3 Ways to Making Running Your Business Easier
The basic idea behind any business is to purchase, process, or develop a product or service at a specific cost, and then sell the product or service at a higher price than the original cost, thus making a profit. But it’s never that simple in practice.
There’s only so much a company can do to manage the cost of its product or service until the process becomes unprofitable. Therefore, to improve the final price, businesses can try to improve processes and lower expenses, and pass on the savings to the end customer. Managing these operations is often a complex process, but there are ways to make running a business easier and more efficient.
Stick to your core competencies
A major success during the life of the company can sometimes give the owners a sense of invincibility which makes them look into expansion, while ignoring what made the company successful in the first place. This is not to say that businesses should not seek growth. The problem is when a company grows in ways that do not align with its core competencies.
For example, back in 2011, Walmart experienced a financial crisis when the publicly traded company kept missing earnings estimates. When experts examined the sales slump, the problem was traced back to earlier decisions that the company made when trying to chase growth. Instead of focusing on what made Walmart successful, the company opted to invest in trendy clothing lines and organic foods. These investments did not align with Walmart’s core competencies and the company began losing their identity, and earnings took a hit soon after. To run a business efficiently, focus on what you do well and look toward improving those activities.
Eliminate the fat
In business, “eliminating fat” means cutting down on any excess spending which increases costs and reduces profitability. To maximize profit, the operational expenses and direct costs of the business activities should be as low as possible. Companies can accomplish this by implementing technology to automate certain process or sometimes by outsourcing certain services that aren’t central to the organization.
In the realm of small businesses, this can increase efficiency while reducing costs. A company may want to hire an accountant to manage payroll or payables, but if the company is small, the salary costs may far outweigh the need. Online organizations can look toward ecommerce accounting firms to handle the company’s books or hire a payment outsourcing company and reduce the investment in payroll to fulfill those needs.
Measure and improve
The management guru Peter Drucker once said “you can’t manage what you can’t measure.” The reason that measurement is important in business is because the process sets a baseline. Therefore, managers can compare the results from any modifications in the business process to determine if there was a significant effect. Leaders and executives need to identify or develop measurements, which allow anyone analyzing a process or an event to determine a mathematical distance between an original observation and how it eventually looks after implementing a change.
Without the baseline and measure of change, there is no way of determining whether the change worked. Measuring allows managers to create efficiencies that can be proven, reduce process costs, increase productivity, and identify best practices, among others, thus creating a way to run a business more efficiently.
