By Jennifer Shelton
Do you often struggle with making ends meet in your business? I often share the story of two business partners that after two years in business were working 14 hour days and were still not profitable. The first thing we did was a break-even calculation of how many sales they needed each day to cover all of their business expenses. Eight customer transactions would keep them in business. That’s impossible, they said. We can only process three a day.
Yet, they quickly discovered that they could turn their business around by streamlining the paperwork process around each sale, by documenting steps and removing overlap. They researched and invested in technology to allow them to be more efficient.
Simply put, operations are the flow of your business service or product to the customer. If your operations are lean, efficient, and smooth, it will likely be less expensive for you to provide the final service/product to your customer.
These two business partners then realized that the paperwork process around each sale was what added value to their customers. It was their competitive advantage. So along with streamlining operations, they created a marketing message to share the value and benefit of their service to their customers justifying a price increase.
With more money in your pocket after each sale, you can have the freedom to lower your prices, which may lead to some of your competition’s customers coming to do business with you. Or you can choose to use the extra profits to invest back in your business for growth and give back more to your employees.
Here is an example of one restaurant manager who did just that. The staff worked on the operations of managing food prep as efficiently as possible. As a result, even when sales went down, profits nearly tripled. With the extra money they were able to provide dental benefits to their employees.
Another example of how tightening up operations can support marketing comes from a small chiropractor’s office that did an operations manual. Consequently, their sales increased by 50 percent. They told me that because they had systems and procedures in place they felt more confident in the office. As a result their customers had a better experience. The customers’ new confidence resulted in increased referrals leading to the growth in revenue.
Small businesses do have an advantage over corporations in the area of operations. Take a look at these recent articles for a trend in manufacturing and business models.
Tips to improve operations
1. Implement the 5S steps into your daily operations. 5S is the name of a workplace organization methodology that uses a list of five Japanese terms:
• Seiri: organization, elimination of waste
• Seiton: neatness, arrange essential things in order for quick and easy access and put them away
• Seiso: cleaning, machines and the working environment
• Seiketsu: standardization, routine cleaning and checking
• Shitsuke: discipline, constantly improve the previous four steps
2. Learn to think lean . Check this out for ideas.
3. Learn how to develop your 2011 office and operations budget.
4. Remember, documentation is important .Jennifer Shelton is the director of the Small Business Development Center in downtown Bellingham and is a regular contributor to The Bellingham Business Journal.