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Small Business Tips

How to Boost Small Business Productivity

Andre Spiteri
Studio shot of young woman working in office covered with sticky notes|Studio shot of young woman working in office covered with sticky notes|Baker spreading flour on dough in commercial bakery|Chefs preparing food in restaurant kitchen|Business woman holding stack of documents in office

When it comes to small business, productivity is more than a buzzword. It's the holy grail. If your productivity is high, chances are you'll make more money. But if you're in a productive slump, this can hit your business (and your bank account) where it hurts.But what is productivity? How do you measure it? And what can you do to improve it and boost your small business's bottom line? Let's find out.

What is productivity and why is it important to business?

In simple terms, productivity is a measure of how much work you're getting done. It's important because it tells you whether you're using your resources efficiently and getting the most out of them.

How do I measure my small business's productivity?

Productivity is subjective, and how you measure it depends on several factors, including the type of business you have. That said, one of the most popular and easy ways to do it is to use the productivity output formula. This method calculates your productivity's monetary value, that is how much money you're earning for every hour of effort.To calculate your productivity using the productivity output formula, take the following steps:

  • Step 1: Choose your output. If you sell goods, this is the value of complete units you produce. If you provide a service, this is the total value of jobs completed.
  • Step 2: Choose your input and calculate the number of working hours it takes to produce your chosen output.
  • Step 3: Divide the answer in step 1 by the answer in step 2.
  • Step 4: Add the £ sign to the answer in step 3 to give your business's productivity a monetary value.

The productivity output formula in action: Example 1

Let's say you run a bakery.In 10 hours, you bake 500 loaves of bread, which you can sell for £4 per roll. So, in those 10 hours, you generated £2,000 worth of output.To calculate your productivity using the productivity output formula, divide £2,000 by 10 hours. The result gives you £200, which means you're generating £200 per hour worked.

Baker spreading flour on dough in commercial bakery

The productivity output formula in action: Example 2

Now, let's say one of your ovens goes bust and needs repairing.As a result, you're only managing to bake 400 loaves of bread, worth £1,600, every 10 hours.Now, productivity is £160 per hour worked.

What other methods can I use to measure small business productivity?

The productivity output formula is simple and straightforward, but it's not always the best way to find out how productive your business is.Case in point, what if some jobs are more complicated than others, so they take longer (or cost more) to complete? Or what if the nature of your work means it's not practical to calculate output over time?To get around this, you could substitute output, input or both with different metrics. Here are a few ideas:

  • Break down a job into several smaller tasks, and measure how long it takes to complete each task. This analysis works especially well on larger projects where it doesn't make sense to calculate output over time, such as writing a novel or building a house.
  • Calculate how much profit you make for every pound spent on salary (or if you don't have employees, on outsourcing fees). So, if you netted £3,000 in a week and used three freelancers to get the job done, this means each freelancer generated £1,000 for you.
  • Track client feedback over time. If your clients are consistently happy with your work, it means you're delivering results and, so, being productive. But if your customers start registering lower satisfaction scores, this could be an indication that your productivity is going down.
  • Divide the value of your output by the value of your business resources, such as the cost of materials, equipment, wages and other costs. This calculation gives you a value called total factor productivity. Use of this method can be especially helpful if you've invested in new technology and want to find out whether it has made your business more efficient.
Chefs preparing food in restaurant kitchen

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What should I do after measuring my company's productivity?

Measuring your productivity is all well and good. But for the exercise to be worthwhile, you need to have something in comparison. Unless you do this, you have no way of knowing what the values mean.What you compare your productivity to largely depends on what you want to find out. Here's a look at some of the possibilities:

  • Compare your productivity from one financial quarter or year to the next. A look back will tell you whether your business is growing, stuck in a rut or going through a bad patch.
  • Compare your productivity before and after you invest in new software, buy a new piece of equipment or hire a new employee. Checking the effectiveness of a new tool will tell you whether your investment is paying off.
  • Measure your productivity against pre-set targets. A target check can help you find out how efficient your business is. For example, if your employees are consistently making less profit per pound of salary than what you're expecting, this could be a sign that they're overworked or demotivated.
  • Find out where you stand next to your competitors. Are you more or less productive than other businesses in your industry?

How do I improve my business's productivity?

So your productivity isn't as good as you expected. Or, perhaps, you'd like to improve it. What can you do to give it a boost?

1. Set realistic targets

Before you splash out your hard-earned money on the latest productivity software or chew out your employees for using Facebook at work, it's worth having a look at your expectations. Are they realistic? Or is everyone spread way too thin?

Several studies show that working too much can lead to mistakes, low morale and — here's the kicker — decreased productivity. So, you owe it to yourself to be realistic about what you and your employees can accomplish in a given workday.Consider having an open discussion to get a reading on your employees. How do they feel about their workload? Are they stressed and overworked? Are some busier than others? If so, less busy employees could take on some additional duties.If you're a one-person operation, it may be time to take your hands off the wheel and start involving others.

You could hire a virtual assistant and delegate administrative tasks such as managing your calendar and answering emails. Or, perhaps, you could consider getting your first employee on board so you can focus less on production and more on other things.

2. Automate what you can

You can free up a ton of time simply by putting repetitive tasks on autopilot. Business tasks you can easily automate include:

  • Bill payments. Set up direct debits or standing orders through your bank's online system, and all your regular payments will take care of themselves.
  • Payment reminders. Clients paying you late? Many accounting software programs, such as FreeAgent and Xero, can be set up to send out automatic reminders when unpaid invoices come due.
  • Mileage tracking. Drive a lot for business reasons? An app such as MileIQ runs in the background and starts tracking as soon as you hit the road. It also generates accurate mileage reports for you, whenever you need them.
  • Social media marketing. Use a free tool such as HootSuite or Buffer to schedule your social media posts in advance.

3. Use technology to stay organised

It seems obvious, but being disorganised wastes time, resources and, ultimately, money. Think about it. Time spent stressing out, hunting around for misplaced documents or chasing your tail is energy you could've spent getting actual work done.

Business woman holding stack of documents in office

Luckily, technology's here to help. And seeing as you can start using some of the best small business productivity apps for free, you have no excuses.Here are some apps you can use to help you stay on top of everything:

  • Use project management software to assign tasks to your employees, monitor their workload and keep track of deadlines. Apps such as Trello, MeisterTask and Asana have generous free plans to start you off.
  • Use a cloud-based storage app such as Dropbox or Google Drive to save important documents, share work-related files and store everything safely in one place. As a plus, you'll be able to access what you need from any device, wherever you are, as long as you have an internet connection and your login details.
  • Track how much time you spend on tasks with a time-tracking app such as Toggl or Everhour. Time tracking apps can be especially handy for measuring productivity, billing clients (if you charge by the hour) and getting a feel for how much it takes, on average, to finish tasks.
  • While you're at it, why not keep distractions to a minimum? Apps such as SelfControl restrict your access to Facebook, Twitter, YouTube and other time-wasting websites of your choosing. You can't reset SelfControl, even if you delete it. Which means you'll have to work whether you like it or not.

4. If possible, encourage remote working

Sounds counter-intuitive, but a recent study found that employees who are allowed to work from home are significantly more productive. As a plus, you could also save on office costs such as utilities (and coffee).Of course, this doesn't mean you should leave everyone to their devices. Make sure you can reach everyone by phone, email or over a messaging app such as Slack during office hours.And keep everyone accountable for his or her work.

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