Poor Internal Processes: The Silent Startup Killer

Poor Internal Processes: The Silent Startup Killer

It’s typical for the handful of people in your startup to wear many hats. Grouping together similar tasks for each person to handle simplifies the workload for everyone and makes life a little more comfortable when you’re thin on human resources. These types of practices are useful and relevant when there are fewer contracts for your company to fulfill. Consolidation also feels natural when one person is overseeing areas of the business that overlap or interact with each other frequently. It becomes easier to develop synergy with other people with more opportunities for interaction.

For example, a large company’s sales division will consistently keep in touch with the financing and logistics departments to ensure there are funds for company supplies as well as the means the transport and store them. It makes intuitive sense to scale that structure down, or remove it entirely, with startup companies. Why not have one person take care of sales, financing, and logistics If your startup business has eight people employed?

Internal Processes & Operations Optimization

The problem with this ideology is it’s attempting to solve a short-term issue by sacrificing the long-term sustainability of the company. Successful companies delegate tasks and responsibilities to separate departments because it’s simply good practice. Streamlined workflows and processes boosts efficiency, sustainability, and it’s the key to long-term success. Thus, organize your early-stage startup’s internal operations wisely.

Some business owners may see these sorts of formalizations and organizational methods as an invasion of the “big business” mindset. Setting off to make your own company is a fantastic endeavor, but there are tried and true methods on how to run a business. There’s no reason to throw out the baby with the bathwater. Refining and formalizing your company’s internal processes is about creating an efficient and intuitive workflow that meshes with your goals.

Clearly defining the steps your company takes to reach a goal and making those steps efficient provides you with crucial advantages. You’ll be able to understand what’s happening regarding your business’s growth easily. You can also expand everyone’s workload without increasing their working hours. A well-oiled system will significantly reduce stress and burnout levels among everyone in the company, especially those who wear many hats. The sad truth is that many startups suffer from poorly designed internal processes, which results in stagnant growth or complete failure.

No one specific issue breaks apart every startup business. There are, however, shared challenges that nearly every startup faces at one time or another. Some companies handle these complications with few hindrances, while other startups crumble under pressure.

Improperly Tracking Financial Data

Poor bookkeeping is a significant roadblock to expanding the business, whether it takes the form of serving more clients or opening up a new store. Having a collection of organized invoices and financial records will make auditing far easier. Perhaps most importantly, you’ll gain an accurate reading on the economic life signs of your business.

The first couple of weeks or months will be the easiest part of the bookkeeping experience for your business. It’s tempting to track all of your expenses and profits in a notebook or on collections of scrap paper when you have fewer client orders to fulfill and lower infrastructure costs.

Beware this ideology.

On the surface, it doesn’t make much practical sense to use formalized profit and loss statements, crediting and debiting of accounts, and other accounting techniques early on, but you should. Getting used to proper accounting methods from the beginning is a great boon to your company.

Also, be careful not to mix investment money with true business income. Many startups receive aid from investors, but some owners believe that investment income is treated the same as business income from a bookkeeping point of view. Investments, which are in fact a type of cash flow, and company profitability aren’t the same thing even if the result they achieve is very similar.

There are important differences between how various forms of income influence your company, and this is why they’re treated like different income streams on accounting statements. Plenty of startup owners expand too quickly with their large sums of investment money and close their doors shortly afterward when the company isn’t profitable enough to sustain itself.

Clunky Onboarding Process

Every workplace has employee turnover. Some industries have higher turnover than others, but the fact is that few people are going to stay with one company their entire lives. Many Americans consistently hop between jobs, sometimes making entire career swaps.

Workers in countries like Japan treat their careers more as a lifestyle, and will stay with one company for the majority of their lives. Sometimes, a family and their offspring will dedicate themselves to a single business for generations. Even companies in those nations have structured onboarding processes in spite of their lower-than-average turnover.

Streamlining recruiting not only saves you time to focus on running your company. It improves worker retention and sets an expectation of their duties and performance right from the start. Many startup owners have little or no experience with bringing on new employees and what to look for in an ideal worker. This leads to a desperate “need people now!” situation that can drive you to hire the wrong people.

Instead, consider investing some time and money towards educating yourself about how to pick out a great employee. Alternatively, you can hire professional advisors for assistance. Make a detailed onboarding process for your company for future reference.1

Revision: Building a Future-Proof Business

All successful companies periodically reevaluate their upper leadership structure and overarching business plans. There are many unforeseen business expenses any startup owner needs to adapt to, even with the best of planning, and many of the biggest operational costs only show up further down the road. This is reason enough to adopt a flexible operational structure with the ability to revise it on the fly from the get-go.

Your revisionary work continues even after you’ve ironed out the initial kinks in your startup. As your business expands, it will need more finances devoted towards insurance coverage, administration expenses, payroll taxes, and infrastructure maintenance costs. If you’re growing the services your company offers, you may need to expand and/or redesign your current workflow procedures.

Eventually, you may discover that the company’s growth demands a brand new department to cope with the changes. If it happens, you’ll have to increase and revise the business’s leadership structure, which may involve redefining how different departments interact with each other. If you’re used to that process, it will be much less painful.

Every startup has a rough ride at the beginning, but you can make that easier by dedicating yourself to honing and perfecting internal processes. Always update and document your company goals, training materials, problem-solving methods, and the core internal processes that your business runs on in an as-needed fashion. And track everything – no matter how small it seems. You can only learn from your mistakes by knowing how every part of your business works.

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