The backbone of success: Why operations matter for small businesses

Does it feel like your business is constantly putting out fires? Whether it’s struggling with cash flow, piles of paperwork, staffing issues, or negative customer feedback, there’s a good chance many of these problems are symptoms of poor operational management. You’re simply going through the motions of running a business instead of considering the best way of how to run your business.

By setting up structured, well-defined operations, you can run your business successfully and put out those fires.

What is operations management?

In a nutshell, operations are how you deliver your goods or services to customers. For instance, a cafe with great coffee and service has found the best way to deliver value to customers by refining its operations.

Operations can be broken down into a few different sections of your business.

1. Process: How you deliver your product or service.
2. People: Who does what when delivering a product or service.
3. Equipment: What tools are needed for people to deliver a product or service.
4. Location: The space (WHERE) used to provide the people and equipment needed to deliver a product or service.

You can expand and add details to these areas (or “silos”) as you develop your business. Over time, you can also refine them so that you deliver your product and service efficiently, and ultimately, profitably.

It is also important to keep in mind that your operations will require administrative support, such as finances, accounting, and payroll.

How to develop your business operations

Good operations reduce the barriers to making revenue, so that you can reach your goals faster. This means all of these silos need to work in tandem. If one core operation is out of sync with the others, it affects the whole business. To put this in perspective, let’s look at an example.

Example: Marty, the cafe owner

Marty’s cafe has a problem: his customers complain that the wait for coffee is too long. If Marty allows this problem to persist, he risks losing customers, which will lead to lost sales.

To fix the issue, he looks at how he serves customers their orders.

Process:	Customer orders at the window counter; a waiter (till operator) takes the order and money; the POS system prints the order docket; a barista receives the docket and makes the coffee.
People:	Waiter: operates till, services customers, cleans service areas, restocks, “floats” (helps where needed) Barista: Makes coffee, helps with orders, cleans station
Equipment:	POS & Till system, coffee machine, sit-down plates, cutlery, and mugs, take-away cups and cardboard meal boxes/cutlery
Location:	Street corner, ‘hole in the wall’ coffee shop, busy foot traffic, small operating space.

 

So he has a basic template for the core operations for how to sell coffee. So what area is the culprit?

After observing peak periods and slow periods over a couple of working days, Marty found that:

1. The coffee machine was fine during slower periods, but the frother couldn’t reach the required temperature fast enough to heat and foam the milk during peak periods.
2. Due to wait times during peak periods, customers would crowd the busy street, making the waiting experience unpleasant.

Marty’s issues were two-fold: his staff’s equipment couldn’t handle the volume of orders, and the location was compounding wait times, making the customer experience unpleasant and reinforcing the negative comments.

Solution

For Marty, there was an obvious solution to part of the problem and a not-so-obvious one to another part. The obvious? Purchase or rent a commercial coffee machine that could keep up with demand. The not-so-obvious solution was how to maximise his small hole-in-the-wall coffee space.

To address his immediate volume issue, he rented a new commercial coffee machine to keep up with demand. Over time, he would be able to fund the purchase of the new coffee machine with the additional revenue generated by meeting demand.

To address the location issue, Marty applied for council permits to ‘expand’ his operating space to include the wall side at the street corner. If successful, Marty would have extra space for customers to wait or eat on-site. This would increase customer satisfaction and ease wait times.

What small businesses can do to improve their operations.

To improve your operations, you need to observe your current workflows and trial new systems and procedures. Consider the four silos (process, people, equipment, and location) and how your administration can support them. To create systems that work for your operations, you need to look at the following:

1. Measure workflows: Map out your current workflows, identify areas for improvement, and address pain points.
2. Standardise the right way to do things: Identify the best workflows and make them the norm by creating standard operating procedures (SOPs).
3. Get ‘tool’ fit: If your current tools, equipment, software, or systems aren’t working, fix them. Look for value, not price: the best solutions are cost-effective and help increase productivity.
4. Design for purpose: Processes, systems, and procedures are only good if based on reality. Create systems that work for the type of staff, tools, and space that you have.

Refining your small business operations

Refining your operations is about identifying, planning, and organising the best way to conduct your daily business activities. Many small business owners struggle when their operations evolve without oversight—they do what’s easiest at the moment, rather than what’s smartest long-term. Instead, combat this by understanding how your business works, identifying pain points, and finding solutions that work best for you.