You mean you actually want to make a profit and stay in business!

Been gone for a while – things got very busy at work and quite frankly I just lost traction for a couple of weeks but I’m back and I decided to put the last remaining sections in this one post.

My last post was about the operations you absolutely have to get right in order to do whatever it is you want to do: know what your customer wants, plan your work and deliver what you promised.  This post will be about the operations that will help you work efficiently and improve over time.

Overview of the Profit Creating Operations

Things you have to get right in order to make a profit. These operations directly impact both your customer and how you run your business.

Work Monitoring and Control

“Are you spending too much and as a result will you take a loss on this contract?”

One of the advantages of performing your critical operations (requirements management, work planning and service delivery planning) is that they provide the key information you need to perform your profit creating operations.  Your requirements management efforts provide a clear picture of what needs to be done to satisfy your customer; your work planning efforts identify what has to be done and your service delivery planning efforts identify how it will be done.

With those three pieces of information it becomes a straight forward effort to keep track of the “whats” and the “hows”, that is monitoring and controlling the work so that the right things get done within your budget and your schedule.  Do not confuse straightforward with quick or easy.  Straightforward in this context simply means that you can clearly see how to do something.

In order to keep track of your work you need to write down the important steps it takes to provide your service and for each step write down how long it takes, how much it costs and when the step must be done.  It’s also important to think about what may keep you from meeting your customer requirements, i.e. you spend too much, take too long or start too late on a step.  Put all this together and you have a work plan.  Congratulations!

You can now use this work plan to track your work which sounds boring and not a lot of fun.  It may not be as exciting as watching “House of Cards” but it can give you a good feeling when you start to detect a problem before it actually happens and in time to do something about it.  This can include changing your plans, reworking agreements or other things that can help reduce the impact of the problem.

Supplier Agreement Management

“How will you work with your partners, prime and/or sub-contractors?”

As a SOHO business you will probably be working with both suppliers and subcontractors (or partners) and this area is where you determine how you want to set up and manage those relationships.  A little preparation will go a long way towards establishing a successful and profitable arrangement for everyone.

This planning enables you to establish the basis of your negotiations:

  • What you will require of your suppliers: schedule, cost, quality, quantity, warranty, after delivery service, etc.
  • What you will provide your suppliers: method and schedule of payment, feedback, recommendations, etc.
  • What will be the relationship with your subcontractors/partners: degree of direct contact with your customer, your fees, in addition to what you would require/provide your suppliers (see above)

Depending on the maturity of your business you may have an extensive list or you may be starting with a blank sheet of paper.  Regardless, your wants and needs in this area will change over time based on your experience and changing circumstances.

The more you have thought through this area the more comfortable and confident you’ll be in your dealings with your suppliers and subcontractors/partners.  As changes come up, and they will, you’ll be better able to quickly and safely adapt to them.

Overview of the Business Sustaining Operations

So you’re keeping the customer happy and doing it efficiently so you’re done, right?  Well, yes for a while at least but if you do this for any length of time there will be tendency to take shortcuts or you may wish to do it a different way or you may wish to expand.  All of these things will go better if you periodically look at what you’ve done from a “big picture” standpoint.

Process and Product Quality Assurance

“Are you doing the right things AND are you doing things right?”

The Work Monitoring and Control described earlier is a look at what you are doing on a day-to-day basis.  Process and Product Quality Assurance is a look at what you are doing over a series of jobs.  This is where you will see gradual shifts away from your original approach.  These shifts can be for better or worse but it is important to become aware of them early, especially if they’re for the worse.

An important element of the activities in this operation is developing the ability to view them objectively.  This means you will have to measure what is important and do it consistently over time.  Your Vision Statement, requirements management, work planning, service delivery planning and work monitoring and control efforts provide what you need to perform this operation.

Measurement and Analysis

“How will you know you are making a profit?

