Thursday, October 30, 2008

Organize Your Business Using The Franchising Model

For those who have read Michael Gerber’s The E Myth Revisited, you’ll recognize this theme: Organize your business as though you were going to franchise it.

Franchising is simply a method of distribution of a product or service utilizing the brand, operating systems and support of the franchisor. Applying these principles to your own business can help improve your productivity and profitability even if you never plan to actually franchise it.

The foundation of a franchiseable business is replicable operating systems. “System” is defined as a coordinated body of methods and procedures, but I would add that for business purposes it needs to be documented in a form that can be most effectively utilized by those responsible for its implementation. So where do you start if you want to document operating systems for your business? I recommend that you create a “map” of your organization, sorted by job function, responsibility, and task. From that map you can document the systems for each key responsibility.

As an exercise, write in simple outline format how your business is organized. Example:

I. Marketing/Advertising
II. Sales
III. Production
IV. General Management/Financial

Then under each section, write the related responsibilities. Example:

IV. General Management/Financial
a. Planning & budgeting
b. Bookkeeping & accounting
c. Human resources
d. Office administration
e. Operational performance review & analysis

Then under each responsibility, write the related tasks. Example:

IV. General Management/Financial
e. Operational performance review & analysis
- Review goals & objectives monthly
- Review job cost reports
- Review cash flow reports
- Review financial statements monthly
- Review marketing numbers monthly
- Review sales plan vs. actual monthly
- Compare closing ratios to plan monthly
- Compare gross profit to budget monthly
- Determine where and why variances occurred
- Make changes to plan and budget monthly

Now create a spreadsheet with a page (tab) for each section, with the responsibilities and tasks listed down the rows. At the head along the columns, list the job functions, not titles, in your company (as the general manager, you may also be the sales manager and production manager; so list all three functions). Where a job function and a task intersect on the spreadsheet, place an X if that function handles that task. Ideally, the responsibilities and tasks will be in sequential order, ascending, so the information will be in a “day in the life” order. Example:

With this breakdown, you can provide your staff with an outline of their duties. This, however, is not an “operating system.” A true system would include a written, graphical and/or video description of how to perform it, which should address the “who, what, where, when, and why.” This would be a staggering project for all the tasks that have been mapped out, so the realistic approach is to identify only the most critical tasks and document those. But don’t assume the burden of doing this all yourself; delegate pieces of it to your staff. If they’re not comfortable with writing, meet with them and tape record what they say.


Concord Carpenter said...

Great post - thanks for sharing that. I read the book a long time ago and your right.

Aaron Siddle said...

It is right, that a famous brand of franchise is pretty handy for new small business owners. It helps them to make a place in market.

tim hortons franchise