[Note: This is the first in a two-part series. Look for the continuation in the June issue of Reeves Journal.—Ed.]

Let’s begin our discussion on why systems are important to your company by reviewing a couple of little known statistics published by the federal government. Did you know that 86 percent of all U.S. companies have 25 employees or less?
    Think about that for a moment. Eighty-six out of every 100 companies are owned and run by individuals just like you and me. These small companies are the basic fabric of this nation so surely there must be classes taught in high schools, trades schools and colleges on how to run small companies.
    Unfortunately, for the most part, there is nowhere to go when it comes to learning how to run a bakery, small retail store, a restaurant or a trades company. The lack of educational opportunities when it comes to running a small company can only mean that it’s relatively easy to run a small business. If that weren’t the case there would be tons of training on how to run a business promoted all across the land. Right? Wrong!
    There’s another government statistic that goes hand-in-hand with the first: About 90 percent of all the businesses that start up this year will fail within their first year.
    That’s right. Ninety out of every 100 companies that starts up this year will fail within 12 months. Worse yet, only one company of out a thousand that start up this year will ever see its 20th birthday. Man, that’s a real confidence builder when it comes to starting your own company.
    The big question is why these new businesses go belly-up at such a prodigious rate? Well, according to the Small Business Administration, a major reason is poor management. In other words the typical company owner knows what to do to provide the product or service but very few understand the business side of running a business.
    Armed with these statistics I can hear the words of my dad ringing in my head. He used to say “Son, if you want to be successful simply find a need and fill it.” That sounds logical, doesn’t it? We know the need for good business training is there, so how has it been filled, at least for a select few? Does the word “franchise” come to mind?
    Many years ago a few sharp individuals created the franchise industry to teach individuals how to run small businesses of all kinds using a “system” to run the company.
    Has it been successful? Good old Uncle Sam says 97 percent of all franchises make it through their first year of business and 95 percent of them make it through their first five years. Those statistics are a bit different than the “normal” business startup.
    So what’s the difference between the two? In a word it’s systems. Franchises have done their homework, found out what works and what doesn’t, and then taken the time to document the process so it can be repeated over and over again. The results? Again, 97 percent of franchises make it through the first year of business while 90 percent of all other companies fail within the first year. There must be something positive about putting systems in place.
    Many years ago, when my youngest daughter was in high school, the annual fund raising season was upon us. Instead of selling candy, the students pre-sold pancake breakfasts at a local McDonald’s that were good for one specific Saturday morning. The parents were asked to actually go to McDonald’s that day to cook the pancakes. My first thought was “I can’t boil water much less cook consistent quality pancakes in volume.”
    The parent volunteers were asked to be at McDonald’s 45 minutes before the event began to “learn how to cook perfect pancakes every time.” To make a long story short, the manager of that franchised restaurant revealed to us the system it used to make pancakes. And sure enough, by following the directions, within a very short period of time I was making perfect pancakes by following a predetermined, proven, system.
    What were the benefits of the system?

• Consistent quality product was presented to the customer no matter where, or by whom, the “pancakes” were made.

• Any employee with a minimum of education and/or ability could do the job at a lower pay scale (more profit) to the company.

• If a problem did occur with the pancakes all the supervisor and/or employee had to do was review the system to see what went wrong.  When the system pointed out the error in the process the necessary correction would be made and the process of producing high quality pancakes for the consumer would be back on track.

• With systems in place for the entire business overall quality and profitability were assured.

What kind of person purchases a franchise like this? It is typically a doctor, lawyer or successful businessperson. Does the owner run the business on a day-to-day basis? Absolutely not! They hire management people and send them to McDonald’s University in Chicago to learn the “systems.”
    McDonald’s University, sometimes known as, “Hamburger U,” is an amazing place. It’s just like any other college campus with classrooms, dorms and labs. I can still remember walking past the “Milk Shake Lab” followed by the “Hamburger Lab” just a few short steps down the hall. Each classroom will filled with students learning new systems to put into place when they got back to their home restaurants. The business classes taught managers how to track costs and how to adjust pricing if, and/or when, the profit margins began to fall. It was amazing to see real people being taught how to run real companies to generate real profits.
    Next month we’ll continue our discussion of how systems equal success by making a few parallels between McDonald’s and your company. We’ll also talk about how to create those systems and at the long terms benefits of making the investments in those systems. 
    For more suggestions on how to run a profitable business you might want to consider attending our three-day “Basic Business Boot Camp”. Give us a call for details or check it out on our Web site at www.grandyassociates.com.