Founders should set up a clear structure, strict rules, and transparent processes for their operations to create discipline and a positive environment with a strong sense of business ethics and professional conduct.
People who are thinking about becoming founders are usually surrounded by sayings along the lines of “everything begins with a great idea!” While this might be true, the real question is: what really happens after the lightbulb moment? We know that many people have great ideas, but ultimately fail to turn them into profitable business ventures. Something happens along the way that has the power to change the direction in which a newly formed startup is heading.
According to Failory, about 90% of startups fail, and 70% of those fail within the first five years. Furthermore, 2 out of 10 businesses fail within the first year of operations. These depressing numbers tell a rather interesting story: there’s no lack of good ideas, but improper operations management can drive startups into the ground.
So, while you’re waiting for the right opportunity, let’s learn how great ideas become scalable businesses. In this article, we’ll discuss how founders can set the stage for success by optimizing operations, which is a crucial yet typically overlooked aspect of startups. You’ll learn what operations are, how to manage operations, and how to set up valuable tools that streamline the operations management process.
In business, whether you make products, sell products, or provide services, the term operations refers to all activities required to create and deliver the goods or services to customers or clients. Additionally, you can think of operations as a group of activities that together describe the optimal way one startup should function. Therefore, if the operations are well-defined and properly managed, your business will perform optimally.
Now, if we take these conceptual definitions, we can conclude that, in practice, operations are functions or functional areas where people oversee and manage the performance of all or some operations processes. This still might sound abstract and confusing, but the specific definition of operations depends on the industry, size, and stage of your business.
To make things more clear, let’s categorize the main duties of operations in an early stage-tech startup and identify three elements that significantly impact these functions.
In an early-stage startup, a lot of operations responsibilities will overlap and cover multiple areas. This is okay, as it’s hard to have defined roles so early on in the game. However, it’s still important to have a clear idea of the main operational processes that could make or break an organization.
Financial operations are crucial for success. When you first start your business, money as a resource will be scarce and finite. You won’t have a steady income that you can rely on, which means that building an effective and sustainable financial operations system is a great protection against impulsive and reckless spending decisions.
Finance operations include the following responsibilities:
Setting up a system that will allow these tasks to run smoothly and efficiently should be well thought out and set up at the very beginning. This will make the work of financial operators a lot easier, allowing them to focus on creating accurate and precise reports and forecasts that attract investors and clients.
Some tools for streamlining financial operations include: employee expenses (Divvy), payroll processes (Harvest, Gusto), accounting (Sunrise).
The second big operations area concerns the management of employees. As you may realize, this overlaps partially with finance, especially when it comes to payroll duties. This is why it’s a good idea to have a person who’s responsible only for payroll (if you can afford it). It’s also recommended to invest in a scalable system for streamlining the payroll process, as this will make things simpler down the road.
However, the bulk of responsibilities within this area involve processes that would later define the HR department. So, in order for these initial activities to develop into powerful HR policies, you need to design a system for hiring new talents, but also for tracking and evaluating the performance of employees.
People operations include the following responsibilities:
We won’t stress just how important these operations are, as we’re sure you’re already aware of their impact on the success of the startup in the long run. Yet, finding the right people for the job, providing a safe environment, maintaining a productive work atmosphere, and keeping employees happy can be quite the challenge.
Make sure you don’t overlook the operational processes in this area, and build a strong recruitment and performance-management system.
Tools for streamlining people operations include: Zenefits, Hire by Google (software for G Suite), Justworks, BambooHR, TriNet, Mirro.
Operations also involve legal responsibilities and the so-called GRC (Governance, Risk Management, and Compliance) area that covers a complex set of processes, rules, and tools for managing risk, improving compliance, and reaching business goals.
While some founders might dismiss operational processes in this area thinking they can be postponed or dealt with further down the road, smart founders understand the value in setting up a clear structure, strict rules, and transparent processes. These practices usually create discipline and a positive environment with a strong sense of business ethics and professional conduct. Not only is that a good selling point to prospective investors, but it also keeps employees’ spirits high.
Legal GRC operations include the following responsibilities:
Operational processes in this area are usually the ones that get outsourced because for many of these operations, the employee must have substantial knowledge of law or even a license.
Consult with a law firm or hire a legal team (if possible) to make sure everything is running as it should be. You don’t want to face legal issues that could potentially destroy your business before it’s even properly established.
In case you’re managing your legal GRC operations in house, there are several tools that might come in handy.
