Finding ways to improve the profitability of an enterprise is always on the mind of an individual that runs a small business. A good foundational business plan, a clear and succinct mission statement, and a group of dependable employees; these all contribute to the overall profitability of a small business. One of the most important ways to increase business profits is to improve and maintain the overall efficiency of the operation.
In the context of small business, â€˜efficiency' means the ability of the business to use the least amount of production resources to yield the greatest amount of products or services capable of generating income. Resources that may be used but are not considered necessary are deemed to be a waste and ultimately result in a profit reduction.
Assessing and measuring business efficiency
The first step that any small business owner or company manager must take to begin improving efficiency is to evaluate the various processes of the business and to measure their individual efficiency. Once this information is all collated, activities and elements that hinder the business' profitability can be modified, reduced or eliminated completely.
The simple equation for measuring business efficiency is to take the inputs of a particular process and divide that by the output of the same process. Input includes energy, materials, money and time; finished products or completed services are usually the output.
Every aspect of a small business can be measured for efficiency, but it is best to focus on the areas of the business where low efficiency is the most obvious or suspected.
Options for improving small business efficiency
There are a variety of different options that business owners can use to help improve how their business runs and to make it more efficient and profitable in the short and long term.
Freeing up time and resources within the business always helps to improve the efficiency and profitability. Outsourcing select business functions can help save money and free up valuable time for dedication to the business' main function, producing high-quality products and services. Many agencies are available that will operate HR departments, handle the bookkeeping and accounting, and see to it that taxes and other regulatory issues are properly handled and maintained. An umbrella company is an example of this type of agency; it oversees certain business functions for a variety of businesses, allowing them to focus time, employees and other resources on the business itself.
Today, the business world is fueled by technology; it powers it, shapes it, and spurs its growth. Small businesses in particular can greatly improve their efficiency and productivity by exploring the technological advancements and advantages available. One of the most innovative and useful applications is the Cloud. Using the Cloud, a small business can store valuable business information such as bookkeeping records and word processing files on web-based systems. This allows for a significant reduction in time and money spent on the maintenance of in-house servers and network systems.
Another area worth assessing is that of suppliers. Having reliable suppliers is important, but relying on certain suppliers exclusively means that over time they may look to increase their prices, knowing that the business relies on them. Suppliers should be reviewed regularly and a small business owner or manager should always be on the lookout for new competitive sources.
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