Most owners of services-focused businesses will find themselves at some point, either positively or negatively impacting their business, through growth and/or income generation, before they have the opportunity of achieving true financial freedom or independence; rather, they have now hit the wall of exhaustion.
At this wall, owners are inundated with appointments, constant Slack messages, and every question from every client.
Every delay from every project, and every exception from every employee eventually will, in some form, end up being addressed by the founder.
This wall or exhaustion point in an owner's journey is also where their once successful business transitions from being a profitable operation to becoming an overpaid prison.
The false promise of traditional scaling advice
When they reach this wall, many owners are told they should work harder, hire more people quickly, or "let it go", as the solutions to their operational problems.
However, simply adding more people to a fundamentally broken delivery system will not create scalability, but only create chaos through additional expenses.
When owners burn out through the process of scaling their business, in the majority of instances, this is not a result of an emotional inability to handle stress, but rather is a function of a structural failure in their operational model.
Moving beyond generic SOPs
Currently, there is a great deal of generic advice given to new and/or inexperienced founders regarding the creation of SOPs (standard operating procedures), aggressive delegation, and breaking through the bottleneck of being the owner or creator of their business.
Unfortunately, this generic advice is not detailed enough to enable founders to complete the transition away from a model of being dependent on them to be the one to get things done through an operational model.
Simply creating a collection of Google Docs will not enable founders to build a business without being dependent on them.
The actual answer is to develop a detailed and clearly defined Service Business Blueprint.
This blueprint identifies with specificity how and through whom value is delivered to clients and customers, the owner of the right to make the most critical business decisions in the business, and details what happens when a problem or error occurs in delivering service to a client or customer.
Use the service blueprint approach to successfully scale your service business
The reality of designing an operational model for scaling services.
Burnout is not the result of a person not having enough resilience personally.
The lack of documentation for each workflow results in each edge case of the workflow needing to have a custom decision made by the owner.
To break out of this burn-out cycle, operations must create functional service "blueprints" of the service delivery that meet or exceed what is essentially a check-list based workflow.
Service blueprints go beyond being simply checklists because they contain decision trees, quality assurance triggers and defined hand-off points between departments.
Therefore, they dictate how quoting, delivery, exception handling occur, independent of the founder.
In short, operational processes can only be delegated, if the operational team possesses an operationally verifiable system for running that service process.
Without an operationally verifiable system, hiring additional staff to handle operational duties only adds an additional layer of co-ordination and begins eroding any profits.
In addition, the hiring of additional staff to handle these duties does not alleviate the burn-out; it merely adds additional layers of co-ordination for the founder.
Burnout is a structural, not emotional issue
The popular misunderstanding that burnout is simply a product of long hours in the workplace is missing the underlying mechanisms of any service business.
Founders' burn-out occurs because they are the central processing unit (CPU) for all operational elements within the business.
In the early days of creating a service business, the centralization of such control is an important advantage for the business owner.
The founder's direct involvement in the delivery of services provides a high-quality service to customers, builds the early trust of customers with the business, and closes sales.
The founder knows exactly how to navigate the grey area of a service delivery in a way that keeps the customer happy.
The illusion of capacity is about what you think is happening and the reality.
If the underlying process is still undocumented and has been hugely customized, the new hire cannot work independently.
They do not have the historical and contextual background or the authority to move things forward.
Therefore, they become very expensive versions of “pigeons” carrying questions back and forth between clients and the founder.
The founder is no longer doing the work; they are now "managing" the person doing the work, "QAing" their output, and addressing all the exceptions.
As a result, the workload generated is the same, just that now it’s being coordinated endlessly rather than executed.
This is a systems issue, not a capacity issue.
The founder dependency diagnosis
A good way to diagnose founder dependency is by reviewing the friction points over the course of a normal week.
If a client requests a slight modification to the scope of work, who provides pricing?
If an internal quality standard is not met for a deliverable, who catches that before it goes to the client?
If a supplier is delayed, who will handle the negotiations for an extension?
