Business Systems: The Good, The Bad and The Ugly

September 15, 2010 No Comments

What’s the difference between long-term, successful business owners and the unsuccessful, unhappy, beaten down, dreams squashed and my-savings-are-gone owners?  Sometimes it’s a lack of planning, education or close-mindedness.  It could be a capital shortfall, construction overruns, poor timing with the opening or bad location.

Many times its arrogant leadership, outdated management philosophy or simply bad people skills.  That’s an odd one, if they chose to be in a people business.  But almost all the time you’ll find huge holes in their operations, fueled by a lack of solid, well thought out and well documented business systems. Without them, the business presentation can’t be duplicated over and over unless the original owner or founder is physically creating the result in an everyday role, or directing everyone to do the same.

Here is a simple owner/manager “Freedom from my business life” litmus test:  When you go away, (if you can get away) do you feel the need to check in often or do you constantly get calls while you are gone?  If yes, you’ve got individuals running and discretionarily interpreting your business in an uncertain way, not your business systems generating a predicable outcome.  If yes, your lifestyle as an owner is tied directly to the hours of your business.  This is “bad.”

Your business systems are the how-to manual that you can hand anyone who works for you, the proven method for the best and most consistent results.  They will follow and produce it in the exact same manner as you would, (the owner/manager) whether you are there or not.  That’s “good.”

Two Alarming Facts

According to Dun & Bradstreet and INC. Magazine, 33 percent of all new businesses fail within the first six months. Fifty percent of new businesses fail within their first two years of operation and 75 percent fail within the first three years.  That’s “bad.”

According to Michael Gerber, author of The E-Myth Revisited, one million small businesses are started every year. Statistically, 40 percent of them will fail within the first year, escalating to an 80 percent fail rate within the first five years. Of those fortunate enough to have survived up to that point, 80 percent of additional businesses will close their doors over the duration of the next five years.  This is “bad” echoed.

The Essence of a Franchise System

Why do competent franchise “systems” work?  First, a franchise is the right to use the name and the proven business systems of an operator who has a market demand for their particular product or service.  They have created a business model that can duplicate the end result of the product or service time after time, anywhere.  Does the word “system” keep jumping out at you?  When you purchase a franchise “system,” you are paying for systems that deliver predictable results. What makes one franchise better than the next?  It’s the ability to completely eliminate “discretion” at the operating level.  The franchise that works is the one that never veers away from these proven business systems.  As soon as new owners decide to use their own personal judgment to adjust processes, the end result becomes less consistent and the business outcome is altered.  The same holds true for your business.  The founder (owner/manager) is the franchisor, while your employee team members are the franchisees.  If you (the owner/manager) choose to let them (your employee team members) use their personal judgment within your operation, you are giving up your vision and its intended direction.   In most cases you relinquish your expertise to a group whose sheer lack of experience and maturity are unknowingly and without any real stake, paving the direction and outcome of “your” business for “their” personal gain.  Most amusement facility employee teams are made up of part-time teenagers whose main mantra is “What’s in it for me?”  Do you see where this is heading?  It’s getting “ugly.”

McDonalds: A Franchise Model to Learn From

So is it any surprise that less than 1 percent of McDonalds fail?  It certainly is not the stellar food quality.  A hamburger is a hamburger and there are many fast food burger joints who have continually tried to knock off McDonalds as the king of the successful franchise, but none have managed to hit the mark.  McDonalds has successfully eliminated discretion at the operating level.  They have succeeded, while operating within a low skilled, high turnover environment, by instilling business systems that work anywhere.  This is “good.”

Contrast this to the family entertainment business that exhausts high energy finding indispensable, go-to employees.  The business becomes overly dependant and at high risk if they leave.  Replacing them is always a daunting and nerve racking task that takes time, energy and money, while crippling the business’ reputation in the process.  This is “bad.”

Great franchise models like McDonalds have training manuals describing in minute detail how to run their business, so that customers all over the world have the same experience.   Your business should be developed with the same philosophy, even if it’s the only one of its kind.  Typical franchise models provide consistent value to customers and employees, beyond what they expect.  They are usually operated by people with low skill sets.  They are a place of impeccable order.  They document all work in operations manuals.  They provide predictable service to the customer and use uniform colors, dress and facility protocols.  This is all “good.”

