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AA 012: Should startups bake processes into their company early on?

Welcome to the eleventh podcast of the Ask Alex show! Today the question is “Should startups bake processes into their company early on?

In this podcast, we get into the details of startup processes:

  • What you should build processes for when you pitch deckstartup
  • The test to know when you should build a process
  • How you should think about building processes
  • Building processes as you are growing
  • Areas that can really make your life hell if you don’t deal with them

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Transcript if you prefer to read

Hey, 50 Folders! Welcome to Episode 12 of the Ask Alex podcast with me Alexander Jarvis. Today we got an interesting question from Alex in Switzerland. Alex asks “Should startups bake processes into their company early on?” Okay, processes are important, but only when they are important.

What are processes for? Processes are made to get things that are done often, done faster. See how many times I said done there? There is a simple test for this.

Are things taking too much time?

Are you doing the same thing more than 3 times?

Is there a critical risk if a potential process is not followed?

You cannot scale without processes and systems. So as soon as you need to do something 3 times, you should automate it or prosify it. The same fundamentally applies to coding. Now, let’s look at this at the early stage. At an early stage you don’t really need processes you just need to get shit done. Processes can get in the way of that where they are not needed. No one wants bureaucracy, right?

By then by the simple means of doing you learn that there is actually a need for process. What a waste of time to build something complex when it is not needed, right? How many accountants do you know set up companies, right? Fuck that.

What do you absolutely need processes for at the start?

Staff.

Yes, you need a ‘process’ to ensure staff get paid when they expect to be. But that’s common sense. They will definitely get super pissy and not trust you if you don’t pay the once on time. So, always pay your staff on time unless you communicate that you might be running low on funds and it’s their option to decide what they wanna do.

Secondly, expenses. I recommend right from the start you start paying attention to this things. Get something like Expensify, which I use personally or something else that makes sense for you from day one. Just get your expenses and accounting in order. If you just do a little bit every single day or as you draw them down its so much easier than trying to remember what happened.

There was a huge learning I got from the early days of Delivery Hero before we acquired Lieferheld in Germany. They didn’t do any accounting and cleaning it up was a total shit show.  So when I was interviewing the guys and asked them “Are there any huge learnings?” And you know what, taking care of your expenses was a huge one. They literally slept in a room for days fixing it up.

So “Get your accounting done right from the start.” is a piece that one of the founders of Lieferheld in Germany told me. If you are in Germany check out my buddy’s startup Book A Tiger if you are looking for a cleaner.

Now what about if you’re growing and growing fast. It doesn’t matter if you are early stage but the whole point is you’re really starting to scale now. There are a lot of things you do need to ‘process’ so do them as you go. But make the process work for the scale you are at. You don’t need enterprise systems for a 3 person company becoming a 6 person company, right? Well, maybe something like hiring but you suddenly become aware of that issue. So use common sense.

Start with implementing processes for the really mission critical things. What do I mean by that? Well, here is an example from Lazada (which got acquired by Alibaba after a round  a year of operating), it’s one of the shit show I had to deal with.

So, you’re doing do ecommerce, if your suppliers aren’t being paid then you can’t shout at the buying team to then get special discounts from their suppliers and get higher margin which the marketing team probably wants to promote, right? For some campaign and there’s always another campaign. So, supply chain management doesn’t submit the POs (Purchase Orders) with the invoices together then finance won’t pay suppliers! If buyers won’t share contact info with supply chain team, then they can’t solve issues fast! I promise you this is a real fricking issue!

We scaled to 300 people in 6 months so we needed to make processes better and faster and they were rarely were done properly for quite a while. It’s so easy to also silo departments and not have someone responsible for ensuring that the departments glue together, right?

They are not just independent entities. You need to think about your company holistically.

You need to get real about your staff. You need a nerd to do processes. They are obsessed about the details but they also know how to document and then communicate them to people so that they can understand them. It’s fairly easy for me to identify these nerds. They’re pretty detail oriented or you know they sweat the details.

But there is no point if people will not follow your processes, so make sure the best person also knows how to manipulate people in a positive way. You as the boss need to make it clear that people need to follow processes where needed and you will not get kick back if you are doing this right though. Good processes make life easy. Who doesn’t want an easy life?

Now I mentioned systems. Make sure that you are using the right systems too. The right systems can make processes easy. Podio is a good example where you can just start with. One of my former companies scaled totally just using Podio for everything; CRM, the finances, their to-do list. They were kids too but they were smart as well. So, anyone can really make this work for them if they put in the work for it too.

Don’t buy enterprise systems though. They are complicated as fuck. They also cost a bomb. Don’t waste the cash on those things until you really need to or you’re totally convinced you’re going to scale at an enterprise level.

Staff hate learning systems, so really think critically about what you pick as you definitely do not want to change your systems. Just think of simple level you go “Well guys we wanna do everything in Slack, oh actually were gonna start using things in Sana or do somethings in Skype.” I mean it’s just a total mind fuck no one wants to deal with it.

So, look. My recommendation is this; pick the obvious things like payroll and do them at the start. Figure it out the first time and then process it. Set and forget. Pay your 39 bucks a month to the right SaaS and forget about it these things, make it work. Then execute.

Hustle, hustle, hustle.

When you see bottle necks, wasted times, say “Screw this. We’re going to fix it.” Either make the process yourself or delegate it to the person to fix it. Also be careful though as not all people are good at this. So let’s say you have an issue in customer care. Maybe that person is fantastic in dealing with staff but when it comes to thinking of how to do their job more effectively they’re not necessarily the best people for it.

Don’t waste time on anything which is not going to be a good ROI as you just don’t have the resources. If you do have the resources like many startups I have done do it ahead of time if you know you’re going to scale. It will save you a lot of pain, pissed off customers, unhappy staff, etc. and also think that the least you’re thinking about the business properly and you’re a good manager. This question is not about super scaling companies so I’m not going to get into too many details about this now. But I hope that gave you some decent thoughts to think about.

Thank you so much guys. Thanks Alex for that. If you would love to be featured on the Ask Alex podcast head over to alexanderjarvis.com/AskAlex and ask your question. Thank you so much. Have a great time guys. Bye!

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