Many businesses have trouble keeping up with their business cost. Here’s how you can make your business cost-effective.
When your marketing is delivering leads which your employees are diligently converting to sales and income, your business must be efficient so that cost is reduced and your business achieve the profitability which you and your employees work so hard for.
To embark on the process of optimizing your business operations, the first thing to do is to know the number of steps you need to get you to the finished product or provide the service to your customer/client and to document the steps.
This documentation, commonly called Standard Operating Procedure (SOP), is important for you to ensure consistency in the quality of your products or service. This means the various steps leading to the product or service must be standardized and recorded.
So the procedures for the execution of each step has to be recorded and standards set so that any employees can be trained to deliver quality products and service when needed. This does also set the template for scaling up as the consistency in operations can be duplicated.
To document your business processes, you can use any software be it a word document or an excel spreadsheet. My personal preference is for the latter.
Once documented, and each process can be tracked in real-time by those involved including those involved in it besides supervisory staff. That’s how you improve business processes, by measuring and tracking what you measure and improving on it.
When you track, you start with setting a benchmark for each and every business operational step with a simple tool to start with, an Excel spreadsheet or project management tool. Then you start to improve on your benchmark, reducing the time spent on each step and reducing the number of steps if possible until you reach a standard of almost no errors and no wastage.
Improving business efficiency must include the process of delivery for that’s when it reaches the customer. If you are providing services, project management capability with a project management tool or app can help your business processes to improve.
Historically, Six Sigma specialists rely on Excel spreadsheets with Minitab, a statistical software for data analysis. Now more comprehensive software packages are employed.
Automation is always a consideration when you aim for Business Process Improvement. Digitalization is an important step forward to improve your business processes and to cope with manpower shortages. And like all change management processes, digitalization must be wisely implemented, or your staff will show resistance to change.
There are many tools for improving business processes. The most common techniques available are Six Sigma, Lean management and Design thinking. Implementing them will help you deliver quality products/services.
For small businesses, it is recommended that you make use of Design Thinking and Lean Management techniques to both improve your product/service and to reduce errors and wastage. (A handout on both these techniques is available to help you clarify your thoughts about this)
Design Thinking is customer-centric, in all stages you will need to involve other people. Your customers will love it because they have the chance to provide input, hence it enhances customer loyalty.
Lean Management, on the other hand, is driven by data and by reducing wastage reduces cost, and hence increases revenue. It’s essential for your business health.
Wastage in Lean Management seeks to cut down on time and resources waste. Thus the time spent waiting, or getting a tool and/or resource is time wastage. Errors such as rejected products that require reworking or get discarded totally or excessive inventory are wastage.
Flow and Rhythm refer to the smooth operations of your business processes and is a mark of efficiency. These indicate that the product being worked on moving effortlessly from one station to the next without any interruption or distraction and with a minimum of rejection and errors. It’s a beautiful picture, isn’t it?
Pull or customer orientation refers to how the product meets customer needs. Customers are the priority and since customers’ needs are always changing, so products must always be upgraded to customers requirements. This means excessive inventory is also wastage.
The above ideas are common-sensical, and the same consideration and concepts also apply if you are selling services to clients. You now understand how the commitment of your employees translate to profitability because customers’ needs are met.
To deploy Six Sigma your business has to be large enough to use this statistical tool, for Sigma is a statistical concept, and is a tool not only to be more efficient but to reduce defects and errors in the production and delivery of your product/service. This will translate to customer satisfaction with what you offer them.
Six Sigma essentially measures error rates in Defects per million opportunities (DPMOs). So
- 3 sigma gives you 66,800 DPMO,
- 4 sigma gives you 6,210 DPMO,
- 5 sigma gives you 230 DPMO, while
- 6 sigma gives you only 3.4 DPMO.
Now you know how Six Sigma got its name, and the rigorous standard of operational efficiency and accuracy which it requires. Because the implementation of 6 sigma is so rigorous and involves every employee, the deployment of Six Sigma has to be top-down.
The leadership must be committed to it and involve all leaders at every level. In addition, enthusiastic individuals are employed as influencers to get everyone on board so that your business literally breathe the Six Sigma ideas and practice it on a daily basis.
In practice, Lean Management is often combined with Six Sigma and there are several software packages that are Lean Six Sigma. As your business grows, you would want to incorporate Lean Sigma ideas and practices gradually into your business processes.
A more elegant way to improve business processes throughout your business is to deploy an Enterprise Resources Planning (ERP) solution to your business. An ERP solution is recommended if the business is large enough to do so and you have the funds or Government subsidy to implement it.
Essentially, an ERP solution provides a software map of all your business functional activities including your operational business process and support business processes. So, an ERP system is implemented in all your business departments so that there is a single reporting system for every process in your business.
That’s how you keep your costs low, provide quality service and increase your sales at the same time encourage customer loyalty because of quality products/services.
You will learn how you can deploy these in your business when you sign up for my course on Business Process Improvement in my Business Strategies for Struggling Entrepreneurs series. Besides, you can get coaching support from me as well as you implement them.
To achieve operational excellence is not difficult but it certainly requires effort and leadership on your part to make it happen. The benefits are clear and obvious as articulated in different segments of this email.
If your marketing is giving you leads, and these are converted to sales by your capable employees, optimizing business processes in your business will certainly help you to have a thriving small business. As your business is growing, it’s time to think about growing it larger, and that is to scale.
If you like this approach to growing your business, and you like to discuss how you can implement those strategies with me, do contact me to talk about it.
