When you own a small business, there are dozens of people and projects vying for your time and attention. It can get hard to figure out where to focus your resources and easy to become overwhelmed.
Furthermore, in my years of consulting what I have found to be the difference in success or failure of a business was not the amount of money, a business owner had on hand, nor the education level of the management team. It was his or her daily habits and beliefs, that determined success or the lack there of.
What is profit? It is simply, how much money the business makes after transaction and paying taxes is over.
Traditional thinking about profit says, Revenue – Expenses = Profit. However, this method fails to measure lost opportunity.
What is lost opportunity?
First, business has people performing activities each day. The lost opportunity is in not measuring, managing and leveraging those activities on a real-time basis.
Management fact, your company profitability depends on how well your people consistently perform specific activities minimizing errors.
The following are 12 tips to help your business increase operational efficiency, reduce costs, improve customer satisfaction, and stay ahead of the competition.
1 – Living a balanced life
A. Work and business are not the be-all and end-all of your life. Learn to have fun! Spend more time with your family. Take a vacation once in a while. Engage in activities that will rejuvenate your spirit and your life. Take care of yourself, and your health, exercise and eat fruits and vegetables. Your productivity and focus will improve if you are stress-free and healthy. Bad health and divorces has destroyed more businesses than I have room to write about in this article.
2 – The Destination: Goals, Themes and Vision
A. Go find your business plans and update it. Since your business’ inception, a number of factors must have changed – from the overall business climate to your product line. Take all those changes into consideration, consider the business and economic climate, factor in your and your family’s goals, and get a clear assessment of the direction of your business. Get in touch with your business coaches, if any. What is your overall vision of your business? What are your goals 5, 10, 15, 20 years from now? What is your business theme and brand to your customers? Is it relevant to your business and memorable and fun for your customers?
B. Setting Team Expectations
1. Small business owners need to insure all managers and employees are on the ‘same page’ daily. Setting proper team expectations and accountability, is the most impactful thing you can do to insure the success of your business. Have weekly meetings with management teams to discuss accomplishments and challenges.
3 – The System: Starting your day off with motivations
A. Take a notebook (or a laptop or tablet) and jot down your thoughts and plans for the day. Whether you prefer doing this in the morning or in the evening, it is always best to take a step back, review what happened during the day (or the day before), and think of ways how you can do better. Take time to review your profit scorecard, in order to find quick hits and losses. Send out an email where you see outstanding work, done the previous day.
B. Figure out the 20% of activities that are producing 80% of desired results. Eliminate activities that are keeping you busy but not producing results, daily.
4 – Understand Customer Needs
A. Write down ideas, whether for your marketing strategies, product lines, or new projects that you want to take on. List your ideas on how to expand and energize your business. Only through innovation and continuing adoption of relevant new products and ideas can your business improve its competitiveness and profitability.
B. Take time to tap into your customer database and get in touch with your existing customers. Whether by phone, email or letter, contact your customers to greet them and remind them that your business is ready to serve them again. Get their opinions about what they think about your business (and make getting customer feedback a part of your business processes). You need to constantly look for ways to encourage repeat business. Although marketing and advertising are important to get more customers, quality, service and customer satisfaction are what keep a business successful in the long run.
5 – Understand the Profit Formula in your day to day operations
A. What are the critical success factors in your business, daily and monthly targets to meet or exceed annual profitability?
B. Develop an executive dashboard for monitoring operational progress on a daily, weekly or monthly basis.
C. Compare the employee time documentation with information gathered from your operational monitoring process. If productivity is not meeting or exceeding goals, look at employee time logs where time is not being used as effectively as possible and make adjustments to that employee’s job role. If operations are running on track with goals, consider elevating goals by small increments until you reach a point of break-even.
6 – Keep employees involved, motivated and trained
A. Good employees are hard to find; yet they are an important element in your business. It all comes down to choosing the right person and personality type for each role so that no one is doing tasks that they resent. Forget coaching weaknesses (too time consuming), focus on leveraging strengths and passions. Check to see if they are getting what they need and make them part of the team. Help them understand the importance of their role in your business and how their job impacts the business as a whole. Review your relationship with your employees and find ways to keep your relationship happy and avoid costly attrition.
B. Hiring the right leader, someone who owns the operation from start to finish.
1. The small business owner needs to hire a operations leader to own the operation from start to finish. This person should be obsessed with the details, the metrics, and the numbers. They should be elated to hit their goals, inspired by business coaching to do better when they miss it. They love the success of your company; it’s not a job but an adventure to them.
