Your business has grown and become more and more complex? Then you’re in good company. Most entrepreneurs experience the rise of complexity and how it taxes their teams and them personally.
Here’s a simple 5 step process to simplify business operations and keep them simple as you continue your journey.
- Get clear on strategic priorities
- Focus on the pareto 20%
- Declutter your processes
- Clear up responsibilities
- Hold “To-Kill” meetings
Let’s go!
Looking to keep more profit of your business’ revenue? Here’s what to do.
Get clear on strategic priorities
Complexity often is caused by a lack of focus. If your business is offering ten different services, serving 20 different client types, you’re bound to experience complexity.
Instead, define your goals and what you want your business to be like in the future. Cut out everything else you do. After all, strategy means to focus on a few things. But also, discarding the rest.
Focus on the Pareto 20%
Once you know where you are going, apply the Pareto principle. The Pareto principle says that 80% of your outcome is produced by 20% of the effort.
Applying this principle rigorously to all aspects of your business will dramatically reduce complexity. Ideally, you’re cutting out 80% of the work you do, while maintaining 80% of the output.
And don’t be afraid to lose business. Instead, this focus allows you to grow with less effort and a clearer offering.
A few examples.
Client base
Sort your client base from large to small. Calculate the sum, and then 80% of it.
Then add up the revenue you’re making with each client sequentially.
Client A: 100,000
Client B: 75,000 = 175.000
Client C: 60,000 = 235,000
Continue until your total exceeds the 80% revenue calculated earlier.
These are your Pareto 20% clients. Depending on your business, it might be more than 20% of your clients you need to add up to arrive at 80% revenue.
But in almost every case, the number of clients that produce 80% of the revenue will be considerably smaller than 80% of your total number of clients.
Consider getting rid of the rest.
This will dramatically decrease workload and overhead. Obviously, find smart ways of doing that, e.g. not extending contracts etc.
Offering and activities
Do the same thing with your offering. List all the offerings and activities that you have, and map how much revenue they produce.
Apply the same logic as above to find your Pareto 20% services. Chances are that out of everything you do (let’s say 10 different services), there are two that account for the majority of revenue.
Dump the rest.
Acquisition channels
List all your channels over which you generate new business. Repeat the exercise to identify the 20% of channels that bring in 80% of the new business.
Dump the rest, and get really good at the remaining ones.
You can apply this methodology to everything else inside your company:
- Team members
- Software tools
- Office or service locations
Declutter your processes
A good portion of the remaining complexity will live inside your processes.
Map your processes to understand the status quo. Then task your team to find ways to eliminate 20% of the steps.
Common steps that drive complexity and can be eliminated (if you do it well):
- Internal approvals
- Client approvals
- Hand-overs
- Reporting
Read more on how to improve business processes here.
Clear up responsibilities
Use a RASCI matrix to create unambiguous and clear job descriptions. It’s crucial that everyone in your team clearly knows what their role is.
Make it clear what decisions you want to be involved in and which ones you trust your team to make autonomously.
Communicate and constantly revisit job descriptions with your team. Adjust them as necessary, but keep them as lean as possible.
Hold “To kill” meetings
Lastly, you can’t escape the nature of business to add complexity after you’ve done this clean up.
Schedule bi-monthly or quarterly “To-kill” meetings, in which your team can present ideas of things you should stop doing.
This dedicated time to simplify your business over and over again will keep the inevitable rise of complexity in check and to a minimum.
Apply these 5 steps continuously for a business that’s as simple as possible to run.
For less pain, more profit, happier customers and a happier team.