5 habits to improve efficiency and profitability in your business
How is your business doing right now?
Many owners and managers would respond to this simple question by listing the many complex challenges they’re facing in today’s economic climate. Costs and interest rates are rising, while consumer demand seems to be falling. Add that to the ongoing problems around labour shortages and supply chains. The problems keep coming.
All the external challenges you face as a business owner are tough, but remember this: problems affect everyone. You are not the only one facing daunting challenges. Cast your imagination ahead to this time next year: some businesses will still be thriving, other—not so much. Which category will your business fall into?
No matter what’s happening with the economy, make sure that your business is one of the thriving ones by taking concrete actions right now.
The 5 habits of efficient and profitable businesses
Our work with hundreds of entrepreneurs every year has shown us that focusing on five good business habits can go a long way towards success. These habits work when the economy is booming and they work when the economy is slowing.
Let’s go over these good business owner habits one by one with a bit more depth.
1. Look at what is happening outside your business
To react effectively to the external forces affecting your business, turn to the classic SWOT analysis. SWOT is an acronym for strengths, weaknesses, opportunities and threats. Your strengths and weaknesses are internal to your organization, while opportunities and threats are external.
For now, let’s focus on the two external factors of opportunities and threats. Drill down into these areas and think about how your business is situated currently to deal with any opportunities or threats posed by changes in the economy. For example, you might instantly point out lower customer demand as a threat. But go deeper and ask yourself how that applies to your business specifically; are your customers really buying less, or are they just buying in a new way? We’ve seen cases where companies with low brick-and-mortar sales find a better niche online.
Opportunities—These are the circumstances that can grow your business or put you in a good strategic position to protect your margins.
Threats—These are the risks to your business or the external obstacles that you must overcome in order to flourish.
Questions evaluate your external environment
| Customer trends | Market trends | Partner trends |
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The end goal here is simple. You must figure out what your customers want and give it to them. Start by talking with your employees who deal with customers every day. What are they hearing from both new and longtime customers? In their opinion, what are your customers’ needs and pain points today and in the future? Where do they see opportunities and threats?
The more voices you hear around the table, the better you’re able to understand what is actually happening outside your walls. Make it a habit to review your SWOT with your team regularly. As things happen out in the world, your team will help you anticipate it and adjust accordingly.
2. Set your North Star
Too often, we see businesses shrug off planning for the future. Keep in mind that success is measured by more than just your end-of-year financial statements. Just keeping a business afloat isn’t enough for long-term survival; you need to take control and steer the ship.
A North Star is the gold standard for what your business is trying to achieve. Like the real North Star, it helps your team navigate by showing you where you need to go. Get into the habit of developing your business’s North Star at the beginning of your fiscal year or the calendar year.
The North Star should outline what you anticipate your company will be able to achieve for the year—whether you expect revenues to go up or down and how you will respond to market trends. This helps employees at every level make decisions. Use hard metrics and identify the key performance indicators (KPIs) that are important to hit your North Star. Don’t hesitate to put down dollar values or targets you want your team to aim for.
It helps you and your team think proactively about taking advantage of the future instead of remaining passive and only reacting to things after they have happened. You would then have a structured way of making tough decisions as you review your KPIs and see if you are on course to the North Star.
For example, let’s say your North Star is to offer the best customer experience possible to improve customer retention rates. When you see that new projects are exceeding their overtime target by 10% and that more than a quarter of deliveries are late, the North Star reminds you to be proactive. It’s time to prioritize on-time delivery over expanding your customer base.
Businesses with a clear North Star respond more quickly to the market and are more likely to focus on improving their performance to become world-class companies. These are the things your customers notice, and it makes them “stickier” to your products and services.
3. Review how your team is organized
The third habit great companies have is by reviewing and empowering their teams. In today’s economy companies need to make sure everyone is on the same page and working to the same goals—the North Star.
You will know if you have the right people in the job if every team leader has a clear objective to fulfill and are taking the lead in finding faster, better, less costly ways of doing things.
For example, if a company knows that sales growth will be a major objective next year, then someone needs to be responsible for it, and it shouldn’t be the person who is already in charge of client services or accounting.
Setting clear roles and responsibilities will let people know exactly what they need to focus on. Even for very small businesses, these roles need to be clearly defined and assigned:
- There's purchases to be done
- There’s planning to be done
- Someone needs to be responsible for client service or inventory or maintenance (the list goes on)
Beware of taking on too many things yourself. If you decide on a new objective and you assign it to yourself, then it might be time to think about hiring a new person or reorganizing your team.
A good rule of thumb is that one person can only have five to eight direct reports. We’ve seen a case where 30 people report to one operations manager. Not surprising to say it was not very effective.
Do you have a communication structure?
Part of having a functioning structure is to establish regular touchpoints at the right levels so information flows across the business.
At the manager level, your team will be focused on resolving day-to-day issues and finding efficiencies. These meetings should discuss what is going well, what isn’t going well, new innovations and progress toward your objectives.
Meanwhile, the senior leadership team needs to keep track of higher-level objectives to see if you are heading in the right direction.
Example of a clear communication structure
4. Look at your operations and processes
Processes are a series of linked activities that ultimately deliver a product or service to your customers. The 4th habit is having a mind set of continuous improvement in your company when it comes to your processes. Are you existing processes built to 1999 or are they built for 2024?
To make your business more efficient, you need to cut out the waste that is costing you valuable money. A few examples of waste are:
- Overproduction
- High inventory levels
- Idle machines or staff
- Rework
Let’s take a restaurant as an example. Before they open for dinnertime service, restaurants do prep work in the morning so the ingredients will be ready to go on the line. The restaurant owner regularly examines the kitchen and asks these questions:
- Is there a way to prepare food more efficiently?
- Can we be faster by changing the preparation method or using a machine instead of doing manual work?
- Do we need this quantity to be prepared every day?
- Are we over-preparing and throwing away food?
- Is there work we need to do twice because it isn’t well-standardized?
In your own business, a good place to start is to map out your processes with your team to get an idea of where waste occurs. Look to reduce touches or re-work while improving quality and speed.
5. Train your staff
Everything we mentioned so far only works if your employees can deliver on them. When everyone is busy with their day-to-day, it’s difficult to carve out the time for training. The 5th habit great companies have is to make time for coaching and training your employees. It has been proven over and over again that investing in people has a fast and rewarding payback for companies.
Let your employees know what is needed from them, now and in the future. If you standardize your workflow, make sure that everyone understands and follows the steps. If you set new objectives, tell them what it is and what is expected from them.
In addition, consider leadership training for your managers and yourself. Managers are often promoted because they are good workers, but that doesn’t necessarily make them good leaders.
Without the knowledge and skills necessary, they end up spending more time reacting to minor emergencies instead of actively managing and improving the company.
A good manager knows how to prioritize objectives. They can motivate and engage people to work together for a common objective. They can also hold their team members accountable for their responsibilities, while resolving conflicts in a neutral and objective manner.
Example of a manager’s daily routine
Know what’s truly important to safeguard your profits
You cannot control the market, but you can control how your business reacts to the market. By starting these 5 habits you are starting to move away from being a reactive company to a proactive company and being ready to deal with whatever is going to be coming at you in tomorrow’s economy. Aligning your team on operational efficiency and key priorities will help you stay strong when external forces act against you.
Watch our webinar Top 5 ways to boost profits in a slower economy to dive deeper into this topic. Or contact us to get personalized help to unlock your productivity and profits.