Dissecting Your Business Units From 0 to 5M Part 3: Operations

Our previous articles in this series discussed sales, marketing, and delivery functions. A fast-growing tech services business is about balancing your deal flow with your execution capacity. At the heart of this balance is your war chest. We crtedited sales and marketing for getting the customers. Delivery for meeting customer needs. Operations supports both of them by ensuring they have what they need to be effective.

In general, building better operations practices earlier is better. There are two risks: Creating processes that are too expensive and take too long to implement. With this guidance in mind, feel free to operationalize a part of your business faster than the recommendations in this article. As long as you remember to keep an eye on cost and make sure today's needs are met rather than pursuing future perfection.

What Is Operations?

Operations is responsible for everything except sales, marketing, and delivery in a tech services company. Operations generally includes finance, legal, accounting, taxes, compliance, insurance, and other functions not associated with Cost Of Sales (COS) or Cost Of Goods Sold (COGS). While HR functions are a part of operations, the topic will be in its dedicated article to discuss it properly.

0 - 500k: Building Your Identity

At this point, you are trying to establish your identity as a company. The founders are adjusting to their new roles. Operations will often take a backseat.

Must-Haves

• Line up experts for accounting and legal. Founders often delay this, and having some go-to advisors for these business areas is better to help resolve any issues sooner.

• Get a handle on finances. Start by tracking the three primary financial statements: PnL, Balance Sheet, and CashFlow. Understand the differences between cash vs. accrual accounting. Also, Record invoices promptly in the accounting system.

• Set up business bank accounts within the first month of business before you take on any customers. Pick payment methods that give your customer a flexible and easy experience.

• Purchase the required communication, messaging, and project management tools.

• Set up a CRM. Start with a simple spreadsheet if cost is a constraint. A good CRM goes a long way toward gathering data that can become crucial for analyzing the business's sales.

• Make sure you have appropriate insurance:

  • Business Owner's Insurance

  • Professional liability

  • Cyber liability insurance

• Have customer template contracts for:

  • Mutual NDA (MNDA)

  • Master Services Agreement (MSA)

  • Statement of Work (SoW)

Should-Haves

• Either one of the co-founders takes on the role of the COO or gets support for bookkeeping and invoicing to ensure you don't fall behind.

• Start being intentional in writing down as much as possible. Create a single place of truth for any information, and use data, however rudimentary, to guide your decisions.

• Start building corporate credit by applying for business credit cards with a personal guarantee.

500k - 1.5M: Building a Strong Backbone

By this stage, you would have established a Unique Selling Proposition. Your goal is to build on that foundation and refine this specialty. At this stage, you are refining your USP and understanding your customer and their needs with practical experience.

Must-Haves

• Collect key metrics for understanding the sales pipeline.

  • Close rate

  • Time to close

  • Lead sources

• Annual targets and forecasts for current and next quarter revenue, bookings, and backlog

• Make sure you have appropriate insurance:

  • Business Owner's Insurance

  • Professional liability

  • Cyber liability insurance

  • Enterprise customers may require general liability and automobile insurance.

• Hire a BizOps manager if you don't have a COO.

• Implement a framework like OKRs for company-wide goal setting.

Should-Haves

• Consider carrying personal life insurance, umbrella insurance, and key-person insurance.

• Build automation for business processes.

• Delegate administrative work to assistants.

1.5M - 3M: Building Growth Infrastructure

With the foundation of your specialty established, you will perfect the delivery specialization, operationalize sales, and establish market channels. You are getting the pieces in place to have operationalized growth. The operations team arms the CEO with financial data and handles the growing company's needs.

Must-Haves

• The operations team may include 2 or 3 people in addition to the BizOps manager to start focusing on specific operations areas as the business needs to grow.

• Financials seamlessly integrate sales and delivery.

• Different lines of business may have revenue streams with different characteristics that need their separate accounting to get a proper view of the business.

• You need to develop the following policies:

  • IT

  • Security

  • Travel

  • Reimbursement

Should-Haves

• Initiate planning for business continuity and disaster recovery. This includes data backups, redundancy plans, and training for staff on emergency procedures.

• Dedicate developer time to build and maintain automations and integrations.

3M - 5M: Managing The Growth

You have an understanding of the elements to scale your business. You use this knowledge to build the growth engine. A complete growth engine for your company is able to drive predictable growth. The goal is to know how to inject money into your lead channels to drive purposeful growth.

Must-Haves

• Financial forecasting one year out.

• Complete modeling of finances from contacts -> nurture -> leads -> deals -> delivery. The operations team helps the other business functions manage their finances.

• Understanding bottlenecks creates a clear path for where and how to invest money for growth.

• Corporate data is well-organized and connected with automations. Everyone knows how to access data relevant to their responsibilities.

Should-Haves

• Start conversations around M&A and investment. Understand the possibilities. An acquisition or investment can take a year, so understand how to have these conversations well in advance. Talk to investment bankers, potential acquirers, and acquisition targets.

What This Means For Growth Of Your Tech Services Startup

The Operations team is a cost-center and not a revenue-generating arm of the business. But it would be a huge mistake to think of it as just a cost. Because more expensive than the cost of a well-functioning Operations team is the cost of not having one. The operations team creates the backbone that supports the complete structure of your organization. Helping you understand financial standing, manage risk, and contain processes.

This series's next and final installment will explore how talent is critical to the organization. Please subscribe and follow us on LinkedIn to catch the next installment.