A System for Making Money

This is all a business really is

People often talk about building systems in your life and business. From business books like “The E-Myth Revisited” to personal development books like “Atomic Habits,” systems are laid out as the weapon the hero uses to defeat failure once and for all.

In startups though, there is a different theme. Move fast and break things. Test and test until you find product market fit. Where systems are for creating order, this startup ethos is about embracing chaos.

Opportunities are found in chaos, but businesses are built by creating order. This is as true for a one-person organization as it is for a thousand-person one.

What is a system? A system is a collection of processes that work in unison. A process is a series of steps that take an input, whatever that may be, and make an output out of it.

A ticketing process, for example, takes customer requests and turns them into bug fixes or new features. A sales process takes people who have never heard of you and turns them into paying customers (read: revenue).

A business, or a system, is just all these different processes put together. An output of one process becomes an input of another and on and on it goes until all the outputs are accounted for.

Why build systems in your business?

Well because without systems, you don’t actually have a business. You may have a product or a couple of processes, but the value of a business is based on the predictability of its outcome.

You, an investor, an acquirer, will all value a business based on the question “If I put $xxx in this business, how much will I get back and when?”

That question can’t be answered without understanding the system of the business and how one process affects another.

Also, it makes your business way easier to build and grow. When you can finally answer the question, “If I spend X time on this marketing campaign, how much money will I earn?” You’ll have a completely different relationship with your business based on predictability instead of risk.

Foundations of a business systems

The most common missed concept when it comes to building a business is that systems are built in layers.

Like a tall building, if the foundational pieces of your system are weak, your business becomes more risky as it grows, not less.

Fortunately, the foundational pieces of a business system are fairly well known.

Things that give you direction

Mission

Your mission is your highest-order goal. It is the north star that guides every action of the business.

Values

Values are not things like transparency and honesty, those are principles. Values are things you find valuable. In other words, they are things worth striving and sacrificing for. Transparency is something you can achieve right now with basically no additional effort. It is not a value for that reason.

Principles

These are your modes of operation. Principles are behaviors that are core to your identity. This is where things like Grit, transparency, work ethic, etc.

Things that move you toward your goal

Tasks

A task is the smallest unit of work. They are the building blocks of projects and workflows. If you want to build and do great things, pay close attention to how you structure tasks.

Communication

Communication is the means by which micro and macro decisions are made. The decision-making process is incredibly important in any system. You will need to determine how communication is done at every level of work (Task, Project, Portfolio).

Resource

A resource is a unit of information. Without dedicated resource systems, you end up with a system where some people are gatekeepers of the necessary information to operate components of a system.

Once you create a system that accounts for how all these pieces will work together and be managed, you can then begin to build your processes.

Defining Your Processes

When Tim Ferriss launched his book “The 4-Hour Workweek” he changed the landscape of entrepreneurship in the information age. Or at least he redefined the principles of entrepreneurship to reflect and knowledge-based economy and not a manufacturing or service-based economy like we were before.

In that book, the first part of his infamous D.E.A.L. framework was the Definition.

Processes are either natural: they occur without the intention being placed on their creation, or manufactured: they are designed with a specific outcome in mind.

Either way, a process cannot be created or changed until it is well-defined.

The best way to define your process is to begin by defining the outcome you want the process to produce.

When doing this for your own business, start with very very small outcomes. Here are some examples:

  • Leave customers happy and thankful after they submit a request or have a complaint.

  • Acquire 3 new customers per day

  • Weekly account balancing

  • Weekly content planning

The process documentation is complete when you can pass it off to someone else and reasonably expect them to be able to produce the result. You see during the creation of the process how the process is built out of the pieces outlined before:

  1. What are the tasks that collectively make up this process?

  2. How will the results or roadblocks of the process be communicated to you?

  3. What additional resources are required to execute this process?

It’s important to do this even if you never expect to hand this process out to someone else. Why? Because without defining the process you have no way of measuring how a change in one part of the process will affect the process as a whole.

Improve and delete

Until you define a process, you can’t edit it. And the editing is where the magic really happens. Once you know that a process has x input and 1.3x output, you can change the process and see how that changes the output.

Each process will produce an output whether it was created by you or a natural phenomenon. For example, success in a business creates cash. It’s for that reason that there are accountants. They answer the question of what to do with that cash or where is it needed next.

A system design is complete when every output becomes an input in another process, closing the loop. An output that doesn’t have a place to go should be considered waste. Even excess cash is wasted if you have no idea what to do with it. It might be a valuable waste, but still a waste.

Your goal for creating your system should be to get the absolute most output for your inputs with as few processes as possible.

How do you do that? Well, it’s a process of creating processes that deal with each output, and then improving the performance of each one.

This all takes a lot of time and a lot of thinking. It can be easy to end up with a monster of a system that no one in their right mind can actually navigate. That happens when a system becomes bloated from adding and adding without closing the loop.

To avoid that, and keep your business small but powerful, you have to pay special attention to what can be deleted to a benefit. What I mean by that is what can you delete and actually improve the performance of the system?

Conclusion

You are either creating a system intentionally or without realizing it. But regardless that’s always what’s being created. It’s better to take those efforts into your own hands and be mindful of each process involved.

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