Automating, Outsourcing, and Optimizing your Business

Business is always about competition, but in a down economy the competition is even more fierce for less customers. If you want your small business to survive the downturn, you need to reevaluate your business, and automate, outsource, and optimize everything you can.

Evaluate

What is the core of your business? The core of your business should be the most profitable part of your business. Keep in mind that I’m not talking about the most revenue generating part of the business. If you spend 90% of your time on what makes you 60% of your profit, then it’s probably not really the core of your business. The 10% of your time that makes 40% of you profits is the core of your business. What makes you the most money for the least amount of effort? Sometimes we forget that our time is money too. It may help you to assign a value to your time. If you are a service professional, this is easy for you, it’s your bill rate. If you are a merchant, this is a little harder. You’ll need to calculate your hourly rate from your revenue.

It may be hard for you to know what you spend your time on and how much money that makes you. Your first step might just be writing down what you are spending time on. I know I can go through a day sometimes and no know where the time went, but if you don’t know where you time goes, then you can’t cut out the things that aren’t profitable to your business.

This is a hard step, because often what you thought was your core business, really isn’t. Successful businesses reassess and reinvent themselves.

Once you find the core of your business, it becomes easy to streamline your business. You are probably going to find that you spend quite a bit of time on things that don’t make you any money at all. They are also probably the things that you dread doing the most. For me, accounting and bookkeeping come to mind. Unless your core business is accounting or bookkeeping, you make no money on these tasks.

Eliminate

Elimination is the most cost saving change you can make to your business. Eliminate anything that you don’t need to do. Look at the list of things you do. Ask yourself if your business really needs to do this. Ask it another way, “how would my business function if I no longer did this at all”. You will find a few things that you just don’t need to do anymore. For your business it could mean eliminating business processes that you really don’t need, but it could also mean eliminating unprofitable customers.

What if you stopped taking non-electronic forms of payment? Would you ever have to go to the bank again? How much time would that save you on a weekly basis? For most businesses this is an easy step but we don’t take it because we see that credit card companies take 2% of your money. This is a good time to look at your hourly rate you calculated in the evaluate section and see how much money you are spending by driving to the bank every week.

Are you spending more time servicing one segment of your customers than another? Realign your business towards the segment of your customers that make you the most money, and require the least effort from you. If you are an accountant, maybe this means not accepting clients less than a minimum income because your percentage is too small. Or it could mean the reverse, taking clients with less income because their finances are less complex and take up 80% less of your time. Just because you make some profit from an activity, doesn’t mean that it’s good business.

Automate

Anything that a machine or computer can do, it’s probably going to do it a whole lot cheaper than a person. Look for things you can automate. This can be as simple as setting up auto bill pay, or as complex as buying a machinery or computer systems that do the work for you. Here are some easy ones:

• Auto Bill Pay
• Automatically downloading bank and credit card statements into your accounting software
• Use software to automate your billing and receiving
• Auto responders to email
• Create a website to provide information to your customers
• Adding frequently asked questions section to your website
• Look for software targeted at your business

Outsource

For things that can’t be automated to the point a machine or computer can do it for you. You can outsource to someone down the street, a big business, a freelancer in the Philappines or India, or even your customers! Bookkeeping, payroll, and legal are things that most small business owners are pretty familiar with. Outsourcing to your customers is the cheapest form of outsourcing you can find, and ironically customer support is the easiest thing to outsource to them. Create a forum on your website that customers can use to answer other customer’s questions. Outsourcing to developing nations is all over the press because big businesses are doing it, but it’s just as easy for small businesses to outsource. We’ll show you the tools and services to use to get high quality workers at developing nation prices in our e-book. If your not cofortable outsourcing to other countries, even outsourcing to other parts of your own country can save you a ton of money. A bookkeeper in rural Mississippi is going to be a lot cheaper than a bookkeeper in Manhattan because of the disparity in cost of living.

While outsourcing non-core parts of your business is essential, it is also possible to outsource core parts of your business. Lawyers get paralegals to draft legal documents so they don’t have to. If you are an accountant, look for accountants in developing nations to do your work for you. You can focus on meeting with customers and checking their work, but let someone else do the hard work.

Optimize

Finally there will still be some things that you can’t eliminate, automate or outsource. For the things remaining, ask how you could do them more efficiently. Optimizing may mean doing things completely differently. I’ve heard of some business people still going door-to-door to get business. This is the internet-age, optimize your business by looking at ways that you can do things differently using the Internet. Can you shift some of your sales and marketing to the Internet. Not only will this often save you money, but it will also move some of that work closer to being automated and outsourced.

Repeat this process. As your business grows it will develop new inefficiencies. Once you’ve changed your business to use the Internet more effectively, you will have a new perspective and new ideas about what parts of your business can be optimized, outsourced, automated and eliminated.

We want to hear your thoughts and experiences. Tell us about how you evaluated, eliminated, automated, outsourced, and optimized your business by adding comments below. What did you discover about your business?