When you consistently see the business owner as the answer to any of these questions, then you have a company that is 100% dependent on the founder.
There is no mathematical possibility of scaling a business when the only person doing work is the founder without catastrophic failures in quality or the founder experiencing total burnout.
Every unique decision that is made drains a cognitive bandwidth.
Scaling requires creating a blueprint for converting the unique, instinctive decisions into standardized, rules-based decisions that can be made by anyone on the team.
How to build an effective blueprint for your company
Many operators believe that in order to create systems, they need to open up a blank page and describe all the things they do.
Most of the time this results in a static list of tasks that no one will refer back to.
SOPs typically identify or describe what someone does, but omit detail on when they are to complete that task (timing), information on whom will be doing that task (who) and provide no guidance on how/what to do when something unexpected occurs (what if).
SOPs do not provide a clear vision of what takes place at multiple locations during the entire lifecycle of a customer engagement with that business.
Using service blueprinting methodologies creates an operational map of the service organization that graphically illustrates all the activities that are done to support client engagement along with defining where & when each activity is performed.
In short, service blueprints help you visualize the entire lifecycle of an engagement from the client's perspective (front stage) and from the service delivery team's perspective (back stage).
Understanding decision rights
When giving advice to businesses, there is one key element that is typically missing — decision rights.
An SOP tells someone in your organization how to write, format and send a monthly report.
However, an SOP doesn't tell them if they can send the report directly to the client without getting the founder's permission first.
Decision rights clarify the escalation path(s) that a person reports through with regard to approval.
For example, an account manager may have the authority to approve client changes to a project up to a certain dollar threshold or number of edits.
Once those limits have been exceeded, there is a predefined path that must be followed through the organization prior to getting the change approved.
By explicitly defining these lines of authority and their scope, the entrepreneur can eliminate the annoying flow of minor "quick questions" that interrupt and derails their focus and ultimately, create burnout within the organization.
Adding order to the delivery process
The blueprint of service delivery must include the exact order of events in the service delivery.
From the time that a lead enters your CRM, until the final invoice is paid and the offboarding has been completed, there is a series of multiple micro-transitions that occur on each client engagement.
The micro-transitions in service delivery are steps where you lose potential gross margin on each client engagement.
At the time a sale closes, there is also a micro-transition of the service delivery information from the sales department to the service delivery team.
When moving that information from one department to another, normally without extensive record-keeping, there is a high probability that service information will be lost.
As part of the ongoing conversation between the client and the delivery team, the delivery team has to re-ask questions that were previously answered during the sales process.
This process creates frustration for clients and delays project completion.
The delivery sequence mapping process creates a way to force every stage of the project to collect required information by establishing a system of mandatory information collection throughout each step.
The sales team cannot mark a deal as "closed won" until the necessary intake forms are completed.
By establishing a process that enforces standards based on documented processes, there are far fewer chances that the final product or service provided to the client will fail to meet their needs.
The process of scaling a service business and avoiding burnout
Theoretical models have no value if they cannot successfully interact with real-life clients.
A service business has some unique limitations placed upon it.
There is an ongoing variability in the demand for services.
Much of the work that is performed is performed on a made-to-order basis.
The client relationship is also tied to the brand of the founder of the company.
A system that is specifically designed to go beyond these limitations can be constructed by building an operational blueprint to meet the individual operators' needs for their specific friction points.
Operational blueprints can be used to help create a sustainable business model and remove barriers that impede a company's ability to grow.
The collapse of the agency review loop
After a creative agency establishes a method of improving lead flow, they have increased their revenues.
However, the owner of the agency is now dealing with many review loops and the backlog of work.
For every piece of copy, every design file, and every strategy that is created, the owner is the last person to approve of the final product.
As a result, the agency's employees are all waiting for the owner's approval to continue working on the next step in the creative process, while the owner has to work on weekends just to keep up with the volume of work that was waiting on approvals.
