Grow Your Business by Increasing Process Efficiency
In previous blogs we have examined three of the four ways you can grow your business. In this final post in the series we look at the fourth way to grow your business - increase the effectiveness of each process in your business.
This is really the last piece of the jig saw and glues the whole series together. The truth is, your business will never reach its full profit potential without efficient systems and processes. It would also be very difficult to implement the ideas we discussed in the first 3 methods unless the business is functioning smoothly. Technology can help, the right people are critical but without proper systems and processes the ‘machine’ won’t function very well. Are your processes streamlined, documented, consistent and standard?
In business, the definition of a process is ‘a series of steps and activities that transform an input into an output that is valued by the customer’. Basically your business is a series of processes including production, marketing, selling, distribution and planning. The quality of these processes really determine the quality of the outcomes. For example, increasing the number of customers will depend on the effectiveness of your marketing processes while retaining your customers will hinge on how good your customer service processes are.
To illustrate the importance of efficient processes let’s assume your business is struggling to win new customers. You might think the solution is to give your website a makeover or ramp up your marketing budget to drive more leads. However, the issue might not be the number of leads you are getting, it could be the failure to convert those leads into customers. That's a sales process that needs improvement and the solution might be to get your sales team to perform more effectively or respond to emails and telephone enquiries faster. The secret is to identify the inefficiencies and make changes, not necessarily throw more money and resources at your website, advertising or marketing.
Most owner/managers don't see their business as a series of processes. However, it’s important to examine each of your processes and identify what’s working, what’s not working and what needs working on. The rate of technological change has forced us to review our processes because there always seems to be a better, more efficient way to do things on the horizon. In the above example, you could measure and monitor the average time your staff respond to emails and phone calls plus measure the conversion rate for every member of your sales team. There may be no need to spend any money, just improve the processes so your team convert more leads to sales.
It is an ongoing challenge to improve the processes in your business but they can drive productivity and profit improvement. This might involve automating processes, improving facilities, implementing technologies or training staff. The processes also include the administrative side of your business such as the potential to use cloud based accounting software, the process of recruiting and employing staff and distribution.
The Four Ways of growing a business work best when all four cogs are working together. In fact, if you could increase each one of these four factors by just 10% the compound effect would be a staggering 46.4% increase in your revenue.
The mistake many business owners make is they focus on just the customer/sales process and ignore the other processes. For example, we find a lot of businesses are focused on winning new customers and almost ignore their existing customers who should be targeted to come back, buy more often and increase their average sale value.
A report prepared for the Australian Communications and Media Authority (ACMA) in connection with the public inquiry “Reconnecting the Customer” suggests business owners should address customer retention strategies before acquisition strategies because:
- Increasing customer retention by only 2% has the same effect on profits as cutting costs by 10%
- Reducing customer defection rates by 5% can increase profits by as much as 125% and
- It costs 5 to 7 times as much to acquire as retain customer
If you’re looking to grow your business talk to us today.