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Starting a Business? Why You Need to Know Operations

While it is true that an astute entrepreneur can be successful in just about any type of business, that doesn't excuse any owner from mastering the details of the venture's operations. The operations are what exactly the business does -- restaurants cook and serve specific types of food, consultants help businesses improve a specific area, retail stores sell specific lines of product -- and how that work gets done. Clearly understanding the day-to-day operations is critical to leading any business to success.

Obviously, different types of businesses have very different operations. In similar types of businesses, such as restaurants, clothing stores, dog training outfits, or whatever, the top level of operations tend to be very similar, such that the basic route of product development to delivery are pretty much the same. Hence, it makes sense to hire managers and employees with experience within the same industry, even if that experience is not exact. Still, within any industry, the details of operations can vary widely. That is, the general work to be done may be very similar, but how the work gets done can be very different from business to business.

The details of operations can be the factor that sets one business apart from another. Entrepreneurial innovation isn't always inventing the latest hi-tech gadget. In fact, most innovation occurs in the operations of common business. For example, video rental has been around for several decades, but Netflix changed the way the product is delivered dramatically...and is overwhelmingly successful because of it. Entrepreneurs pushed distributors to develop just-in-time options for ordering and delivering inventory and are generally at the forefront of improving efficiency and productivity in all industries. But those innovations cannot occur unless the person in charge understands the ins and outs of the standard operations of their industry and business.

Aside from years of experience in an industry, the best way to understand the operations is to actually do the job, even for a little while. In some cases, working a short time in a similar business coupled with a good amount of research is enough. If there is not enough time (or opportunity) to actually work in the field your startup is in, the next best option is to hire an expert. Use networking contacts to gather referrals, whether for employees or consultants, to help you establish the operations portion of your business. Of course, it is never a good idea to completely hand over any portion of your business to an outsider, so it may be beneficial to bring on an expert as a partner.

If working with a partner is not in your plans, you will need to work your startup budget to include the expertise you will need to master the operations. Whether you choose to hire a permanent employee or a temporary consultant, the critical factor is that you take the time to learn the operations yourself. Then, use your knowledge (and your expert) to develop comprehensive SOPs -- Standard Operating Procedures -- that will be followed by everyone in the company. Once the SOPs are developed and functional, it is far easier to identify opportunities for increased efficiency in each step of the business process.

Developing SOPs early in the life of your venture will also establish a key point in successful cultures -- that there is a right way to do things and everyone is expected to work the same way. In addition, it is important to allow employees the opportunity to contribute ideas for improving efficiency, as well as a process for evaluating, and perhaps testing, those ideas. Creating a culture of attention to the details of operations is important to the success of any small business, and failure to acknowledge the importance of operations is a sure road to business failure.

Knowing the operations is an absolute necessity for most entrepreneurs. Relying solely on an experienced employee is dangerous -- what happens when they quit? Unless the expert is a full partner in the day-to-day of the business, you will need to put in the time and effort to master whatever it is your venture does. And, formalizing the operations into SOPs will create consistency and commitment in the company culture. From there, every bit of improved efficiency goes directly to the bottom line, but the only way to make the right decisions is to understand your business's operations, inside and out.

About the Author

LaunchX.com is dedicated to training entrepreneurs to turn their good ideas into great companies. The LaunchX System provides step-by-step education in the mindset and skill set entrepreneurs need to succeed. Our program includes intensive seminar training, key business software, and specialized workbooks that teach you the fundamental skills you need to achieve your financial and worklife goals through entrepreneurship. Register today for our introductory course and see what LaunchX can do for you!