Once the owner acknowledges that an operational blueprint focused on QA triggers will solve this problem, the owner can create an intermediate level for Quality Assurance (QA) by developing a grading rubric for all deliverables.
This grading rubric should outline the specific criteria that will determine whether a particular piece of work meets the standard expected by the agency.
For example, a design can only be considered "good" if it meets specific criteria.
The Blueprint establishes a peer review step or a dedicated QA Manager to utilize these Rubrics.
After QA Review, the Founder only reviews 10% of the deliverables that were selected randomly, to make sure the system is operating properly, instead of 100% for perfection.
Quoting has historically been the major bottleneck in the trades and home service businesses.
The Owner is the only individual who knows how long a job will take or what materials will cost based on their visual inspection.
The Owner is on the job site doing the work, therefore quotes take longer to prepare and potential customers go to other companies.
To scale this business, the Pricing Model needs to remove the Intuition of the Founder from it.
The Blueprint must have a Standard Pricing Matrix established for the services rendered.
The services will be broken down into "Base Units".
Instead of estimating how long a custom installation will take; Historical Data will be used by the system to assign a Fixed Number of Labor Hours for a specific variable.
Junior Estimators can then use this matrix and All Site Specific Photos combined with Standard Intake Questions to provide Accurate Quotes without the Founder needing to visit the Job Site.
Consultants and Niche B2B Service Providers fall into the Delivery Trap due to Administrative Drag.
As the volume of Client Work increases, the Consultant spends less time Strategizing and Building Client Relationships, and spends more of his/her time Scheduling, Invoicing, and Following Up on accounts receivable and/or assets.
The Blueprint utilizes automation and establishing Boundaries for Clients and/or Prospects.
The Intake Process, including the Creation of Work Orders for Project Coordination, is completely automated through the use of CRM Workflows.
Before a Kick-Off call can be scheduled for the client, all required data must be submitted via the standardized portal.
This information will then be used for invoice generation and follow up, which is handled programmatically.
By properly structuring the information flow, the Consultant can minimize the number of hours spent following up manually on administrative tasks.
Diagnosing the failure modes of delegation
Most of the advice for those who want to scale is "delegate it."
Our analysis of the best operators shows that delegation is not the end point of failure; it begins the journey to an entirely new set of operational failures.
When the founder steps away from the process, elements of the system will inevitably become dysfunctional.
By understanding which components are subject to initial dysfunction, you can add "safety nets" to your blueprint.
Quality deterioration and margin erosion
The most frequent failure mode after delegation is quality deterioration.
When a founder hands a task to an employee but is still invested in the success of the project, the employee will tend to set lower quality standards.
If not properly monitored, this results in progressive deterioration of quality.
Eventually, clients notice this deterioration, which results in increased client churn.
Most businesses react to client churn by throwing more time and hours into the problem, requiring additional time for employees to perform re-works.
The result is the second major failure mode, which is margin erosion.
When scaling a business, the profit margins will usually be negatively impacted.
When new project managers, middle management, and software are incorporated to coordinate work, the business incurs additional overhead.
If the newly assigned team lacks efficiency and continues to experience rework loops, the business may generate double the revenue, while only producing 50% of the net profit.
When creating blueprints for the business, it is critical to measure margins at the unit level.
All services offered will be compared against actual hours versus the number of hours that were estimated for them.
Exceptions/changes and rework processes
Service Delivery isn't a linear progression.
Clients' requests can change at the last minute; new versions/updates made to the software can cause disruptions with existing integrations; the delivery chain (e.g., shipping) may stop delivery because of bad weather.
There are numerous ways to experience an operational breakdown due to a lack of an effective operational system.
When operational systems fail, all the way down to the very last process, each exception creates a scramble effect within the process.
The team halts all work until the founder directs everyone to continue.
A correct operational system includes not only defining the most commonly encountered failures in the operational process but also providing a written standard operating procedure (SOP) that must be followed in cases where a client makes an additional request beyond the agreed-upon amount or services offered.
