Seven strategies to make your small business more efficient

What is business efficiency?

An efficient business is a well-run business. One that strips out unnecessary spending, keeps customers happy, helps employees reach their full potential and takes advantage of time-saving technological advances.

Business efficiency is a measure of productivity relative to the resources required to achieve it.  

This might sound simple, but even at the small and medium enterprise (SME) level, achieving business efficiency requires a multi-pronged approach, covering areas such as:

• Financial efficiency: How much of your company’s revenue is eaten up by expenses, and could these be reduced?

• Operational efficiency: Are you paying as little as possible in bills and taxes?

• Process efficiency: Could greater automation save you money and time?

• Labour efficiency: Is everything in place to allow your employees to perform to the best of their ability?

Why is business efficiency important?

By maximising the efficiency of your small business, you can cut costs, improve communication both internally and externally, and boost productivity, which should result in making more money.

By not doing so, you increase the likelihood of your business falling behind competitors and running out of cash. 

So, it’s no exaggeration to say that the level of business efficiency you manage to attain can be the deciding factor in the success or failure of your small business.

How to improve business efficiency

The main aim of any drive to improve business efficiency is to increase the margin between a company’s income and outgoings. In other words, its profits. 

Six in 10 SMEs in the UK made a profit in 2022, according to the latest figures from data analyst Statista. 

Here are seven business efficiency strategies you can follow to ensure your small business is one of those making money in 2024 and beyond.

1. Plan, plan, plan

When you start a new business, it’s common practice to create a business plan, or a formal statement of your business goals and how you plan to achieve them. 

But is your business plan today the same as when you started out? As companies evolve, their business plans need to evolve too.

Part of building an efficient business is to review your business plan regularly and be prepared to adapt and revise it as necessary.

By implementing an agile business model, you can cut ties to outdated ideas and respond quickly and decisively to changing circumstances or market conditions.

2. Set achievable goals

Setting yourself and your colleagues targets, such as the completion of a task by a certain date, can boost motivation, as long as the targets are realistic.

Having business goals and objectives also makes it easier to measure performance and spot where improvements could be made – especially when it comes to employees who work remotely or outside normal office hours.

3. Invest in training

Whether you’re a sole trader or you are managing several different teams, the quality of your business depends on the quality of the people working in it.

So don’t neglect professional development and training, even if you are a one-man band.

Taking a course can enhance your skills and help you develop a new take on ways to make your business more efficient. 

And if you have employees, offering them the chance to stay up to date with the latest techniques and technologies, including so-called soft skills such as teamwork and problem solving, will make them feel valued and less likely to move on. It will also improve the standard of the work they produce.

4. Prioritise good communication

Misunderstandings and delayed responses are the nemesis of business efficiency. 

To maximise productivity, it’s essential to establish and maintain open communication channels within your organisation.

Technology can help with this, especially if you work with people in different locations around the country or the world.

Collaborative tools, such as Slack and Google Workspace, facilitate real-time communication and allow teams to work together easily on projects regardless of where they are based. 

5. Look at cutting costs

Reducing expenditure is a sure-fire way to increase your profits – as long as it doesn’t have a negative impact on the quality of your products or services. 

How best to do this will depend on the nature of your business. But common examples include:

• Dropping non-essential perks, such as parties

• Cutting out any middlemen 

• Investing in time-saving technology

• Finding cheaper raw materials

6. Consider outsourcing

Sometimes it's more cost-effective to outsource certain tasks than to employ in-house staff to do them.

For example, many SMEs now save money by outsourcing office admin, such as invoicing, to off-site virtual assistants who charge by the hour.

By doing so, they can often cut back on expenses, such as office space and employee benefits, as well as only paying for the hours they need.

Outsourcing is also a great way to access specialist skills, such as social media marketing or recruitment. 

7. Increase automation

Automating repetitive tasks such as data entry is an effective way to free up your own or your colleagues’ time so you can concentrate on more productive activities.

This helps to increase job satisfaction levels, as well as slashing the time required to complete those tasks. 

The first step is to identify the processes that can be done by machines. 

Once that’s done, you can investigate what tools are available to take on that work.

To maximise efficiency, it’s also sensible to streamline your operations by converting to digital records that are easier to manage and more environmentally friendly.