While Process and Product Quality Assurance will help you identify “drift” over time, the Measurement and Analysis operation will help you determine when and if it’s time to “change course”.  If you decide that it’s time to change the course of your business then the results of this operation will help you rewrite your Vision paper and start the entire process over again.  You’ll be surprised how much easier it will be the second time because you will be able to tailor the Tiny Business Mentor process to what worked for you the last time, adding and dropping things as necessary.

Configuration Management

“Are you’re delivering the right version?”

Configuration management is the tracking of the “things” that are part of your business.  These things include any products you deliver to your customer, plans/procedures you may use to deliver services and major hardware/software you use in the running of your business.  This operation is left for the last because in most cases it’s not only too much work early in the life of tiny business but it’s also not really necessary.

Next up: Some examples

You really, really do need to read this … really you do!

We’re starting to get into some serious stuff here… I mean these are the critical operations right?  These are the things you really do have to get right.  I know that this can get overwhelming, seems like a lot of work and you’re probably not sure where to start. Here’s the deal… a little effort now will save a lot of grief later.  You’ll only have to do these first 3 critical operations and then you can claim success.  Also, you don’t have to get it all done the first time through. It’s not a test, unanswered questions don’t count against you and you can go back as often as you like when you have more information.  You’re new motto is:

One step at a time and skip the hard stuff until it gets easy

The Critical Operations

The Critical Operations are the things you must get right immediately or your business is dead before it even gets started.  All of these operations directly impact your customer.  These operations are:

  • Requirements Management
  • Work Planning
  • Service Delivery Planning

Requirements Management Overview

“Is what you delivered what the customer ordered?”

This operation is the first and most important operation of your business – learning what the customer wants. This is also the operation that is easiest to get wrong because it seems so simple.

You and your customer talk about what is needed and you both understand completely what the job will require. You’ve completed the job feeling proud of the work you’ve done and when you deliver it to your customer they explode that this isn’t what was ordered.

Can’t happen to you?

Just wait for it.

So what happens and how did this go so completely wrong when it started so wonderfully right? English is a wonderfully rich and complex language but when it comes to defining the needs for a job it can also be extremely frustrating.

It’s helpful to look at requirements in at least two different forms, verbal and written.  The written form is preferable but for the tiny business, a verbal discussion followed up by a written statement of each of the requirements discussed is good enough. However let your business needs decide on what is the best way to identify, negotiate and capture requirements. Other considerations affecting requirements can stem from your customer’s agreements with other suppliers (e.g., the customer’s underpinning contracts, operational level agreements, memoranda of agreement, subcontracts).

Once you and the customer are confident that the correct requirements have been captured then those requirements must be managed.  When doing this you might think of requirements as loveable but energetic children who will constantly be getting into mischief if you let them. Just like good parenting, management of requirements often includes:

  • Managing all changes to requirements (new shoes every 6 months, etc.)
  • Maintaining relationships among requirements, plans, and work products (playing well together)
  • Ensuring alignment among requirements, plans, and work products (anyone have to go to the bathroom before we leave on our vacation?)
  • Taking corrective action (why didn’t you go before we left?)

In summary, the major elements of the requirements management operation include:

  • Understand Requirements
  • Obtain Commitment to Requirements
  • Manage Requirements Changes
  • Maintain Traceability of Requirements
  • Ensure Alignment Between Work Products and Requirements

Traditionally, well-formed requirements need to be:

  • Clear, concise and stated in words that can be measured.  For example, the phrase “as soon as possible” is not measurable, who knows what is possible and what may be possible for you may not be possible for me.  A better phrase is to state a specific time period or date and time.
  • Complete.  Does the requirement contain all the information necessary to enable anyone reading the requirement to know what is necessary to fulfill the requirement?
  • Consistent.  Not only should the requirement be internally consistent it should also be consistent with other requirements.  For example, one requirement states that measurements will be made in feet and inches and another requirements states that they will be made in meters and centimeters.
  • Verifiable.  Fancy way of saying testable.  How will you prove that the requirement has been met?
  • Traceable.  Every requirement needs to have a starting place with the customer.  A requirement that cannot be traced back to the customer or other high level source can be a problem since you may be putting resources into a requirement that the customer has not asked for.
  • Viable.  Can the requirement be fulfilled in today’s world?  We may want to be able to have same day delivery but depending on the product, price and distances it may not be possible.
  • Necessary.  If a requirement is not necessary for customer satisfaction or other high level commitment then why spend resources on it?
  • Implementation Free.  At the highest level a requirement should only discuss “what” is needed, not “how” it will be provided.

