Profit More by Simplifying Your Business
The key to improving most business operations is to look for ways to simplify them. As a business grows more complex, the harder it is to manage. While profitable companies may be able to afford inefficiencies, it is unfortunate that even companies that are not growing tend to get more complicated as time goes by.
Simplification is one of those objectives that everyone can appreciate, but implementing it frequently runs into resistance. It is easier to add than to take away what is no longer useful, especially if it has been there for a long time. Some find habits hard to break, while others find it difficult to give up what is beneficial to them that is of no use to the company. There are many other potential road blocks to simplification.
Despite the mentioned difficulties, the overwhelming advantages of simplification more than compensates for the time, effort and investment to attain it. Below are just several of the profit enhancing ideas for business simplification:
Eliminate the unprofitable or borderline customers. For many companies, this is a fine way to start the simplification process. However, to do this well, you need to have an accurate accounting of data to determine who indeed the unprofitable or marginal customers are. You will usually find that many of your clients are not worth the time and effort you spend to keep their account. After this weeding-out process, you can focus more of your resources on profitable customers.
Reduce the number of suppliers. This has many benefits: First, you gain more concessions. With fewer suppliers you will be able to purchase more from your remaining suppliers. It is possible that you can negotiate better prices or terms for the additional volume that you will be procuring. There is also less paper work. Since time is money, you will be able to save cash on the lesser time you will be spending with the reduced number of suppliers. Finally, you get more consistent quality. With fewer vendors, there will be less variation in product quality.
Outsource non-core functions. Passing non-core jobs to an outside party means less people to manage and more time to focus on important functions. Also, you will be able to save money in outsourcing for many reasons. Since they are specialized and have economies of scale in their work, the outside parties are often able to do the job better and for a lesser price.
Have less and shorter meetings. Meetings are the worst time wasters. Most of them take too much time. Almost every company would benefit by reducing the frequency of meetings and shortening their length so that everyone can get back to work. To further save time, make sure that everyone is informed of the meeting agenda so that they would be prepared; and do not invite those that are not really needed.
Have established procedures and templates. Do not reinvent the wheel. If a similar problem has been solved in the past, then it should be documented and made known to personnel who may have need of the information.
Reduce the number of rules. While rules are necessary to maintain order, some of them are counterproductive. For example, I know of a famous pastry chain that has a rule that managers must be in the store during Sundays because there are more customers. However, there was a store located in a business district where there are more customers during weekdays. Still the franchisor insisted the manager be there on Sundays. It would be better to have fewer rules that are wisely written and implemented well, rather than too many rules that prevent sound discretion.
Reduce payment options. In theory the more payment options, the greater your sales will be. However, this is only if your product or service is seen as just the same as any other supplier. Otherwise, customers would not be swayed by convenience alone.
Reduce the number of products and services offered. The logic here is similar to reducing the number of customers – too many slow moving products just tie down capital, and some services cost too much to be profitable. But again, to be accurate in selecting the products/services to reduce, it would be wise to consult with your accountant to know the real costs and profitability of the product/service.
Avoid using paper, whenever possible. The more forms and other paper documents you generate, the harder it is to find the information you need when you need it. Faster retrieval of documents is easier to accomplish if there were less paper. Also, using less paper ensures immediate savings in paper and ink costs. Do not forget, too, that paper files take up a lot of valuable office space. Whenever possible keep your data in digital format instead of printing them out.
Terminate excess personnel. This is one of the most difficult things to do. However, if there is nothing else that can be done to make the employee of use to the company, it is a bitter pill that must be swallowed.
Simplifying your business operations is one of the best ways to make your company earn more. The reduced overhead and improved nimbleness enables management to allocate more time and money in pursuing more profitable projects. Furthermore, the substantial cost savings from the elimination of non-essentials add directly to improvements in the bottom line.
*Originally published by the Manila Bulletin. Written by Ruben Anlacan, Jr. (President, BusinessCoach, Inc.) All rights reserved. May not be reproduced or copied without express written permission of the copyright holders.