Startup Dox

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Ask a Lawyer:Systems

Dear Startup Dox:

I’ve been hearing about systems everywhere. Online coaches and organizational consultants are always talking about SOPs and “tech stacks” and organizational charts.

Do I really need systems for my business?

I feel like my handy notebook and brain is enough.

Signed,
Salty about Systems

  1. Why this matters: Documenting a system prevents liability by allowing you to duplicate yourself in the future and identify potential risks.
  2. What you need: Standard Operating Procedures (SOPS) – can be your most consistent tasks. Can be a Google Sheet.
  3. Who you need: YOU and your honesty.
  4. Learn more here:
    i. MC: CINC
    ii. MC: Leveraged Goals for Profit

Dear Salty,

The implementation of systems may seem unnecessary and overwhelming to start, but they are crucial and highly recommended for a variety of reasons.

In fact Leila Hormozi, (Multi-exit business owner and current owner of Acquisition.com) states:

“Systems should make your life easier, faster and make more money”.

  • Systems are necessary for a healthy company and an exit.
  • Some systems are legally required and others act as legally preventative measures.
  • Documenting as you go can prevent a lot of headaches in the future.
  • They are also necessary for proper growth.

Let’s dive into them below.

A. Standard Operating Procedures (SOPs) and business management systems, all increase operational and business value.

Business systems are imperative for a company’s maintenance & exit.

Having a simple Staff Employee Handbook is the beginning.

It will allow you collate your code of conduct and your replicable processes, such that a potential buyer can easily integrate or edit for their own portfolio.

When you have the systems documented, it allows the Buyer to “value” the systems as part of your company assets, which increases your sale or exit value.

Apply now:
Mark it on your calendar for your annual review to update your systems, SOPs, handbook, contracts, file your reports. <—-This is a system too!

B. Systems allow for legal protection as evidence of common law “business customs”.

Having a set system sets a baseline standard for your company to prevent negligence and reduce liability in your business.

This sets up your “business customs”.

Think about a fast food restaurant’s bathroom.

Usually, at the back of the door, you will see a timesheet where sanitation workers can mark off the time/date of the last cleaning.

This is a system that shows the schedule of sanitation, so that if any customer “slips and falls” or makes a claim, then your timesheet and sanitation system is your basic “business custom” which may help your defense, if you were to get sued.

Apply now:
Set up a simple Google Sheet or within your Task Management application (www.monday.com; www.trello.com; www.asana.com) with timed input of regular tasks.

C. A smooth system allows for outliers to show up and be addressed earlier. Consider everyone is wearing a red shirt and the outlier is the blue shirt. You will notice when something is awry… because the system (red shirt) is the norm.

Apply now:
Document or write down every time an incident happens.

Every mistake is a treasure trove of learning material.

One business owner had a customer sign up for a cost reduced membership and then the customer utilized the membership’s benefits and then asked for a refund.

Since this was an outlier to the system, the owner was able to track the customer’s usage to deny the unwarranted refund.

To prevent future requests such as these, the business owner set up a minimum amount of months that any customer must be a member, before allowing a refund.

D. Systems can be replicated and integrated into other systems.

You’re probably using the Google Suite products for your personal communications.

Consider Google Workspace for your business.

If you can’t find a “connector” between your systems, use Zapier (www.zapier.com) to create a seamless system.

One business owner used to use a specific survey tool for years for her students.

Then she got fancy, and built a whole, stand alone learning management tool.

Unfortunately, this delayed applications, double charged applicants.

A lawsuit was impending.

Mismanaged personnel and poor communication led to the owner finally shutting down the management tool and reverting back to her old system.

Apply now:
Invest in applications that integrate with other systems or “plays nice” with other inherent operational systems.

Salty – systems work for you, with you and by you.

ACTION STEPS TO APPLY Now:

1. Mark it on your calendar for your annual review to update your systems, SOPs, handbook, contracts, file your reports. <—-This is a system too!

2. Set up a simple Google Sheet or within your Task Management application (www.monday.com; www.trello.com; www.asana.com) with timed input of regular tasks.

3. Document or write down every time an incident happens.

4. Invest in applications that integrate with other systems or “plays nice” with other inherent operational systems.

Startup Dox CEO & Lead Attorney
Sankeetha Selvarajah, ESQ

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