Work Planning Overview

“What are the major steps required to do the work?”

The purpose of work planning is to establish and maintain plans that define work activities, in other words this is where the rubber meets the road.  As a tiny business, the majority of your work planning may be done informally as you think through what you will need to do to satisfy the customer.  You may repeat many of the same activities from one job to another because this is what has worked for you in the past.  It’s those repeated activities you want to capture in your work plan and in so doing you will:

  • Have a checklist of activities reducing the possibility of forgetting or accidentally skipping an important activity,
  • See possible ways to combine or eliminate activities that you hadn’t noticed before,
  • Be able to delegate activities quickly and efficiently when necessary.

Your work plan may start out as a simple list of activities with a very brief description of each activity but as you get more work you will have the opportunity to expand on the information you have on each activity.  Key elements of work planning are:

Establish Estimates of key activities:

  • Establish and maintain the service approach.
  • Define service delivery phases on which to scope the planning effort.
  • Establish and maintain estimates of work product and task attributes.
  • Estimate effort and cost for work products and tasks based on estimation rationale.

Develop a Work Plan based on your key activities

  • Establish and maintain the budget and schedule.
  • Identify and analyze risks.
  • Plan for the management of data.
  • Plan for resources to perform the work.
  • Plan for knowledge and skills needed to perform the work.
  • Plan the involvement of identified stakeholders.
  • Establish and maintain the overall work plan.

Obtain Commitment to the Plan with your stakeholders

  • Review all plans that affect the work to understand work commitments.
  • Adjust the work plan to reconcile available and estimated resources.
  • Obtain commitment from relevant stakeholders responsible for performing and supporting plan execution.

Service Delivery Planning Overview

“Did you fulfill all your contractual obligations?”

You’ve identified the requirements and have planned your work so now is the time to put it all together in an agreement with you customer on how the service (your work) will be delivered.  This can be as simple as a hand written work order but it is imperative that a written agreement be drawn up if only to make sure that everyone is working from the “same sheet of music”.

The Service Delivery process area focuses on the following:

  • Establishing and maintaining service agreements
  • Preparing and maintaining a service delivery approach
  • Preparing for service delivery
  • Delivering services
  • Receiving and processing service requests
  • Maintaining service systems

Service delivery covers establishing and maintaining a written agreement with customers. A “service agreement” describes the service to be delivered to the customer, service level targets, and responsibilities of the service provider, customer, and end user as appropriate.

Establish Service Agreements

  • Analyze existing service agreements and service data to prepare for expected new agreements.
  • Establish and maintain the service agreement.

Prepare for Service Delivery

  • Establish and maintain the approach to be used for service delivery and service system operations.
  • Confirm the readiness of the service system to enable the delivery of services.
  • Establish and maintain a request management system for processing and tracking request information.

Deliver Services

  • Receive and process service requests in accordance with service agreements.
  • Operate the service system to deliver services in accordance with service agreements.
  • Maintain the service system to ensure the continuation of service delivery.

Next up: Overview of the Profit Creating Operations

Enough already with the lectures! Where is this heading?

I hear you, this stuff can be a bit dry.  Here’s my plan for the next bunch bundle of posts:

  • Overview of the operations (this post)
  • Overview of the Critical Operations
  • Overview of the Profit Creating Operations
  • Overview of the Business Sustaining Operations
  • Introduction of the case studies

At my current pace that means 5 more weeks … it might actually have stopped snowing in Maryland by then.  If you’d like to read ahead then everything except the case studies are available from Amazon in Kindle format (SOHO Operations Planning) for $1.99.