A high-functioning operational blueprint provides a process that is used to manage this area.
For example, if a client requested an additional service or product that wasn't identified in an initial sales quote, the team doesn't have to contact the founder for permission to provide this.
They trigger a workflow called "Change Order Workflow," which will provide the client with a document (Change Order Pricing Updated) indicating what price would now be fair and accurately reflects the work completed and being performed under the original agreement.
The Change Order Workflow mitigates or eliminates the shock of the exception created by clients requesting additional work or products.
Strategic system implementation (Week by week)
Overhauling the service business cannot be done in a weekend.
When a person or organization attempts to provide an operational framework for a business, the entire team becomes overwhelmed with change, resulting in confusion while performing current service projects and responsibilities.
All attempts to put in place new processes and procedures within an organization need to occur in stages, and an assessment of the biggest bottleneck in a service business should be conducted first.
Phase 1: Audit and determine bottlenecks
Isolating where the founder's time is spent.
The first step in addressing this is to track what decisions the founder makes, what approvals he/she provides, and what client inquiries were made to the founder.
By tracking the time between these three functions for two weeks, it becomes possible to identify the primary choke point in the operational process.
In almost every case, the choke point is in one of three key areas:
- sales and estimating processes;
- Service delivery and client onboarding or
- Service delivery process and final review/approval of the service delivered.
Once the primary bottleneck(s) have been pinpointed, the next step will be to map out the current state of the bottleneck in 3 specific areas.
At present, no actions have been taken to enhance the existing systems.
The present intent is simply to get a clear understanding of the real-life circumstances.
Phase 2: Structure the outputs produced
After establishing the bottleneck, the next step will be to carry out work to describe the ideal conditions or scenario.
This is the part of the process that is referred to as blueprinting.
During this phase the team creates and agrees on the specific steps of the new system, what 'inputs' or activities are required to accomplish each step; the 'outputs' or results that are expected from the input required, and the 'decision rules' (i.e., criteria that must be applied or considered before moving from one step of the system to the next).
For instance, if the bottleneck were the onboarding process for new clients, the 'new' blueprint may consist of an automated e-mail welcoming each new client to the agency; an intake form that the client must complete prior to the kick-off call; and a script for creating a standard folder structure to store all project related documentation and materials for each new client).
In this phase, the founder will be removed entirely from the process of setting up new clients.
During this phase it is necessary to develop all the assets needed to implement the new process, namely: email templates; pipelines in the CRM system, and checklist used internally to track project progress.
Phase 3: Maximising profit and the transition between team members
Once the new system has been put in place, the next step will be to focus on improving the efficiency of the system.
Is the transition phase between team members effective?
Is information being lost after being passed from one team member to another?
Is each of the projects being completed within the estimated number of hours allocated?
This is also the testing phase for the new decision rights.
It is vital that the founder be disciplined about not jumping back in to fix minor mistakes made by employees exercising their delegated authority, i.e., if an employee makes an error while working in their designated authority the founder should create a new method for correcting the error and fixing the system that created it, not going back and doing it for them.
By completing the work for the employee, it teaches the employee to rely on the founder to do it for them.
By fixing the system, it teaches the employee to rely on the blueprint to do their job.
Creating a system for creating unique client needs
A common argument against the idea of systematically creating the process for highly personalised services is that this is not able to put a business into a box.
Creative agencies, high-end consultants, and bespoke firms in architectural fields have claimed that the nature of their work cannot be documented because it is too fluid and requires unique expert knowledge.
This is a misunderstanding of blueprints.
Blueprints do not mechanize or automate the creative and strategic work, only the external factors surrounding that work.
For example, it is impossible to create a SOP to help produce a unique, brilliant quality of strategic thinking.
But you can and must create SOPs for all due diligence processes leading up to that strategic thought, as well as the completion of the strategy presentation to a client and the process of invoicing the client, as well as how you will route feedback from the client back into the process.
