
3. Assign an accountable person. This may only be you for now, but if you have staff and they generally manage a group of procedures, then assign them as the accountable person who is now in charge of these procedures. Make sure to have a good talk with them about why you’re doing this and what you’re trying to accomplish (and review Superpower #14: Accountability Mindset). Let them know you want their help in getting procedures documented in the company and how valuable it is (and will make their life easier as well). If you’re looking to hire, include documenting procedures as one of their initial responsibilities. 
4. Write the procedures. Either write or have your accountable person write the procedures one by one. See the Chapter Resources for an example of a Written Procedure (including proper naming). 
   1. Start by writing the procedure that is the most burdensome or gives you or your team the most grief. Putting things down in writing will help clarify your thinking so you can simplify it.
   2. I highly recommend you start with digital documents at first (so you can move, copy/paste/edit them later) but paper documents will do if that’s all you have. 
   3. Don’t overthink and just try to get as much of the basics you can down. Aim for 80% or higher but don’t kill yourself getting to 100%. A good goal is to have the procedure detailed enough so that someone new can get the basics with some quick training. 
   4. If your procedures are complex or you or your staff are having a hard time writing them, make a Procedure for Procedures that shows exactly how to write them for your company step-by-step. 
   5. Don’t bother writing rarely done procedures right now; focus on the recurring procedures. A good way to prioritize is to start with the harder procedures you do daily, weekly, monthly, quarterly, and then yearly.
5. Review the procedures. Go over each procedure with your team to make sure they are generally correct and “how we do it.” You’ll have time later to optimize and streamline, but for now, take a quick glance and identify any “this doesn’t make sense” steps or missing steps. Edit them and make final versions for publishing or storage. 
6. Centralize the procedures. Determine whether you’re going to use a binder or store them digitally (or both). It’s important that you centralize all of them so they are easily accessible and updatable by your team. I prefer an intranet or shared drive (printing updates to binders can be a hassle). Make sure they’re listed in some kind of order somewhere (either a table of contents or a spreadsheet) and reference them by number if appropriate (1.1, 1.2, for one department, 2.1, 2.2 for another, etc.). We’ll discuss this more in The Right Tools. 
7. Schedule the procedures. You will have procedures that are daily, weekly, quarterly, etc. Figure out how best to track that they are getting done using a spreadsheet, a calendar or specialized software I recommend in the Chapter Resources. 
8. Use and maintain the procedures. You have to actually use the procedures and keep them maintained for them to be effective. Make sure all staff are aware of their location and that the accountable person is responsible for monitoring and keeping them updated. There should be a simple system for requesting an update, writing the update, notifying people of the update and recording when it was last updated (a simple spreadsheet usually works). 
9. Optimize the process and procedures. Once you have them listed and documented, you can now look at your processes and procedures holistically and identify duplication, constraints, bottlenecks, inefficiencies and find ways to streamline or even eliminate steps. The whole point is to get everything so simple that anyone can take over any process or procedure with little training. Try to review or optimize a major process every quarter as one of your goals. 

Two Processes to Get Right 

I think two procedural and policy areas that are important to get right early for a startup are the 1) customer service and 2) money and compliance issues. All the processes and procedures are important, but I want to emphasize these two because getting them right will remove a lot of vulnerability and problems in a fragile startup. 

Customer Best Practices

Within your Operations written procedures, you should start documenting how to take proper care of your customers. This will vary from business to business but providing good service is an antidote to complaints, bad reviews, angry clients, angry employees, lawsuits, and generally being miserable all day. You will kill momentum and morale if you have angry customers, so take care of them as best you can from the beginning. 

At the very least, manage expectations and provide plenty of self-service information that’s easily accessible or provide it with your product or service. Well-written documentation, FAQs, welcome packages, emails, or other helpful information will answer your customers’ questions before they ask them. The best service in this regard is no service; the best companies have a system or product where customers rarely or never have to ask for help at all. 

Finally, one thing in small business I think is important is to realize that the customer is not always right. There are simply some humans who cannot be satisfied, appeased, or even reasoned with, and they will make you and your staff miserable. In these cases, I try to have a manager (or myself) have a conversation with the customer. But if that doesn’t work, then don’t feel guilty about firing them as a customer, refunding their money if appropriate, and even referring them to a competitor as “more suitable to their needs.” 

Money and Compliance Best Practices

Money management, compliance and controls are fairly obvious, but a lot of entrepreneurs drop the ball and pay for it dearly. Some of these are in the category of business-ending, so I mention them here as a cautionary note to make sure you pay attention to them. 

Money Management Best Practices 

These can obviously be a lot more complicated depending on your situation. Most of them are easily resolved with some quick research and basic common sense. 