Tools for streamlining legal GRC operations include: Fusion Framework System, Enablon, Riskonnect, Nasdaq BWise, StandardFusion, Navex Global RiskRate.
While technical operations are almost always assigned to professionals in their respective departments, we still wanted to go over this area because in an early-stage startup, you still must manage people and decide who’s going to take on the responsibility of designing and overseeing the productive systems aimed to reach business goals.
To be more specific and clear, depending on the type of business you have, technical operations is an umbrella term for marketing ops, sales ops, product ops, development operations (DevOps), IT operations, etc.
To make sure you have everything under control within each department, assign one person to manage day-to-day operations within that department. These people will then coordinate with operators from the other departments, and make sure that everyone’s work is complementary and that the startup is reaching its goals as a whole.
Finally, if it was hard for us to make a clear distinction between areas of operational processes before, this last category makes things even more foggy. That is, the term business operations is used online and in popular literature in a very broad sense, concerning many different activities.
Sometimes, even the whole concept of operations is interchangeably used with the term business operations. However, in our context, we'll refer to business operations as processes that harvest value from assets owned by the startup, both physical and intangible.
Unfortunately, this still might not help you much as assets can be anything from tools and products to ideas and skills. Anything that can be used and managed for advancing the company’s goals, can be considered an asset.
For these reasons, let’s give a practical example and sum up the responsibilities included under business operations:
Tools for streamlining business operations include: Trello, Slack, Freshbooks, PandaDoc, MailChimp.
Now that we’ve explored the key areas and responsibilities of operations professionals, let’s discuss the elements of operations in startups that contribute to growth.
It’s important to understand these elements because they influence how effective the operational processes are, regardless of their nature. These elements are company culture, focus, and leadership. Let’s get into the details.
The best way to explain the concept of company culture is to refer to it as the startup’s personality. If the startup was a person, what type of person would it have been? Is it a serious person with strict rules and principles, or a fun and playful friend?
It may be weird to think about your startup as a person, but is incredibly helpful for setting up a positive environment where people feel comfortable. It’s something you should try and match to your own personality and work ethic as a founder, but also something to keep in mind while hiring, so there’s no-to-little conflict between employees. It can help you avoid hiring people with very different characters, expectations, and beliefs, but if you provide a positive and tolerant environment with a very transparent way of doing things, people will follow your lead and have a high work satisfaction.
Needless to say, the culture you develop will impact day-to-day operations. Not only will it impact their effectiveness, but it will also direct the speed of execution and quality of output.
Another important element that greatly affects operations is whether the startup is people-centered or processes-centered. Another way to phrase this dichotomy is answering whether your business is data-driven, which is associated with company culture in a way.
If you want your business to be data-driven (centered on processes instead of people), you’ll have strict rules and guidelines for doing things. Furthermore, you’ll want the decision making process to rely on facts, data, and algorithms, which leaves no room for contextual cues, resulting in a low-context culture. This means that contextual cues such as body language, status, authority, and behavior have little influence over task performance.
Depending on the industry and type of business you’re running, there are both benefits and drawbacks to each of these approaches. Of course, today, data-driven businesses dominate the market because they’re less prone to mistakes. Our advice is to try and find a balance and think how different aspects of the company’s culture can be managed with a different approach. Better yet, think how you can reap the benefits of both approaches by using them both in your decision-making process.
Last but not least, leadership style is yet another element that builds on the previous two and affects the effectiveness of operations. There are many types of leadership styles, but in our context, we would like to emphasise the relationship between the leadership style, company culture, and the approach to doing things. Whether your leadership style will motivate employees and contribute to growth, instead of resulting in conflict and stagnation, depends on this relationship.
For example, people-centered businesses that rely on context for making decisions more than anything, value collectivism and depend on validation from colleagues or mentors. On the other hand, processes-centered businesses that rely on data, experience, and facts, value individualism and leaders provide less supervision and guidance.
Keep in mind that this is a very brief and simplified description of the relationship between leadership and company culture. In reality, things are much more complex and there are many layers between the two extremes. However, one thing is for sure - operations will suffer if these elements are not in harmony with each other.
Regardless of whether we are talking about sales operations, product operations, operations in the area of finance, or other, all the operational processes share characteristics that we can use to begin understanding operations management (OM).