A chance for literary immortality

If you’d like to volunteer to be one of the case studies then I would help you set up your tiny business using this approach for no charge.  In return you would grant my permission to use our experience as a case study.  I’m willing to write up the case study replacing all names, etc. with fictional names or with the actual name of your business – your choice and you don’t have to decide up front, you can wait until after I’ve written the case study and you get a chance to read it.  You can volunteer by leaving a comment on this post or if you want to be a bit more discrete then send me an email at stuart.l.lesley@gmail.com.

And now back to our regularly scheduled programming…..

Overview of the operations[i]

An operations plan provides a high level description of how your business works, that it is the actual things you do to provide your service or product to your customers. It should contain enough detail to accurately and comprehensively describe your business operations yet not contain anything that is not absolutely necessary. Beware of including things solely because you can or think they might be useful.  Anything you add to the operations plan will cost you time and money and those are two of your most scarce resources so chose those things carefully.

The recommended operations are based on a minimum set of widely accepted practices for services[ii] and should be fairly straightforward.  I’ve grouped these operations to help demonstrate the value of thinking through each of these operations as they apply to your business.  The 3 groups are:

Table 1: Critical Operations

Critical

Things you must get right immediately or your business is dead before it even gets started.

Requirements Management

“Is what you delivered what the customer ordered?”

If you don’t know what your customer wants you’re dead in the water from the very start.

Work Planning

“What are the major steps required to do the work?”

Once you have a good understanding of what the customer wants then it’s critical that you plan your work well.  As an expert this is probably the area you’re most comfortable with.

Service Delivery

“Did you keep your commitments to your partners, suppliers, etc.?”

Having performed the work you need to make sure that you’re delivering everything the contract (verbal or written) requires. This may include things that may not be explicitly included in the customers’ requirements like delivery location, packaging, etc.

Table 2 Profit Creating Operations

Profit Creating

Things you have to get right in order to make a profit.  These operations are not included in the critical group since not all tiny business ventures are designed to create a profit.  They are in the second group because they are important in keeping control of your costs (money and time).

Work Monitoring and Control

“Are you spending too much and as a result will you take a loss on this contract?”

These are things that will help you do your work efficiently, i.e. at the lowest cost and in the least amount of time.  If your business is a hobby or avocation this may not be that important but it’s always good to make sure you’re spending your time well.

Supplier Agreement Management

“How will you work with your partners, prime and/or sub-contractors?”

These are things that can quickly consume huge amounts of time and resources if you’re not careful.

Table 3 Business Sustaining Operations

Business Sustaining

Things that will help you stay in business and help create the conditions in which you can grow your business. 

Process and Product Quality Assurance

“Are you doing the right things AND are you doing things right?”

 These are things that help you stay on the right track and get better over time.

Measurement and Analysis

“How will you know you are making a profit?

These are things that help you see how your business is doing and what it can do better. 

Configuration Management

“Are you’re delivering the right version?”

 These are things that help you keep track of your stuff and make sure you’re delivering the right stuff to your customer.

That’s it!

8 operations of which there are only 3 (4 if you include visioning) that you really have to focus on.

Next up: Overview of the Critical Operations


[i] For the purposes of this plan the terms “operations” and “processes” mean the same thing.

[ii] Software Engineering Institute’s (SEI) Capability Maturity Model Integration for Services (CMMI-SVC), NOTE: Don’t let the fact that the source of this information has the work “software” in its title.  The practices described have been used in many other service areas, e.g. landscaping, etc.

How to save $1.99

At the end of my last post I promised to provide more detail on the specific operations identified in the Tiny Business Mentor.  This material is going to undercut my sales of SOHO Operations Planning in the Kindle section of Amazon.com available at the amazing price of $1.99.  So if you keep reading this blog long enough you’ll have all the material provided in that treatise (its 12 pages long) plus a whole lot more.  Who said reading blogs doesn’t pay?