Family Entertainment and Leisure Businesses

Family entertainment and leisure business entrepreneurs (owners/managers) have great intentions of building their business with all the critical tools to operate successfully.  Most understand the great need for written systems, but believe that if it’s in their head and they can see it clearly, so should everyone else.  They fall short by letting the business control them, instead of the other way around.  “We’ll get to it, but we’ve got to open first or we’ve got to start making money before I’ll have the time to create these.”  I hear this all too often and find out later when the business is fully “Dis”eased, they never did get to them.  Lack of time and eventually lack of energy, pushes it off until they fall too far behind.    As Michael Gerber, author of The E-Myth revisited (entrepreneurial myth) puts it. “They are too busy working in the business and not on it, until it’s too late.”

We are seeing today’s family leisure business entrepreneurs getting wiser.  They do their homework, study markets, current business models and write business plans.  They consult feasibility and finance experts, hire qualified architects, make construction plans and go to trade shows to learn new trends and get the best pricing on attractions and fixtures.  Plenty of time and energy is devoted (as should be) to planning and building their new business. The challenge begins when they look back and realize you only build and open once; you operate the business for as long as it remains alive.  “Maybe I should have understood and begun this process long ago.”  This is “bad.”

Corporate-owned entertainment entities, as well as small entrepreneurs and “Mom and Pop” businesses all feel this pain.  There is one difference, the corporate CEO or manager leaves one “DIS”eased business and finds another to infect in the future.  The Mom and Pop or small entrepreneur has to put food on the table and pay the mortgage, so they stick with it as it dies a slow death.  They are typically left with nothing, except a bad credit rating and lucky to pick up a job similar to the miserable one they left.  They start in business with a dream of gaining more freedom, more money and more time to get more life.  Most end up buried and broken, up to their eyeballs doing low level tasks to get by, never realizing any of what attracted them in the first place.  It’s “ugly” and “sad.”

Don’t Get Ugly with Your Party Program

Parties and events are a substantial revenue generator for all family oriented businesses. Many of the largest and most prominent family leisure businesses don’t quite get it and do not reach their potential for a variety of reasons.  The main cause for not reaching potential is owners’ limiting belief that includes a lack of understanding of how to manage parties and the idea that they are too much work. I hear these ugly comments from rookie and seasoned owners and managers. “I would rather concentrate my efforts on the large numbers brought in by general admission or large company events, than the smaller numbers brought in by birthday parties or family reunions.”  “I don’t have the staff to handle these ‘little’ groups.”  “It’s not worth the effort.”   If this were the case with all family oriented amusement businesses, then why are some gross party revenues in the millions, with 50 to 60 five percent profit margins?

Follow the same simple rules of successful business with your party and event program:

Rule #1: Children, adult, corporate or family gatherings all need to be unique, eliminate frustration and offer a “Wow” value to create a more memorable, long-lasting experience.

Rule #2: Create written step-by-step processes to deliver rule one, every time, by anybody.

Do you need stellar employees to pull this off?  The answer is yes, without well documented systems.  The answer can go either way if you have a well defined step-by-step manual.  Without party/group systems, be prepared to be held hostage by your party business as well, allowing the outcome of your offer to be dictated by the moods of even the best personalities.  When I hear owners or managers say:  “We can’t do that; we don’t have the right kind of employees.”  “Who’s going to train them?”  “How will they learn it?”  What I’m really hearing is, “I’m too afraid of things I don’t understand.”  “I’ll keep doing it the same way I have always done it or I’ll do it like the guy down the street.  It seems like it works for them.”  Ugly. Ugly. Ugly.

Take advantage of the huge and consistent demand for quality family recreation and milestone celebrations.  Create something unique and frustration free to set you apart from the pack.  Let the outcome of each experience be your greatest marketing tool, as folks leave to tell the story of how they felt while at your business, over and over.   Make sure each visit is as remarkable as the last.

Let’s review. You decided not to buy a franchise system, but create your own concept, good for you.  It’s fun and rewarding to use your creative juices.  You’ve got the name, uniform look and outstanding facilities, all good stuff.  But have you taken the time to put everything in order, to create predictable service by writing systems and training with operations manuals?  If not, the pain you are feeling, the frustrations you are causing, all work against the very essence of the reason you created this business in the first place.  Freedom, more time, more money, and as for your business, as Clint Eastwood said in the 1976 film “The Outlaw Josey Wales,” “Dying, ain’t much of a livin.’ ”

(Industry Owl Frank W. Price is the founder of Birthday University and FL Price and Associates. Visit www.birthdayuniversity.com.)

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