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Efficiency is the key to bottom line profits in a small business.

The size of a business is not related to the bottom line of a business! There is a misconception that bigger is better and bigger means more profit.

When I first ventured into the business world my father gave me a book entitled  Small is Beautiful which was written in 1973 by E.F. Schumer. The following is an excerpt from the book:

“It is quite true that today there are more large organizations and probably also bigger organizations than ever before in history; but the number of small units is also growing and certainly not declining, and many of these small units are highly prosperous and provide society with most of the really fruitful new developments”. “When we look closely we can notice that as soon as great size has been created there is often a strenuous attempt to attain smallness within bigness.”

It wasn’t until I began my consulting practice that I realized the truth of these statements. I have worked with larger companies that were struggling to make payroll and smaller companies that were extremely profitable. In both cases, the efficiency with which the businesses were run dictated the bottom line profits.

The term efficiency has many applications. It pertains to systems for managing the internal aspects of an office, the marketing efficiency of identifying and targeting markets, the time management of the owner and staff (if applicable), the delivery system for products and services, understanding the benefits to markets of those products and services, the careful accounting and budgeting process, and the pricing of those products and services to make the company   profitable.

A small business is in a better position to monitor all the aspects of an efficient operation. A small business can design the systems in each category and then, if necessary, make rapid changes, if necessary.

It is important that the business be broken down into each of its components, then the component is systematized for efficiency. Once each component is looked at they are blended together with changes made as necessary so that each component enhances the next.

Designing the efficient business is not a short process. It requires dedication to the development of the different systems and then adhering to them as part of the business structure.

There are benefits. Once the total process is in place, necessary changes don’t take long. The owner and staff find less stress in the work, time seems to expand as does the bottom line. The additional time found in an efficient operation allows for those “fruitful new developments”.

Commit yourself now to creating goals and designing systems that will guarantee your future freedom and success.

Nick J. Petra CFP       Our only business is helping you grow your business.©

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