5 business improvement tips.

Finding ways to improve your business is a constant for all businesses. It does not matter how small or big your business is, there is always room for improvement.

In this article we are going to explore 5 business tips that could help your Micro, Small Medium Enterprise (MSME) find improvements. Are there other areas? Yes, but today we will get started with just 5.

1. Be clear on your purpose.
2. Know your customer.
3. Price correctly.
4. Be efficient.
5. Be consistent.

1. Be clear on your purpose.
When you are not clear on your purpose it is hard for other people (customers, staff, and suppliers) to understand and help you achieve your purpose. It is also easier for you to be distracted and not give sufficient attention to your business.

There may be more than one objective as part of your purpose. All businesses should have an objective to be profitable. Without profits a business will not be sustainable and will eventually go out of business. But profit is not the sole objective, you may have personal objectives such as providing future security for you family, not working for other people, you are entrepreneurial, or your product or service can help people or the world.

To get to your business's purpose it may help to ask yourselves these questions.

• What do I want to achieve from being in business?
• Why do I want to be in this industry or sell these products or services?
• When I leave this business, what will I have hoped to achieve?

When you have your purpose, write it down. It can be as short as one sentence or take a whole page. Then show it to other people and ask them if it makes sense. Is it clear what you are trying to do with your business? When you are happy with it share it with the people who will help you achieve your purpose.

2. Know your customer.
Not everybody is your customer. Some people prefer your goods or services over your competitors. Why? Maybe they like the quality, speed of delivery, size, after sales service, your location, the look and feel, how it makes them feel and maybe many more benefits and attributes. The people who prefer your goods and services are your target market and hopefully there is enough of them for your business to make a profit.

If you know who the people in your target market are, you can develop goods and services for them and you can let them know (advertise) that you have what they want.

What do you know about the people in your target market? Are they:

• Young, old, middle age?
• Male or female?
• Of a certain religion or cultural background?
• Rich, poor, or average income?
• Married, de facto, or single?
• Young family, or no kids?
• Speak English as their 1st language?
• Living locally or elsewhere?
• Well educated?
• Travel by public transport, car, bicycle, or walk?

This list is just a guide, there may be more or less demographic attributes you would like to know about your customers.

You may also want to know how they feel about your goods or services, how they feel about the industry, what they say about your goods and services and how they use your goods or services. To find out this information, you could observe your customers or conduct a survey of your customers. Ask your suppliers if they have any information about customers. The idea is you build up a picture of what your ideal customer may be like to help you make decisions about your products and services and how you market them.

3. Price correctly.
When pricing your goods and services there are three things you should consider.

I. How much does it cost you?

You need to know how much it costs you to deliver your goods or services to ensure you do not price below this. You should consider all your costs including marketing and overheads to get a clear picture of what your price should not go below.

II. How much are competitors charging?

What competitors charge gives customers a perception of what price they should be paying. When looking at competitors pricing, consider who their target market is and what benefits the customers are paying for.

III. How much is your customer willing to pay?

This is the most important question. Is your product or service perceived as worth more or less than your competitors? Price accordingly.

Here are a few other points to consider:

• It is easier to price higher and then lower your price than to price low and then try and increase your price.
• Believe in the value of your product or service and the price you have set. Your belief will help you maintain prices.
• Increase prices by small amounts as often as you can to keep ahead of your costs going up.
• Beware of discounting to increase sales. Know how much more sales you will need, to at least make the same amount of profit. Are the extra sales possible and is the increased work worth it?

4. Be efficient.
Being efficient can be about saving time and money, giving customers a better experience, and reducing stress.

Efficiencies can generally be found in every part of your business. From purchasing, to the types of equipment, to systems and procedures, marketing, personnel, stock management, and the list goes on. Obviously, you cannot improve everything at once. Accept that and set in place a continuous improvement program where you are always looking for ways to improve.

Where do you start? Listen and look. Customer and staff complaints can often give you clues on where you may be able to improve efficiencies. Look at your financial statements and other productivity measurements you may have in the business. Walk around the business and see if there are any holdups, blockages, or unused or underutilised space or equipment. Investigate any rework and why it needs to be done.

Once you have a list of potential efficiency improvements, you then need to prioritise them in your order of importance. The ones at the top of the list are the ones you will work on first. 

For each improvement area you are going to work on, set up a plan. What is the objective and how will you measure it to know it has worked? For example, improve debtor collection from on average 50 days to 45 days within 3 months. Now, work out what activities you may need to undertake to achieve this goal. You may not know all tasks or how long they may take, that is OK, the important thing is to start. Finally, the most important part is to allocate the activities to people with a date to achieve the activity by.

Every three months you may want to revisit your list of efficiency improvements, to reflect on what you have accomplished, check if any new ones have emerged, and re-prioritise what you will do for the next quarter.

5. Be consistent.

Customers like to know that the value (quality, service, experience) will be the same every time they purchase. And, if they recommend your business to friends or family, they will get the same value. You need to ensure you do things the same way again and again. This is consistency and is generally achieved by implementing policies and procedures into your business.

In addition, policies and procedures could:

• help to embed efficiencies into your business,
• provide the basis for training new employees consistently and getting them up to speed quickly,
• free up your time by allowing you to delegate, and
• reduce rework and wastage.

Being consistent does not mean being stagnant. Customers change over time, as does technology. By continuously looking at ways to improve your business, you can make changes that maintain the value customers are receiving and improve your business at the same time.

Your business is important.
MSME’s make up a large part of the Australian economy employing approximately 7.6m people and 54.7% of the total businesses contribution to Australia’s Gross Domestic Product (GDP)^. In addition, the United Nations has called out MSME’s contribution to sustainable development and the global economy and set aside a day to raise public awareness. The importance of MSMEs cannot be underestimated and by finding ways to improve your business, it not only benefits you, but your business will continue to support Australia and the world.

There are many ways to improve a business and you may find more on the Davidson Institute website. I hope the 5 I have mentioned today have encouraged you to think about your business and how you may find some improvements.

^From “Australian Small Business and Family Enterprise Ombudsman | Small Business Counts December 2020 | Small business in the Australian Economy” paper.

This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness or the information to your own circumstances and, if necessary, seek appropriate professional advice. The taxation position described is a general statement and should only be used as a guide.  It does not constitute tax advice and is based on current tax laws and their interpretation. © Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.