Getting the best out of your business
The key to productivity isn’t about cutting costs, it’s about seeking out every possible opportunity for improvement. So how can you get the best out of your business?
Lesson One: Improving productivity isn’t about cutting costs. The first thing many business owners do when faced with a productivity crisis is to look at the budget and get out the red pen without fully considering the ramifications of what they are about to do.
The difference can be compared to a crash diet versus a lifestyle change. How many diets work in the longterm? They are usually quite drastic; you cut loads of calories until you reach the number on the scales you were aiming for, then you go back to doing everything normally and the weight comes back. A lifestyle overhaul is much harder to achieve because it involves a multitude of smaller and yet more sustainable processes and an ongoing commitment. A successful outcome is much more likely if you take a gradual, holistic approach.
In a perfect world, productivity wouldn’t be an issue because every start-up would have an accurate, well-researched and comprehensive business model that takes into consideration the worst case scenario across everything from taxation management to getting an order so large that you need to hire people to fulfill it. Paranoia is an asset in this exercise.
Case in point: password security. A company gave its CEO the admin password to the server. When he was stood down, he proceeded to log in to the system and delete everything. Lucky for the company, he was caught out and stopped in the nick of time. The 00.1 percent risk that something like this could happen almost cost the business 100 percent of its operations.
Percentages are critical to building core productivity competency and the easiest way to apply this is to think like a really big business. Most businesses run at a ten percent profitability margin, meaning if you improve your productivity by 00.1 percent on a profitability margin of $100,000 you make $101,000. Multiply that by 100 and suddenly you’re talking about a profit increase of $100,000 instead of $1,000.
The difference between competitors is often something as miniscule as 00.1 percent and that’s what makes all the difference between being number one and being one of the others. Furthermore, that 00.1 percent is not that hard to find but many business owners disregard it because it seems inconsequential.
Imagine you’re standing at the checkout and you are offered a 5c discount. Most people wouldn’t bother. But what if you were offered this discount every time you went shopping? That 5c would make a huge amount of difference over a lifespan of transactions.
Still not convinced that small percentages make a big difference? Consider this; there is a four percent difference between a human’s brain and a monkey’s brain.
Based on this concept of small percentages, it follows that a lot of productivity gains are not going to jump out at you. It requires analytical thinking to identify where those small margins for improvement are. If analysis isn’t your strength, hire an expert. This is one of the basic foundations of true productivity. You are much better off spending $1,000 on a consultant who will get it right than trying to do it yourself and realising down the track that your business model is full of holes; holes that money is falling out of.