In addition to the Vision or Overall approach I discussed in the last post you’ll also need a business plan.  There are many excellent resources for writing a business plan but your first stop should be the Small Business Administration (SBA).  Many parts of the Vision/Approach document will be reused in the early parts of any business plan and parts of the business plan will be used in the operations plan … “write once, use many times!!”

In my mind the terms “Tiny Business” and “Small Office / Home Office” are synonymous.  They both refer to a business that consists of no more than 5 or so people who are offering a service of some kind.  An operations plan is something that describes how you operate your business, i.e. the things you do that are directly related to providing your service to your customer.  This is different than the business plan which focuses on marketing, structure and financing and it is definitely different from the financial and legal planning that is often involved in running a business.

There are multitude of books and other resources on these subjects so I’m not going to repeat that material here.  I encourage readers of this blog to post your recommendations, experiences, etc. concerning these areas.

Tiny Business or Small Office / Home Office (SOHO) Operations Planning

So what is an operations plan and why should a tiny business spend precious resources, especially time, working on it?  An operations plan focuses on the planning of all aspects of the delivery of your service, from determining the need, through workforce activities to service delivery.  Your Operations Plan should enable you to answer the following questions:

  • Is what you delivered what the customer ordered? (Requirements Management)
  • What are the major steps required to do the work? (Work Planning)
  • Did you fulfill all your contractual obligations? (Service Delivery)
  • Are you spending too much and as a result will you take a loss on this contract? (Work Monitoring and Control)
  • How will you work with your partners, prime and/or sub-contractors? (Supplier Agreement Management)
  • Are you doing the right things AND are you doing things right? (Process and Product Quality Assurance)
  • How will you know you are making a profit? (Measurement and Analysis)
  • Are you’re delivering the right stuff? (Configuration Management)

In the earlier part of this post I said “write once, use many times!!” and here is the first area where you can start to reuse previous efforts. The high level answer to many of these questions should be in your Business Plan so copy and paste the appropriate answers from your Business Plan into your Operations Plan and add details as needed.

What Vision and Planning Provides You

With this set of vision and planning documents you should be able to quickly and consistently describe your service to any potential customer or partner, respond to any request for proposals and apply for financing or capital with a minimum amount of additional effort. This is assuming that you have actually thought through each of the parts of each of the planning documents and provided the appropriate answers or the reason(s) why a particular part doesn’t apply to your business.

The documents are not as important as going through the process and thinking it through.  The documents just help you remember what you did and communicate it to others.

That’s it. It may sound like a lot but you should only have to go through this once and then as your business changes you can go back and make modifications to your plan(s) as appropriate.

When it comes time to response to a request for proposal you should be able to find the majority of your material in these plans which means you’ll be able to respond with much less effort and your response should be of high quality. You can also state in your proposal that you have these plans, use them on a regular basis and provide a few examples of how they have helped you and especially your customer in the past. This will definitely give you a competitive edge over other proposals.

When you begin negotiations with potential partners, prime contractors and/or sub-contractors you can use these plans to establish credibility and the appropriate level of visibility into your business. This could give you a stronger negotiating position helping you ensure that you establish an agreement that is good for your customer, your business and you.

Up next: The first set of operations

What is a vision and what if mine isn’t 20/20?

I think of the vision as the 2-minute elevator speech that you’ll need when people ask you “so what is it you do again?”  Having this at the tip of your tongue will come in handy in so many ways:

  • chance encounters with potential customers,
  • explanations to family members,
  • reminding you why you’re doing this when it’s midnight and you’re facing a 9 am deadline, etc.

Don’t be fooled, creating this can be very difficult and more than a little frustrating.  You can see it in your head perfectly but every time you try to tell someone or write it down it gets all scrambled. Trust me when I say that if you can’t do this then life is going to be lot more difficult and possibly much less successful than it could be.

