Tips to improve operational efficiencies in your business
No matter what industry you are in and whether you provide goods or services, focussing on operational efficiencies can help drive your costs down and the resulting margin and profit up. Maximising your operational efficiencies means that you are getting the greatest output you can from your given inputs. This means using your resources more efficiently - doing more with existing resources, as opposed to investing in more resources.
It is encouraging that a recent SME Research Report found that the number two emerging trend for owners of small to medium-sized enterprises (SMEs) is an emphasis on improving efficiency and productivity. This is because owners of SMEs are prioritising strategic business issues to try to maximise growth potential and keep their businesses healthy. In addition to improving efficiencies, the report identified de-risking the business (number one) and working smarter (number three) as the top three emerging trends for business owners.
The resources (inputs) which SMEs may target for review can include:
- human resources - their employees;
- capital resources - buildings, equipment, motor vehicles, other assets;
- energy resources - electricity, fuel; cash/money resources; and time, expertise; and
- management resources of the owner.
Each of these components should be minimised for maximum output, while still producing a quality product or service. It will depend on the industry, the outputs of the business, and the individual business as to which inputs should be the focus for improvements to operational efficiencies.
When attempting to enhance the efficiency of your operations, you must first determine where your business is at right now. This can take the form of a situational “SWOT” analysis to establish your business’s Strengths, Weaknesses, Opportunities and Threats and can look something like this:
Strengths - identify what it is that you are good at. Perhaps benchmark your operating and financial KPIs against your competitors to determine where your strengths (or weaknesses) lie.
Weaknesses - identify where your capabilities are lacking and then decide whether you need (or want) these capabilities? If yes, look at options for training yourself or your staff, or employing people with these skills; If no, consider whether you should outsource this capability, or even divest this part of your operations. The resources used in this area of operations may be utilised more efficiently elsewhere.
Opportunities - Look at how your strengths can be used to grow your business. Do you have untapped resources in your existing business? For example, employees who have the skills to scope out and implement technological advances to create operational efficiencies. Not only could this increase the competitiveness of your business, but also potentially increase motivation and reward for your existing employees.
Threats - who are your competitors? What is happening in your environment which could impact your operations?
This analysis, and the actions which come out of it, could form the basis of your business planning process. This will ensure the actions are not only documented, but that accountability is introduced into the process.
Our advisors at Hanrick Curran can assist you in undertaking a review of your operations to determine where efficiencies can be improved. The Better Business Program is a collaborative and cost effective way to determine your business SWOT and an action plan to deliver improved operational efficiencies. Please contact your usual Hanrick Curran advisor or speak with Matthew Beasley, Nathanael Lee, Angela Winton or Scott Hutton on 07 3218 3900 for assistance.
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.