Starting a business is not for the faint of heart. Navigating the tricky, and sometimes murky, business environment can test your resilience. Statistics indicate that up to 90% of new startups fail. 20% of those that fail do not even make it past the first year. Less than half will make it past the fifth year, while only 33% will reach the ten-year mark.
These shocking statistics may perhaps not be the best way to start our discussion. But, it presents a stark reality that business startups have to face.
There are myriad reasons that contribute to low success rates. One of them is ignoring to set up proper business standards.
Let’s explore more about it together.
Reasons why startups and small businesses fail
Many reasons contribute to why startups and small businesses fail. Such include:
- Lack of enough financial resources
- Insufficient market demand for the goods and services
- Having the wrong team on board
- Inability to keep up with the competition
- Improper management practices
As an entrepreneur, you may have had to deal with some of the issues above. Our article will explore how to go about setting up business standards to better manage these potential developments.
In coming up with the guidelines, we got advice from a startup marketing agency and other experts. Since they have experience in handling start-ups, they know what you should watch out for.
What are business management standards?
Company standards refer to a set of values, performance benchmarks, and beliefs. All of these components make up the character of the business. Look at it much like you would the personality of a person. They are a significant determinant of how other people view or form an opinion about your brand.
Management standards are a critical component of running a business. It determines the level of trust and credibility amongst different stakeholders. Such include customers, employees, suppliers, and the public at large. They are also business guidelines that determine every process you make in the company.
Management standards cover a wide area. You look at performance, quality standards, safety, and testing, to name a few. The entrepreneur must come up with a set of rules that everyone must follow.
There are two facets to setting up business management standards.
The first is how you, as an individual, want to run your company. It is voluntary but goes towards establishing greater confidence amongst customers. Deciding to use local ingredients in a restaurant is a personal decision. The law cannot come after you if you decide to source your ingredients elsewhere, including internationally.
The second complies with regulatory authority guidelines. If you are in the medical field, it is a rule that practitioners have the relevant certification. It is a regulatory requirement, and breaching such can result in legal repercussions.
Why create business management standards?
Before we dive into the steps, let’s look at the reasons why you need business management standards.
Better return on investment
You set up a company with the aim of getting ROI. With proper standards in place, companies can expect higher conversions. This leads to better financial stability.
Management has better control over the business processes. There is higher efficiency resulting in higher productivity. The company can lessen the waste of resources due to poor management and you get to avoid mistakes that cost you a lot.
Furthermore, startups can manage their growth better when they have clear growth plans.
Business management standards emphasize a clear definition of processes and ownership. Everyone understands their responsibilities and how it contributes to the company’s overall productivity.
The company implements proper monitoring of action. There is proper documentation, and management keeps everyone up-to-date.
Continuous improvement, analysis, and risk management are critical. Further, management implements performance measures on specific benchmarks. It provides a chance to correct areas of weakness that could end up running down the business.
Companies that have business standards are also early adopters of technology. Industries always review and update the latest innovations and developments. Access to such will improve the workflow within the company.
Higher quality products and better customer satisfaction
Quality management systems ensure higher quality products reach the market. Entrepreneurs put in place stringent measures to ensure this. It allows embedding a culture of quality and excellence amongst staff members.
A business can differentiate itself from competitors with product quality. Furthermore, the company ensures higher customer satisfaction. By always meeting their needs, you build confidence and credibility. With happy customers, the company will see a boost in sales and profit.
Positive stakeholder perception
Business management standards determine how people view your company. Who would not want to transact with a company that has effective systems in place? With high-quality products, you will have customers flocking to you.
Happy employees equal high-quality work. High-quality work equals top-notch customer experience. Commitment to providing the best service builds trust and credibility with third parties. This in turn builds positive perceptions amongst different stakeholders.
Greater employee satisfaction
Lack of job satisfaction may arise when systems are not in place. Startups sometimes deal with high turnover as they work to establish the company. It is important to have business management standards to help with employee management.
When everyone understands their roles and responsibilities, it helps with better productivity. Incentives and recognition for good performance can be powerful motivators.
A company should prioritize the welfare of its employees. It results in a happier work environment and better morale.
Compliance with regulatory laws
As we stated above, standards help companies comply with regulatory requirements. As a startup, the last thing you want is to break laws. Customers, suppliers, and other stakeholders will be more confident dealing with your company.
Steps to set up business management standards
Let’s look at what goes into setting up business management standards.
