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5 Ways Efficiency Drives Profits

To sustain long-term success, you need to be able to gauge the economic fluctuations in your market and ride through the times when your income might take a dip. This requires one thing--efficiency.

Your business is efficient when your processes are optimized. While you may not notice the impact of wasted resources while your profits are high, you will notice when you hit that dip. That is why it is important to do everything you can to implement efficient strategies from the inside out.

When your systems are running at top performance, you will maximize your profits in any economy. The best place to start is to find and eliminate any bottlenecks that are preventing your system from functioning at full capacity.

1. Rip off all of your band-aids. Band-aids, although useful, should never be used as a long-term solution. Unfortunately, they tend to be forgotten when they appear to work really well. Remember that a band-aid is a temporary solution; no matter how well it might remedy symptoms, it can never fix the cause. If efficiency is your goal, you need to resolve issues at the root.

2. Only use temporary solutions with a plan of action. Temporary solutions that remain in place for too long start to blend in, become familiar and overstay their welcome. For this reason, each temporary solution should be accompanied by a plan for a more permanent solution. Even if you do not know what the ultimate solution is at the moment, just documenting that you need to create one is enough to prevent it from slipping by.

No plan for a solution means wasted energy and money. When your bike has a flat tire, it is okay to pump it up before your next ride or patch it up with a temporary kit, but eventually, you will need a new tire. You are going to get tired of pumping it up and shelling out money for more patches.

3. Find your performance gaps - they are filled with money. There is always a good sum of money sitting inside of your performance gaps. Sometimes enough to significantly increase your annual profits without any extra effort in selling when you can fix them. Fixing your performance gaps could be as simple as finding more efficient ways to use existing assets like people, equipment, software and systems.

Take PinnacleART for example. This company created a risk-based reliability project to help a U.S. engine oil packaging facility increase their asset utilization, which generated a cool $12 million increase in profits.

When you are not seeing the profits you have projected, inefficient operations are almost always the cause. The more efficient you can make your systems, the more profits you will see.

4. Take an objective look at your company culture. "Company culture" is a phrase used to describe a company's virtual and office environment, its values and anything that influences the way employees interact with each other. Because people differ so much, company cultures can vary just as much as world cultures do.

Your company culture is not created by handing out an addendum to your policies and procedures manual, but through the ongoing way people work and interact with one another. In a sense, your company culture essentially creates itself. And while you probably know it is important to maintain a supportive company culture to keep your employees happy, you may not realize it heavily influences your bottom line too.

In short, when your employees are happy, they connect with each other more efficiently - that translates to more efficient solutions for your customers. A supportive company culture can be the difference between a $5 million software project that just meets the client's needs, and the same project that exceeds the client's expectations and provides features and functions that enhance the client's ability to use it effectively.

When you have a team that is known to over-deliver, you can charge premium prices for your services.

Signs of a supportive company culture

  • Trust. Everyone knows what it is like to be wary of leaving their personal belongings in the break room. In this type of environment, trust is absent. When you can generate a culture of trust among your employees, they will feel more comfortable with each other, which produces better teamwork and collaboration.
  • Enthusiastic employees with a purpose. While you can tell employees their purpose according to the job title they have been assigned, that will not necessarily guarantee they will buy into it. A company culture where employees take their roles seriously and pour their heart and soul into what they do are not only more efficient, they provide a great example to new people.
  • Staff that takes initiative. When your staff members take the initiative to work on themselves, improve their skills and add to their knowledge base without being told, it is clear they are committed to their work. This attitude tends to rub off on others as well.

5. Be willing to change what is not working. There is a direct correlation between efficiency and income. The more efficiently you run your systems, the less money you will waste. It is not difficult to increase efficiency when you are willing to look for the gaps and then implement solutions.

The key is you have to be willing to change anything about your business that is not working. The good news is no matter how attached you are to an inefficient system, you will be willing to change it once you see the potential for increased revenue.

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This article first appeared on GuruFocus .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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