OM is the application of business practices to ensure the highest level of efficiency possible of operations. It’s a process that aims to convert assets into products or services as efficiently as possible in order to maximize profit and reduce costs. In other words, the desired result of OM is a scalable business.
For these reasons, there are two goals of OM: efficiency and risk management. But, how do you achieve these goals? Here are some practices that might help you manage operations:
You can easily implement many of the practices mentioned in the sections above if you have the right tools. Today, founders are lucky because there are many free or affordable solutions to once major issues concerning business operations.
Knowing everything that we’ve explained so far about operations, you can easily decide in what area you can use the following tools to streamline operations and create a productive company culture.
Google Workspace (GW) is a collaboration and productivity app for businesses of all sizes. The main functionality of GW is its popular email hosting solution, but the app itself offers so much more! GW is composed of a variety of features and apps within the platform, including: Gmail, Google Calendar, Google Drive, Google Docs, Google Sheets, Google Keep, Google Chat, Google Meet, Google Forms, Google Slides, Google Sites, Endpoint Management, Google Console Admin, Cloud Search, and Vaults.
That’s a lot of Googles! We assume you’re familiar with and used some of them already. The truth is, Google Workspace offers unparalleled benefits for both personal and business use.
Everything we’ve mentioned so far can be utilized to streamline business operations, but since we’re talking about startups, we have to mention some special features that are available only in the business package:
To learn how to set up Google Workspace, watch this video by SkillsBuild Training.
Operations management won’t be complicated if you have Asana. It’s a popular management web and mobile application that helps teams to organize and track their work assignments. The aim of the platform is to simplify the management process, which is one way to make operations more efficient.
Why use Asana?
With Asana, you can:
To learn how to set up Asana, read this resourceful guide on their website that will get you up and running in no time.
Slack is a business communication platform that aims to replace emailing as a means of communication within a company because it’s claimed to be faster, better organized, and more secure.
You can try and use Slack for free, or choose a business plan that better fits your needs. With Slack, you’ll get:
This collaboration hub can improve the communication between colleagues and significantly increase the efficiency of everyday work. Some people say the tool behaves almost like a social media app solely for the company. Features such as highlighting items or drawing while communicating further helps facilitate online interaction.
CRM stands for Customer Relationship Management, the process that administers the company’s interaction with clients or customers. In today’s world, that almost always refers to the online behavior of users when they come into contact with the company’s website, products, social media channels, or advertisements, as well as the subsequent actions that lead to a purchase. Because of the complexity of this process, there are sophisticated systems and advanced softwares that offer many powerful features for tracking, analyzing, and reporting on customer relationships.
Sophisticated systems usually result in intimidating platforms and processes that might turn off new founders. Let’s prevent that!
We won’t deny that there’s a learning cure, but setting up a CRM system doesn’t have to be a painful experience. The following seven steps can serve as a general guide:
Some of the best CRM softwares that are suitable for small businesses and are easy-to-use:
Trello is a very popular organizational tool that helps teams to create lists and visualize their workload, upcoming tasks, and progress. It’s an easy and practical solution for small businesses, but also for large enterprises.
The platform features a Kanban-style board, with many power-ups that transform a typical to-do list into a dynamic organizational board with many useful features.
Overall, Trello is a simple solution that usually proves incredibly beneficial at the beginning of the entrepreneurial journey. It allows you to keep an eye on everything, without too much fuss via automation. The biggest advantage of Trello is its almost unlimited power-ups or integrations that broaden its functionality. For instance, with power-ups you can integrate calendars, time-track apps, use Gantt charts, agile metrics, introduce card aging (highlighting tasks based on creation time or inactivity), notification systems, burndown lists, etc.
The main drawback of Trello is that many useful power-ups are created by third-parties, which might not be very reliable. Of course, you can still try them and find out how much you can trust these integrations, but for some people it might be frustrating to experiment with less-than-perfect features.
Becoming a founder is a stressful endeavor that can be very rewarding if you follow through. Hard work will put you on the road to success, but you have to pair it with useful knowledge. Considering the failure rate of startups today, you can’t afford to enter the game unprepared. Fortunately, learning opportunities are not scarce today.
For these reasons, we’ve begun this series of introductory articles for new founders that explain things very thoroughly. Last time, we dissected analytics, while today, we’ve explained operations and shared some valuable tools that can make all the difference.
But, we won’t stop here! We’ve prepared a lot of content, so make sure to subscribe to our blog to stay on top of everything. In the meantime, visit our website and check out the guides we have already published.