7 – Keep an eye on new opportunities, markets and products
A. Start the year by exploring new markets for your business. Whether you are looking at targeting a new demographic or getting your business up on the web, take time to plan how you can expand your existing market. Look for ways to improve your marketing, whether by winning easy publicity, arranging an open house or preparing direct mails.
8 – Find Ways to Operate efficiently with lower cost
A. Motivate employees with production goals and ask employees and managers what they need to improve workplace operations. If suggestions seem practical and are within budget, consider implementing them. Example, only scheduling 30 minute meetings unless subject requires extra attention.
B. Documenting your Processes
1. Document the workflow of every operation within the business, with policy and procedures and special customer instructions. Yes, this is a time-consuming, tedious, boring exercise, initially. However, if you are able to provide clear and concise documentation to your team, it leaves very little room for things to be miscommunicated. Documentation makes it easier to onboard new employees, saves business from being reliant on any one person and allows the business to continuously improve and innovate operations, without having to waste months and money, researching and gathering workflow procedures from inexperience contract workers. Documenting helps to avoid ‘lost opportunity’ of being slow to change operations in the marketplace.
9 – Use Process Improvement initiatives to your competitive advantage
Six Sigma methodologies is a tool that can be utilized to improve process, people and profits. By establishing performance measures for key processes, asking the following questions.
• What is the purpose of the key process?
• What is the expected deliverable?
• How will the process owner know if there process has succeeded?
Six sigma benefits for small businesses are
1. Provides a road map and tools to determine root causes and solve problems
2. Reliable facts for decision making, improved metrics and measurements
3. Improvement in order accuracies and on time delivery
4. Improvement in labor efficiencies enterprise wide
5. Increased customer confidence and profitability (customer buy more better quality)
As a business owner, it is vital that you understand how ‘technology’ helps me to make more money by eliminating errors, overhead expenses and attracting more customers.
Invest in new technology that will help streamline operations and improve productivity, after processes have been documented. This could include new computers or equipment related to your industry or designing more efficient work stations and telephone systems. Provide training for new hires to ensure they are aware of how to effectively perform the functions of their job. If seasoned employees are underperforming, send them for training refresher courses.
Documenting processes, installing six sigma and implementing technology improves the customer experience with your business, making your profit planning measurements more transparent to employees throughout the enterprise.
Implementing an employee recognition system and recommendation process, continuously improves operations aligning performance with corporate vision, mission, performance measurements and corporate profit scorecard. Quality improves your customer emotional attachment to your business. Loyal customers are repeat customers which will recruit others to your business, increasing profits.
10 – Identify and Resolve Weak Spots in the System
A. Take stock of all aspects of your business operation and list down the areas that you want to improve. If your list of delinquent receivables is longer than Santa’s list, find out how you can improve your billing and collection process. Perhaps you need to improve your record keeping to help flag you on delinquent accounts
11 – Keep an eye on your competition
A way to get the inside edge on your competitors is by asking your customers for help. This need not be especially difficult or complex. Simply ask your customers (in the form of a survey or follow-up call) if there’s anything a competitor does (or sells) that they wish you did. Now, the idea isn’t that you’ll necessarily turn on a dime and honor every request that comes in.
Own a share of stock in their publicly-traded competitors. This alone entitles you to detailed financial information about the company each and every year. But what if you and your competitors aren’t public companies? The basic idea is the same: any financial data you can get your hands on is worth having. You want to know as much as possible about what their costs are, who their suppliers are and how you stack up in comparison.
If there is a trade journal or research study about your industry, now is the time to subscribe – and digest what it contains.
In addition to using your competitor’s products, you should go through and closely study their sales funnel. Every successful business has a system for attracting, educating, selling and following up with customers. Whether it’s via direct mail, Internet marketing or the telephone, this is the infrastructure that actually turns their prospects into buyers. How do you know if your sales funnel is performing at max capacity if you don’t compare it to the competition?
12 – Go Play Golf: Network, Network, Network
Effective business networking is the linking together of individuals who, through trust and relationship building, become walking, talking advertisements for your business.
Join business associations to meet other business owners, you might be surprised at who will assist you towards your success or what ideas you hear that can solve your current dilemma.
Join your areas Chamber of Commerce and participate in community service events. Get involved in your community by volunteering, donating to and/or sponsor local events. It gives you the opportunity to network with other business owners and maybe cross promote with others. These monthly meetings let you know what going on economically in your area.