1. Define your company values
Start by defining your company mission, vision, and objectives. The questions you need to answer include:
- The reason for your existence
- What kind of behavior you want within the organization
- Understanding of rules and regulations
- A clear path to success, including timelines and techniques
- Priority areas for the short-term and long-term
Make sure everyone in the organization knows the answers to the above. Knowing them provides direction and purpose. Think of it as a road map to the company’s existence.
2. Create clear management standards
Management standards are a set of expectations for those in a managerial position. Consistency and quality are only possible with accountability.
The lower-level staff looks up to the managers. Yet, sometimes managers get away with a lot. They hide behind authority and feel they are not accountable to anyone. Every manager should have the same set of rules apply to them.
It becomes easier to see the performance when you have such standards.
3. Provide the right leadership
How can you lead a team to success if you’re not a good leader? Employees mirror everything you do, and that is why you must adhere to the cliché term; lead from the front.
The reality is, not every entrepreneur can make a good boss. You might have great business acumen but cannot provide leadership. Take advantage of training opportunities on leadership and team management.
It also helps to surround yourself with the right management team. They can take over some of the responsibilities. Remember not to spread yourself too thin. Find a team that you can trust to take over other tasks on your behalf.
4. Instill company values values in staff members
Staff members are brand ambassadors. How they speak about your business has the potential to make or break it. Start by hiring the right people for your business. Now may not be the best time to allow nepotism to take root in your business.
Provide the necessary support and training to allow them to do their jobs better. Put into place reward systems; after all, who doesn’t like recognition for a job well done?
Remember, all employees must buy into the value system. If not, they will only be around for their paycheck without caring about the company vision. Engaged workers will adhere to the rules. Also, it is a boost on productivity when everyone is pulling in the same direction.
5. Keep the lines of communication open
Achieving business growth means you must learn to communicate effectively. Consistent communication of values and goals is critical. As the owner of the business, it helps to lead by example.
You must be at the forefront of encouraging interaction and open feedback. You may know organizations where junior employees do not interact with management. The hierarchical system rules. Those at the top see themselves as separate from those at lower levels.
You don’t want an environment where employees feel that they cannot talk to the management. They could very well be the source of fantastic ideas that can grow the business. They are also the best source of information on what other people are saying. After all, they communicate more with customers than you do.
6. Pay attention to team dynamics
The work environment may bring different people together. You get a clash of personalities and interests. If you do not handle this well, it could lead to dysfunction within the company.
Take the time to understand each team member. It is not possible to avoid conflict altogether. But there are peaceful ways to handle these situations. Encourage open communication without fear of negative repercussions.
In extreme cases, get a mediator to step in when necessary.
7. Delegate and balance your priorities
As a startup, it only makes sense that you want to know how everything is running. You spread yourself thin by trying to be everywhere. But, this can only go on for so long.
Micromanagement and the inability to delegate can herald doom for your business. We go back to the original point of hiring the right people. Next, spend the time looking at long-term goals for the business.
Focus on what needs your attention and only focus on those.
8. Meet with your teams regularly
It is a good idea to hold status meetings on a weekly or bi-weekly basis. It may seem a lot, but it is important to do this in the initial phases of setting up a business. Team members handling key roles should give progress reports. They must then establish the next course of action with input from the team.
It is a fantastic way to establish accountability. Everyone within the team also gets a chance to be visible. Best of all, it gives you a chance to know that processes are running well without micromanaging.
9. Establish a system of measurement standards
You could have the best policy document on business management standards. You could have even invested in getting experts to help you come up with it.
But, how do you measure performance if you do not have metrics to go by? After all, it is only possible to improve upon what you can measure.
It is important to have a benchmark to measure performance and success against. Think about it in the same way you have KPIs for staff members.
Measurement standards must be specific to each process. It may include things such as:
- Technical specifications
- Quality assurance
- Product inspection
- Financial audits
- Management audits
- Staff audits
- Customer service
- Human resource
- Staff and customer feedback, and so much more.
Each organization is unique in its processes. You will not find a one-fits-all measuring template. Come up with your own and consider it a living document. What it means is you should be able to make adjustments as time goes by.
Get rid of what is not working and improve upon what is. Remember, scalability comes with changes that you must adapt to. Defining goals and values is a critical part of growth.
A guide for your business
We have looked at how to set business management standards for your startup or small business. It is critical to have value and objectives in place, so that you can use these to guide every activity within the organization.
Invest in hiring the right people to drive the company forward. The team must embrace the values of the organization. It requires open and constant communication. You can only improve processes if you have a way of measuring performance.
Determine the critical business management areas and the relevant metrics. Finally, continue to redefine your values and goals the more your business grows.