Business Efficiency in Small Business

Author: Stewart Clark / Date: March 14, 2016

Category: Business Performance

Improvement in efficiency has been an age old quest in business, as it has enabled either more to be achieved with less effort, or for the same amount of effort, but faster.

For many reading this article, the phone or tablet you are using provides you with a more effective use of your time – as you can read this on the run. Five years ago, you would have needed to be at a computer, 10-15 years ago you would have needed to go and buy a magazine.

Increased efficiency has a variety of potential benefits, including; reducing costs, improving capacity, mitigating risk and of course, driving greater profitability. Operational efficiency is also not just for big business, as is completely scaleable. So for the small to medium business realm, here are a handful of practical operational efficiency tips which can provide great value.

Relevant Information Flow

Quality business decisions rely on good information. Many businesses know the information that they really need, but many simply don’t have the processes or systems in place to capture it quickly and easily. Invest in good systems and/or software to capture this, as when used correctly, the benefit will outweigh the cost.

Employee Efficiency

Often 20-50% of business expense will be employee cost, so its a massive expense. However a few % points of improvement can also make a massive difference to the bottom line. Consider basic data capture to start assessing employees on performance – number of billable hours, number of sales, number of “widgets” completed per hour etc. This is not a new concept, but many of the smaller businesses have no measurement in place at all. Without the measurements, it is difficult to drive incremental improvement.

Concentrate on Travel

The time and resources spent “travelling” can be extreme, so pay attention to; 1. the amount of travel in your business,  2. the cost of travel and 3. the pattern of travel. Each of these points can yield efficiency, by either better planning (especially the case with air travel), a better method of travel (or perhaps using virtual options with no travel), or by improving the sequence or order of travel.

Remove clutter and waste

Consider your operational environment and how it is laid out. Position everything so that it is convenient to access when you need it. Consider also removing any clutter from the work area, as it will typically just get in the way or cause inefficiency. Mess and clutter breed inefficiency as they encourage items to get lost, or require additional work in moving items around.

Avail of appropriate IT

Some of the IT hardware today makes processing intuitive and highly mobile. Add some app’s/software and you are getting more done in less time. A simple example is the 3 minutes for your BAS statement if you’re using your Accounting Package correctly. Every business has some cost effective IT solutions to make things easier, so spend a few dollars and get them – you will reap the benefit.

Retain good staff

Good staff know you, your business, your customers and your product – so this is worth something. Bringing in a new person will cost you time and money for recruitment, they will take some time to learn the ropes (read – this costs you money in inefficiency) and they may end up being the wrong person. So if you have the choice of retaining a good employee, then do so – even if costs you a small pay increase.

Focus resource and activity

The simple tips here are; 1. have a plan – even a basic one is better than none at all, 2. the format/layout of the plan is far less important than the level of considered thought that goes into it, 3. a plan without action is better described as a dream – so allocate clear actions and do them, and lastly, 4. measure, monitor and manage what you do against milestones, as it is often easier to walk a hundred small steps than to tackle a large hill (break down the objective, tick off the steps as you go, improving the way you travel with each step).

In reading these 7 efficiency tips, you will realise that none of them are earth shattering and you have most likely heard them before. However, the real test is whether you are using ALL of them in your business – and if not, why not? Equally, if you are doing all of these now, stop and refresh them as best practice 1-2 years ago may not be the best practice of today.

Work hard on your operational efficiency, as success in this area results in more money being retained for every EXISTING dollar of sales that you have now. If you wish to read more on efficiency, then check out some of our prior articles, or contact us for some specific information.

Improved efficiency in your business means more money in your pocket.