By creating a structure around and systemising the various elements of the business that are routine or less than exceptional, you free up the cognitive bandwidth required for the bespoke or highly custom elements of your business.
In other words, by systemising the mundane, you create the opportunity to customise the exceptional.
Structural scaling & exit readiness
Building an operational blueprint is more than just a way of reducing the day-to-day stress of the founder of a company; it changes the way the company is valued.
If the company is heavily dependent on its founder to run the day-to-day functions of the business, the business is merely a job for the founder.
Consequently, it will be very difficult to sell the company, and if it is sold, it will be at a steep discount to the cash flow that will be generated by the company, and the founder will be trapped in the new company (most likely for a 3- to 5-year earn-out agreement).
When evaluating businesses to invest in and possibly acquire, the investors and potential buyers are looking for structure and sustainability.
They expect to see documented lead generation, predictable conversion rates, and a delivery method that does not rely on the person whose name appears on the door.
The processes that eliminate founder burnout today are the same processes that lead to increased enterprise value tomorrow.
By building decision trees, automating the process of handing projects off to the next person using a cue sheet, and putting in place a robust quality control (QA) process to stabilize profit margins, you are effectively turning your service offering into a product.
Hence, you demonstrate that the business will generate cash flow without the need for heroic efforts from any one person.
Summary
In order to scale a service-based business without burning out, it is essential to move away from the "hustle" mindset as a viable plan for business growth.
Hustle will allow a company to go from zero to its first significant revenue milestone, but after that, hustle becomes the primary barrier to company growth and profitability.
Therefore, founders need to recognize that their experience with burnout is not a failure of the founder but rather a lagging indicator of an ineffective operating structure.
The solution is not simply taking a longer vacation or purchasing a shiny new planner but rather creating a blueprinted way of doing things that forces the business to run on a system of processes, logic, and documented expectation.
If the founder is the only individual in the business capable of resolving a client’s complex issue, approving a final design, or pricing a new project accurately, the business is not scaling; the business is merely increasing in size.
Real scale occurs when the operations manual is written with ultimate detail, and when the decision rights are clearly defined, the owner has the ability to be absent from the business, and the business can continue to operate effectively.
Frequently Asked Questions (FAQs)
What is the first process to be documented by the owner?
First and foremost, document the recurring tasks that create the most friction and delays in getting paid.
In the majority of service businesses, this is either the client onboarding phase or the final invoicing and product delivery handoff.
The onboarding process stops the constant back-and-forth in collecting initial assets for the client.
Systematising the invoicing process ensures that cash flowing into your business remains uninterrupted so that growth can be achieved.
How does service blueprinting differ from basic SOPs?
Basic SOPs are generic instructions for one task, and many times they are written without consideration for other processes.
Service blueprints are a complete visualisation of the entire client journey, in chronological order.
A service blueprint connects the front-stage client experience and back-stage employee activity, along with the back-end internal support systems.
A service blueprint shows how the different SOPs work together, illustrates where the handoff points are, where the dependencies are, and where the potential fail points are in each department.
Can a highly customised service business scale?
Yes, the way to scale a highly custom service is to isolate the custom delivery elements from the standardised operational processes.
You cannot systematise the delivery of bespoke strategic thinking or unique creative output, but you can systematise approximately 90% of the surrounding processes, which can be very structured to provide continuity for your team.
Lead generation process, quoting framework, client intake and communication schedules, QA rubrics, and billing can be very well defined.
When these processes are systematised, the team's time is freed up to focus exclusively on the delivery of the customer-customised output.
What happens to margins when scaling a service-based business?
Margins compress as you scale due to quality drift and the coordination overhead to coordinate the work.
Founders are very efficient in working on a project, but the instant when they delegate this project to someone else, you incur the cost of not only the person working on the project but the cost of the software that is used to track the project, and the cost of the manager supervising the project.
If your operational blueprint is weak, then the opportunity for rework loops increases, which translates into more man-hours consumed and subsequently further erodes the profit margin associated with fixed-fee service.