Importance of Systems in Business
How Does a 16 Year Old Run a Multi-Million Dollar Business?
If you don’t know anything about business, take some comfort in the fact that one of the world’s most successful businesses is run by 16 year olds! It’s called McDonalds.
Each McDonald’s store turns over, on average, about $2 million per year. The average age of a manager is around 21 years. The average age of an employee is around 16 years.
The success of McDonald’s depends on everyone in the business following a system. This is one of the key secrets of business success. Grasp the importance of this and you can achieve great things.
To understand how systems emerge in business, imagine 10 people started a widget company. Statistics would show us that after the first year in business 7 out of the 10 that started would be out of business for one reason or another. Now there are just 3 companies left in the widget business.
Over the next 5 years it is likely that one of these 3 would also close its doors. Now there are just 2 companies left in the widget business.
The question to ask is what did these 2 widget makers do that the others didn’t? What made these 2 companies successful? If we could find the answer we could start another widget business, do exactly what they did and we’d have a good chance of success.
This is, of course, the basis of a franchise. We simply take a success formula from one business and duplicate it in another. The formula comes in the form of a system. Systems consist of lots of smaller systems for everything we need to say and do to make the business a success. Here’s another way of looking at it…
Think of your business as a stage. On the stage we have a number of actors. In order for the performance to be a success, each actor needs to follow the script. Back to the McDonald’s example… When someone says to you “would you like fries with that?” you are hearing part of the script. The McDonald brothers worked out that if they asked every customer “would you like fries with that?” 3 out of 10 would say yes. That’s a 30% increase in the sale of fries! Now here’s something that a lot of people are not aware of…
You’ve been given a script too! Successful businesses not only write scripts/systems for their employees, they also write them for their customers. These scripts are either subtle or direct instructions to customers to help the business owner become more efficient and profitable.
An example of a subtle customer script is an ‘In‘ door and an ‘Out‘ door. Don’t laugh! What this script says is that if you want to buy something from me you have to walk in through this door. When you leave walk out through this door. Don’t believe you’ve been cast in the role? Try walking ‘ In’ through the ‘ Out ‘ door! Not only will you feel like you’re being a bit naughty, other people in the store are likely to glare at you with disapproval. Remember, they’ve been given the same script! What about more elaborate scripts…
Probably the most successful and elaborate customer scripts have come from banks. Bank executives worked out how much it costs to do a transaction over the counter. They also worked out that if they could train you and me to do their work for them, they could make a lot more money. All they needed was a script. They developed the script, and relatively quickly, were able to get you and me to do exactly what they wanted. I’m referring to the use of Automatic Teller Machines (ATM’s).
The script that the banks came up with was so elaborate that it alone would probably have done little to change our behaviour. So to get us to follow the script they used basic psychology in the form of the “carrot and the stick” approach. The carrot was, and still is, lower bank fees if you use their ATM. The stick is, higher bank fees if you don’t. Pretty simple eh? It’s also quite scary. What the banks did was to succeed in changing the behaviour of 100’s of millions of people in the space of less than a decade! And in doing so reaped, and continue to reap huge profits.
The point is this: systems are extremely powerful tools in business. Your task, as a business owner, is to develop systems for your business that maximize your profits.
For most people new to this idea, the question is ” Where do I start? ” To help you answer this, here is a framework that you can use to systemize your business.
In business, there are only 5 areas that determine how much profit you make. When you develop a system that works for one of these areas, you will increase your profits. As you systemize each area in turn, YOUR PROFITS WILL MULTIPLY … The 5 areas are…
2. Conversion
3. Number of Transactions
4. Average Dollar Sale
5. Profit Margin
You can use the above framework for any business. If you’re using Network Marketing to promote your home based business, you’ll find some helpful information on Lead generation and Conversion on this site.
To get what YOU want…
Help people to get what they want.
