SOPs Are the Key to Business Success | Think Realty | A Real Estate of Mind

SOPs Are the Key to Business Success

Providing a consistent customer experience depends on having standard operating procedures in place.

Is your business set up for success? Or is it doomed for failure?

Multiple factors will decide the ultimate outcome, but one of biggest—if not the biggest—determining factors is the SOPs you have in place.

What Are SOPs?

SOPS are standard operating procedures. SOPs provide documentation, in writing, for how everything within the business is accomplished, whether it is creating a product, completing a task, or performing a service. If SOPS are written properly, someone from outside the business should be able to follow them without any help and get the same result you do.

I had no idea just how extremely critical SOPs were until I retired from corporate America in 2002 to pursue real estate investing full time.

For the previous 19 years, I was working for McDo-nald’s. I started working there as a 17-year-old teenager and was general manager of a store at 19. When I retired, I was part of the department responsible for training and overseeing all the franchisees and their management teams in the Southwest U.S.

After leaving McDonald’s, I started attending multiple real estate conferences across the country, where I met dozens of business owners who were also investing in real estate. Of course, in my conversations with them, their business ventures would come up. After learning my background, they would ask me questions to help their business.

I was shocked at the number of them who had little to no SOPs in place. I had taken them for granted and assumed every business had them. That was all I had known, experienced, and taught my entire career with McDonald’s, so I just figured that was the way it was with all businesses.

It was not.

The SOP Difference

I quickly observed the incredible difference in results between the businesses that had proper SOPs in place and those that did not.

It became clear that SOPs are the foundation of every business regardless of the industry or whether the business is product driven or service driven. Without SOPs, long-term success is not possible, in my opinion. The only exception I can imagine would be if you do everything yourself for that business, but in that case, how long will success last until you are burned out?

True long-term success begins with a solid foundation of SOPs. Creating them is the only way a business can ensure consistent results for the customer, have well‑trained internal staff, and allow the business to grow without you.

Customers depend on consistency. Between your marketing efforts and the customer’s first experience with your business, that customer has now has an expectation of your company. Whether it is a product they expect completed a certain way or a service performed in a specific manner, your customer now expects the same result each time. If you do not meet their expectation, they will stop being your customer.

How many times have you quit patronizing a business once your expectations were not met?

As we’ve established, the best way to achieve consistent results is with SOPs. Procedures for every task and function are documented precisely so the same steps are followed every single time.

Let’s use McDonald’s french fries as an example. All the potatoes are grown and harvested in exactly the same way. They are then cut, packaged, stored, and sent to the restaurants according to the exact same procedures. They are then cooked in the same type of oil, at the same temperature, for the same amount of time. Then they are salted with the same amount of salt, in the same manner, and kept for the same amount of time before they are thrown out. That is why, regardless of any McDonald’s you go to, the fries are the same.

Is your business set up the same way? Regardless of the product or the service, does each customer get the same exact result every time?

SOPs also allow staff to be easily trained while maintaining the expected result for the customer. The challenge is always hiring the right people, but once that is accomplished, it becomes quite easy for the staff to follow SOPs as the business grows. There is a reason a lot of businesses can be run by teenagers.

SOPs also allow the business owner to have a life. Too many owners burn themselves out thinking they must do everything, when all they really need to do is create documented SOPs and then hire staff to follow them. A truly successful business can be run without the owner being physically present.

Tips for Creating SOPs

Unfortunately, one of the biggest challenges with creating and documenting SOPs is that it is very time-consuming on the front end. And, quite frankly, it is not usually a strength of the entrepreneur who owns the business. They are usually great at creating a vision and making things happen on a larger scale, but generally they are not great at taking the time needed to create and document proper SOPs.

There are exceptions, but most business owners would be much better off bringing in a manager-type individual to help document the SOPs—or hire a third party to do so. If left to most entrepreneurs, the task probably won’t get done at all, or not to the extent it needs to be for true success.

It is also important for business owners to understand this process should be done early in the business. The SOPs are a foundation for the business. Too many businesses do not do this, and they grow too quickly, only to suffer the consequences eventually. Either the business crashes because it just cannot handle the volume without SOPs, or it crashes because customers get turned off when their expectations are not met because of the lack of consistency.

If you already own a business and have not created and documented all your SOPS yet, do not panic. It is never too late to get started. Just get it done.

SOPs also should never be considered 100% complete. As the business grows, SOPs need constant review and possible revisions. You should always be looking for ways to make things better and easier for everyone while maintaining that consistency for the customer.

At the end of the day if you genuinely want a long-term successful business, then SOPs are the key.

Greg Slaughter has been investing in single-family homes since 1999. He entered the industry full time in 2002 when he retired from McDonald’s Corp. after 19 years. Since then, Greg has been involved with more than 1,000 real estate transactions, doing a lot of flips and creative finance deals. He also currently self-manages his portfolio of rentals in multiple states.