5 Operational Bases Every Startup Should Have Covered If It Wants to Grow
Once a business gets up and running, it’s time to reassess where the company's operational priorities are. It’s tempting, at that point, to let "structure" remain on the back burner, when you're scrambling for growth. But having that singular factor in place early on is much more effective than backlogging it two years later, should you, for instance, need a clear picture of your financial history.
Related: The Basics of Business Structure
Having a strong operational foundation in place, in fact, is key for a business to efficiently scale and, ultimately, realize its full potential value. Follow these steps to ensure you place your own startup on a solid foundation footing:
Be sure to use accrual accounting.
Businesses typically follow one of two accounting methods: cash or accrual. Cash accounting is a straightforward measure of cash flow, where revenue is recorded only when money comes in. Accrual accounting is more complex. Entrepreneur has defined accrual accounting as:
“Accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged. The term 'accrual' refers to any individual entry recording revenue or expense in the absence of a cash transaction.”
The key part of accrual accounting is that it records economic events, including contract agreements, regardless of whether any cash has been exchanged or not.
This method leads to a more accurate valuation of your business as it grows. It means you’ll be able to plan ahead and be more flexible with your resources. On top of this, the “Internal Revenue Service requires certain businesses to use accrual accounting,” according to finance expert Cam Merritt. “Any business with sales of more than $5 million a year generally must use the accrual method.”
Adopting the accrual accounting method from day one will give your startup the greatest flexibility for growth. Eventually, you'll find it worth bringing in a qualified accountant if you lack solid accounting skills, yourself.
Have a business plan in place.
Putting together a business plan involves using all the information you can gather to formulate a winning strategy. It should identify the strengths and weaknesses of your startup, detailing how you will make the most of your opportunities while minimizing the risk.
A comprehensive business plan should include:
Market and industry analysis
Your marketing plan
These are all essential elements to a business plan because they build a picture of your startup and where you plan to be. It needs to be detailed and consider all the possible outcomes.
There are plenty of tools that can make this task easier. Bizplan has a multitude of features to guide you in crafting a winning business plan.
Give yourself up to four weeks to build a presentable business plan. It pays to take your time to consider all the factors. But the time invested will be worthwhile when you're ready to pitch your business to investors and show you are prepared for any hard questions or challenges.
Use analytics and tracking.
When it comes to web analytics, it’s hard to look past Google Analytics. It’s a powerful tool, capable of tracking anything from straightforward website visits to conversions. In today’s digital world, it’s critical to have a web presence, and Google Analytics should be an integral part of analyzing its performance and making data-driven decisions.
Here are some additional suggestions for useful tools from leading startup investor Vikas Agrawal:
Buffer: For social media analytics and management, few platforms can compete with Buffer. It allows you to monitor and optimize your output, maximizing engagement with your audience.
ClearStory Data: What separates this business intelligence platform from others is its ability to compare your startup performance with your competitors' performance, in real time. This provides nvaluable insight as you seek to grow your business.
Mint: This is an app which can integrate with your bank accounts and payment systems. It will help you stay on top of your finances and ensure you maintain a healthy cash flow.
A plethora of apps designed to automate analytics and business tracking are also available. What's important is to focus on the key performance indicators (KPIs) of your business and choose your tools accordingly.
Use document standard operating procedures (SOPs).
Using SOPs will help you refine the running of your startup. This will prove particularly useful as new team members join your business and allow them to hit the ground running.
Of course, you'll engage in experimentation with, and tweak, your processes and methods along the way. However, once you’ve settled into a routine, it’s a good idea to document those procedures at the earliest opportunity.
Ensure your documents are clear and up to date. There’s no reason for SOPs to be fixed, as that will leave no room for improvements.
SOPs further act as a vital buffer against burnout. And burnout is a real risk for any business owner -- perhaps you -- who finds it difficult to delegate jobs and tasks to other people. “The fact is,” says Peter Shankman, Faster than Normal podcast host, marketer and angel investor: “If you’re not willing to relinquish the majority of functional control over the day-to-day running of your business, you’ll spend all your time on those day-to day-tasks, and never be able to focus on actually growing your business.”
Implement a customer feedback system.
Enabling customers to provide feedback, and responding to them, is essential for any startup. There are several ways you can do this:
Minimal Viable Product (MVP): An MVP is a product with the minimal features that will make it usable for early adopters. Those adopters can then provide feedback on how the product can be improved and enhanced. It’s one of the most effective forms of product development.
Free trials: For service providers, this could be a more feasible option. Allow customers to try a limited version of your product, and encourage them to buy the full package. If they are not buying, seek their feedback and identify how you can improve.
Tools: Drift is a great way to offer customers a channel for communicating their questions and challenges directly to your business. Trello is an excellent organizational tool that puts customer requests and relevant project updates all in one place. This makes it easy to track your product development process and customer feedback.
From day one, you need to treat your startup as a serious business. Set up proper accounting processes, formulate and implement a business plan and track your performance. The easier you make it for investors to understand your startup, the more likely they'll be to invest and set you on the course for success.