How to Build an Effective, Self-Managing Service Business
Originally published: 06.01.20 by Kenny Chapman
Planning and strategic analysis go a long way toward entrepreneurial freedom.
In 2007, when I returned to my company after six months of exploring 27 states with my wife in our motorhome, there were a lot of questions coming my way. The most popular ones involved some version of “How did your company do while you were away for so long?”
The second most common question was from my entrepreneurial peers asking if I could help them figure out how to create similar freedom for themselves (in case you’re wondering, my company had its best year t that point).
Building a company that essentially functions at a high level of effectiveness without your full-time involvement takes some planning and strategic analysis, but when you focus on the correct elements, it can become your reality.
The journey to building an effective self-managing company starts with considering why you want to be less involved than you are right now; it’s truly different for everyone. Understanding your personal motivation will help you along every step of this journey, especially when you encounter an obstacle.
Are you driven by spending more time with your family? Are you driven by the desire to travel? Are you driven by the possibility of selling the company for top dollar? It could be a combination of those, or it could be something completely unique to your situation.
Personally, I wanted to travel and also took it as a personal challenge to see if I could build an elusive self-managing company.
After you’ve decided why you desire this type of company, it’s time to define exactly what “self-managing” means to you and build your overall vision around it. There are no right or wrong answers here; it’s up to you!
Many owners have a hard time with this, based on their own limiting beliefs and those of people around them. These limiting beliefs usually show up as excuses for why a self-managing company is absolutely impossible in their situation. I’ve heard them all. “I need to be in the business every day,” “My company isn’t the right size,” “I don’t have the right people” and on they go.
Get those excuses out of your head RIGHT NOW. You don’t need to be micromanaging. The perfect time to start is whenever you decide to start, and you can either find or develop the “right” people to support your vision.
When I left my company in the motorhome’s rearview mirror for six months in 2007, my vision was clear: I wanted the company to exceed the previous year’s profitability for that period without walking through the physical doors of the company, having only strategic coaching and reporting meetings with key managers along the way.
Did I need to help my managers through some things that came up along the way? Absolutely. My vision became reality, however, because I set the company up for success before I left.
Think about what level of independence you’re looking for your business to provide and, if it’s more comfortable, start with small steps based on your personal goals and long-term vision. If you want to spend more time with your family, maybe build your plan around leaving earlier in the day so you can attend soccer games or have time for dinner with your spouse consistently.
Once you’ve gained clarity about why you want it and what it looks like, there are four main aspects to consider as you build your business to fit that vision: people, systems, accountability and finance.
I think it’s clear that the term self-managing doesn’t mean there aren’t managers involved; it just means you don’t need to be in a full-time management position, and the business is strategically built to be a well-oiled machine.
In my company, I maintained what I referred to as a “Board of Directors” role, with two key managers who reported to me and got me involved in large decisions. I worked with both of them for months before I left regarding their roles, expectations, reporting, and strategies.
The key to putting the right management in place for this type of company is that they are already good at, or you groom them to become good at, running and managing systems.
The goal in a self-managing company is for your people to be extremely effective at running systems that have consistently created positive results for the business. These systems, in turn, have a crucial role in holding every individual in the company accountable to their actions and overall results.
When you aren’t physically at the company on a regular basis, the sense of urgency within your team members can decline. I’ve seen it happen in multiple companies, and that’s why many owners are afraid to step away.
The reality is: poor performance and low urgency happen because there aren’t effective systems, tracking, and reporting in place to hold each person accountable to results.
Holding your team members accountable is a complex topic, but when done effectively, offers you a great deal of freedom. It’s so complex because there are many aspects of holding people accountable, like the fact you can’t expect people to produce your desired results without proper tools and training.
Weaknesses, such as improper training, however, show up as patterns when there is good reporting and systematization in place. Build accountability systems around your key team players and the people you have identified who already have a sense of self-accountability.
For the purpose of breaking down the complexity, the keys to accountability are organizational structure, effective communication flow and iron-clad reporting.
The most crucial reports that exist within a self-managing company are the financial reports.
A company CANNOT be effectively self-managing without a great financial reporting system in place. I’ve seen lack of knowledge and understanding in this area tremendously hurt companies, especially when an owner attempts to step away for even a short period of time.
Strategic budgeting, tracking and reporting are essential, and too often overlooked. A budget needs to be based on historical data, include plans for growth, and adjusted according to current circumstance.
Tracking and reporting are structured to reveal strengths, weaknesses and opportunities for improvement, without being so lengthy they’re overwhelming.
The more self-managing your company becomes, the more you will enjoy your role at the company, whatever that looks like for you. You will enjoy seeing your team members more, and you’ll be able to have a more constructive perspective rather than being bogged down by daily tasks you’ve been doing out of habit or fear of letting go.
Building a self-managing company isn’t easy, but it’s definitely rewarding. For many people (especially in the trades) it’s hard to give up being the “go-to” person who has all the answers. If you started as a technician, you’re used to being the master of your technical craft. Now it’s time to master the craft of leadership and executing vision through others.
Keep in mind that people run systems, and systems need to be held accountable. When you start allowing others to take over “the way you’ve always done things,” they won’t always do it how you would — they might just do it better.
There are people who love doing the things that stress you out about the company, so let them do those things. Get over being the person with all the answers and let others shine. You can still know what’s going on through strong reporting.
You can still do things you are truly good at and love doing in the business. Simply commit to operating differently, focusing on the why behind your vision, and you will actually be surprised by the confidence you will gain in yourself and your company.
When I returned home after that incredible trip in 2007, I was so proud of myself and my team for what we had accomplished together. For years, I enjoyed traveling the world, coaching fellow contractors and maintaining my “Board of Directors” position. In 2017, I sold my company to one of the managers who helped me run the company while I was on that trip so she could execute her vision for the company and I could coach and train full time.
If your vision includes a self-managing company, go for it. Just be sure to focus on the four critical areas I mentioned, and feel free to reach out to me if you’d like advice or support.