There is no specific format for the Vision/Approach but it should be short and well-focused. Anyone should be able to read it and understand what your business is about.  Here are some things that could help:

  • Don’t worry about perfection or completeness at first.  Write down whatever comes to mind and when there’s no more do something else.
  • Keep a notebook with you and jot down thoughts when they occur to you.  You’ll be surprised at the randomness of this. NOTE: Be safe! If driving repeat the thought out loud over and over until you can pull over safely and write it down.  Ignore the strange looks from your passenger or even better ask your passenger to write it down for you!
  • Focus on how your business can help your potential customer. Your capabilities, certifications, etc. are important but don’t assume your potential customer will know how they benefit them. Explain how each one helps your customer but keep it short.
  • This is your business’ resume and like a resume its sole purpose is to get you the “interview”, i.e. a contact (email, letter, phone call, meeting, etc.) with your potential customer

Next: More detail on the specific operations identified in the Tiny Business Mentor

A side note before continuing

What I’ve done in creating Tiny Business Mentor is take the latest industry best practices in the area of service delivery, distill them down to their bare essentials and then translate them into real people language. These are the things that once done can be used to keep you on track and freeing you to focus on what you started this business for in the first place whatever that may be.  For those interested in the source of the best practices you can go to http://www.sei.cmu.edu/reports/10tr034.pdf to get a copy of CMMI® for Services, Version 1.3. Be careful though, it’s over 500 pages long!

I’ve been involved in many projects large and small and both as a project leader and team member.  It’s been my experience that the projects that were both smaller and shorter needed greater attention to things like budget and schedule because there was less room for error.  If a large project that was scheduled to last 18 months ran over budget for 1 or 2 months there would be time to detect and correct the problem, assuming it wasn’t the last few months.  On the other hand, a small project that is scheduled to last 3 months had the same problem by the time the problem is detected the project is almost over and there’s no time for any kind of recovery action.  I think a tiny business is very much like a small short project, i.e. not a whole lot of room for detection of problems and their recovery.  One of the key features of Tiny Business Mentor is to put some things into place early to keep those problems from happening and when they happen anyway give you the tools to detect them early and correct them quickly.

Should you really be reading this?

Time is valuable and we are all swamped in a tsunami of information so this really an important question you need to ask yourself.  You might consider reading this if you are:

  • operating a tiny business (see the Jan 18th TBM blog post) and it’s not as much fun as you thought it would be or it’s outright painful
  • operating a business successfully and you might be able to add helpful insights to others reading this blog (including the author – me)
  • thinking about starting a tiny business and you want to learn what you need to know to operate a business and are hoping this might be of some help

Of course everyone is welcome regardless of your reasons for reading.

Tiny Business Mentor is assuming that your business is a service oriented business, i.e. you are be using your expertise and experience to provide some service to your customer.  This doesn’t mean the approach won’t work with a manufacturing, i.e. craft business, in fact the first example I developed to help “test out” the approach was just such a business and it worked out pretty well.  Another assumption is that you are highly competent in whatever service you are providing.  So if you know your business inside and out and are an expert in your field why do you need this “extra planning stuff”? Believe it or not, there are some very good reasons:

  • It allows you to be in more than one place at a time

Part of the planning is to write down your vision or approach. This becomes a big part of your “story” and that combined with an explanation of what you do and how you do it (another part of the planning effort) can be given to those who might be interested to read and get a sense of what you do.

  • It helps you keep track of the details

Your business consists of you (and maybe a few others) so you don’t have time to repeatedly go over things to make sure you’ve thought of everything. The “extra planning stuff” can help you do it once and forget it.

  • Improve the visibility of how you do business

You are providing an important service to your customers, a service that if not provided properly could seriously impact they’re plans. Providing a view in how you do your routine business will help them feel more comfortable and more willing to contract with you.

  • Expands your opportunities

Funding for expansion, cash flow management, etc. often requires a business plan as one of the first pieces of the line of credit request. Government contracts often require parts of a business plan to be included in your proposal in order to effectively compete. Competing for partnering and prime/sub-contracting arrangements often are helped by the “extra planning stuff”.