How To Make Your Business More Profitable In A Four-Step Approach
While you search for how to make your business more profitable, mostly, what gets measured gets done yet, most small business owners ignore the metrics in their business. They intuitively know what to do, so they bypass the most crucial tool to help make the right decisions to keep the business thriving through.
How To Make Your Business More Profitable
It is easy to make snap decisions based on your gut while telling yourself that you can’t measure anything worthwhile in your business, this is a major mistake to think of if you want to know how to make your business more profitable.
Check Out The 4-Step Approach Below
1. Understand The Importance of tracking
There are operations of several growing businesses, one of the commons of the most successful was that time was spent to measure key performance indicators.
Those business owners didn’t take the growth of their business for granted. However, in doing same, you need to make sure you know the rate at which you business grow. You need to track everything to ensure you continued to improve your efficiency and effectiveness. This allows you to scale to give you the foundation to make major decisions. You could refer the key performance indicators or data metrics to confirm your instincts and challenge you when it’s wrong. It will also give you the ability to continuously improve without risking what you already built, nailing you to know how to make your business more profitable.
2. Plan, Do, Study and Act
One of the great leaders in quality improvement created an approach to improve businesses known as the “Deming Cycle”, and business leaders have used this in almost every aspect of business to know how to make their business more profitable since it became popular. The Deming Cycle is comprised of four parts: The first part is to plan.This is where you establish benchmark outcomes and develop the strategy for the proposed change.
The next step is to do, this is where you implement the strategy. When you do this, you would often segment out part of the process to test your ideas.
Then you study the results, you measure the outcomes from this process. You compare those to your benchmark data from the outcomes you observed following the standard process. Was there an improvement? Was there a regression? Comparing the outcomes from the old process with the results from the new process will tell you whether it made you better.
The final step is to act, this means you decide if this new process is better or worse than your old standard. If it is better, it becomes the new standard process that everyone uses. If it is worse, you revert to the old process you had been using.
3. Continuous improvement through the Deming Cycle
The four-step process allows you to constantly improve all aspects of the business. You can apply this methodology over and over again. You don’t need to worry about an idea being flawed. You shouldn’t ignore great suggestions because you are afraid to change. Instead of relying on “That’s the way we have always done it”, take feedback and see if it works or not. This is a great strategy to keep improving instead of growing stagnant in your processes. But the key is that you need to have benchmark data to know where you stand.
The Deming Cycle of Plan, Do, Study and Act works when you are focused on the metrics in your business. Without a metric-focused approach, you will try out different ideas without any real sense of whether they improved things. You need to know that if you continue to follow your process, you will get a certain range of results. When you apply a new idea, you measure the outcome to see if it is better or worse.
Instead of continuous improvement, you will change for the sake of change. You will get haphazard results and oscillate up and down. Are You Wondering What to measure first? Now that you can see the value in measuring aspects of the business, what should you measure?
Every business is different. Every department and task requires a unique approach. But almost everything can be measured.
You can measure aspects such as sales volume, revenue and time spent doing a task. You can also track cost per unit, throughput, number of errors per batch, net promoter score and expenses. When you set up key performance indicators for a business, always think about the value for the business. What does the business value? What is the value proposition? These are the starting points.
If the differentiator for the business was quality and efficiency, you would measure the accuracy of each department and how quick they are to complete a task. If the differentiator provides a low-cost alternative, then everything should go into measuring costs to reduce spending.
Once you establish some key aspects that you want to measure, you decide how you are going to measure those things.
The more you do, the more of a trend you will start to see. Trend analysis gives you a great look into where each area is headed. Is the department getting more efficient or not? Is the quality getting better or deteriorating? Studying the trends gives you that information.
4. Measurement leads to improvement
Once you start measuring something, that area begins to improve. The numbers helps to spotlight performance. People want to do a good job, so when you give them clear goals around important metrics, they shift their focus and work to reach a higher level. And those that resist, if they under-perform, can be coached up or coached out of the organization.
You will see the artifacts of your decisions in black and white. Instead of assuming every decision that you made was right, you will see how it impacts the performance of the business, good or bad.
Most small businesses run from these structures and systems to remain flexible. In either case, the optimal approach is more balanced and centered. You need to use metrics to help improve the business without letting them get in the way of progress.
If your business relies on gut decisions and observations alone, realize the power of metrics. Understand that the time spent developing the right metrics will accelerate your business growth and give you the systematic approach necessary to keep growing and improving.
Kindly Join Our WhatsApp Group For More Updates, Thank You!