• Be frugal. Be frugal and don’t get cocky! Big offices, expensive parties, and similar luxuries in the startup phase are some well-known ways to break the bank (and probably jinx yourself). You’ll have plenty of time and cash later if you run things well, so don’t rush to do the flashy stuff until you can easily afford it and really need it. Note that being frugal is not being cheap; don’t cheap out on the important things. 
• Establish controls. Almost every case of theft, loss or mismanagement of cash in business (by employees or others) has to do with the lack of controls. Be very cautious granting full access to money, bank/credit accounts and expensive inventory (or don’t do it at all). Background checks for employees with access is recommended. Video monitoring and other security mechanisms may be necessary for physical locations, inventory, etc. 
• Accounting literacy. Learn basic accounting. Accounting is just money moving in and out of your business and keeping track of it (and other things like inventory and other assets). Don’t over-complicate accounting if the money management part of your business is not core to what you do (example: banking, finance, loans, investing, etc.). 
• Understand financial reports. Learn to read and understand the three most important accounting reports: the Profit and Loss statement (the P & L, so you can know if you’re making money or not), the Balance Sheet, and the Cash Flow statement (especially if you are not pre-paid or paid upfront for your work and have to bill clients), and perhaps others depending on the complexity of your financials. Every good founder has a decent grasp of the numbers. 
• Reconcile monthly. Reconcile your books at least monthly or make sure your bookkeeper does. This is the only way to know your true numbers regardless of what your bank account says. 
• Keep business and personal separate. Do not commingle your personal money with the business money. Know how to properly reimburse yourself and others from the company accounts. Know how to properly distribute profits and dividends from the company. 
• Manage receivables. Don’t just send a bill once and hope it gets paid. You want to actively manage receivables with various methods like getting to know the accounts payable person, sending big invoices via FedEx to ensure delivery, putting due dates on invoices (instead of the nebulous “due on receipt” or “Net 30”), following up late payments via phone and email, and consider sending past due accounts to collections.
• Don’t keep all your eggs in one basket. Be very careful about having one or a handful of customers that make up the bulk of your revenue; any change in the relationship can be devastating to your business. Be especially careful of any billing that goes past 30 days; they can likely afford to pay late but that may be damaging to you if they do. Make sure to run a company’s credit before giving them any billing terms. 

Compliance

Compliance is pretty broad but basically means anything you can get into legal trouble or trouble with the government. Generally this means making sure to get your legal ducks in a row and pay your taxes on time. A lawyer can do a good legal review of everything if you can afford it but there are some common sense best practices to avoid most issues. 

Compliance Best Practices 

• Business entity. Treat your corporation or LLC as a separate entity, maintain all licenses/permits, file all necessary annual reports, don’t commingle cash, document decisions in writing, and follow basic corporate compliance, which means holding meetings and writing minutes. This is how you protect your corporate veil and what protects your personal assets in a lawsuit. For a simple solution to this, visit https://www.mycompanyworks.com/premium 
• Legal landmines. By far the biggest threats are customer, vendor, and employee lawsuits. Review them below and make sure to review with an attorney anything you believe is not rock-solid. Good insurance can also cover many of these issues as well, so speak to an insurance representative if necessary.
  • Customer lawsuits. Frankly, most customer lawsuits are bad situations that simply escalated between the business and customer until someone got mad and called a lawyer. You always want to de-escalate if possible, but don’t hesitate to vigorously defend yourself as there are some very sue-happy people out there. A good product or service, good customer service, clearly written terms and conditions (acknowledged by the customer in writing), and a safe and clean office or retail location are good antidotes to lawsuits. 
  • Vendor lawsuits. These mostly have to do with payment and service issues. These can be more complex as a big vendor can be more aggressive and have more resources than your average consumer. With vendors, you want to be very careful with any legal agreements you sign and review their terms and conditions very carefully (if ordering from them is dependent on accepting them). Don’t hesitate to have a lawyer review big agreements and “push back” on items of disagreement (the other party will be used to it and probably surprised if you don’t), especially evergreen contracts that renew automatically and anything that limits your ability to act against them for various bad things that might happen. 
  • Employee lawsuits. Many employee lawsuits are from disgruntled employees, so make sure to hire and manage (and fire) well as shown in The Right People section. Again, you always want to de-escalate if possible but don’t hesitate to vigorously defend yourself as you don’t want to provoke others. Make sure to have a clear employee manual and ensure that it is signed and acknowledged by each new employee. Make sure to follow all federal, state, and local hiring laws, especially safety, discrimination and sexual harassment laws. Document absolutely everything in writing to be safe, especially underperformance or behavior problems. Use a payroll service to ensure tax and other compliance issues regarding pay. 
  • Contractors vs employees. Make sure you know the definition of a contractor (someone you hire to perform a specific task or project but do not control their schedule or work methods) and an employee (someone you hire to perform a job but can control their schedule and methods of work). The main difference in paying them is how taxes are taken out for employees. There are stiff IRS penalties for hiring a contractor to do employee work. Check the official IRS definitions for more. 
• Taxes. This should go without saying, but let me just emphasize how expensive late and underpayment fees can be or how badly an audit or other paperwork nightmare can disrupt your business. Pay your taxes and don’t ever try to skirt on them. 
• Security issues. If you deal with technology or have an office location you’ll want to make sure you have a written security policy regarding things like passwords (hard to guess, changed frequently), alarm pass codes, backups of data and any industry specific requirements like Payment Card Industry (PCI) Compliance if you accept credit cards. 

Have a systems mindset about your business and keep things in writing. This solves so many problems and makes life so much easier that it astonishes me that most small businesses are so bad at it. Take the time to get the Right Process down.

This was an excerpt from our book Startups Made Simple: How to Start, Grow and Systemize Your Dream Business. Learn more about the book here or see our previous excerpts here.

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