Before you spend resources on improving your business performance, it is best to know where you want to go. This means getting clear on your business strategy.
Improving Business Performance
There are two main ways of improving business performance:
- Optimization – Making things better, best practices, incremental improvements,
- Innovation – Doing different things, doing things differently, leaping past the competition.
It is easy to think there is a magic bullet for optimizing your business’s performance. It isn’t as easy as that though.
Optimizing it to do what?
What To Optimize Depends on Goals
The first thing you need to decide is “what is your business strategy?” There are trade-offs between which areas you want to optimize.
Is it to maximize profit? That sounds pretty good. Profit is the difference between what you charge and what it costs you do deliver a service or product. You can charge more or reduce costs.
Reducing costs is attractive if your processes and cost structures are inefficient in some way. However, if you reduce services or quality to achieve “maximum” profits, over the longer-term you may drive away your customers.
Same with raising your prices.
I think a better strategy for most businesses is to figure out what a decent profit level is for your business, considering its strategy, and then optimize pricing and costs to achieve it. You will need to balance profit against a number of other factors to determine what is optimal for you.
Is it to grow your business? Generally growing your business requires investment. If you are not going to outside investors, that means funding growth from profits.
Is it to attract more customers? You will need to invest more in marketing and sales. You may also need to improve your offerings or add more staff to handle the customers. Will you rely on word of mouth from happy customers?
Another option is to lower prices.
Do you want to focus on customer retention?
Is it to maximize the value of the business? Focusing on the saleability of your business may impact other areas. You may need to spend resources ensuring you are not required in the business, etc.
Other Strategies? There are many other strategies and many factors that affect your business.
It Starts with the End in Mind – Business Strategy
Ultimately, you need to know what you want to accomplish as the starting point for optimizing it. Then you can begin the optimization process.
By the way, avoiding the subject of optimization (for whatever reason) means you are likely leaving money on the table; maybe a lot.
Is part of your business strategy to grow? You might need better lead acquisition and conversion to achieve that goal. Download the free Guidebook.