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What "Lean Business" Means Today: Apply the Concept to Drive Profits

Posted by Stephen King
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Lean Business

When most business owners think about the concept of operating a lean business, they think about trimming the fat, or cutting unnecessary expenses to drive profits in the least expensive way possible. Today, however, the concept of a lean business goes beyond the idea of saving money.

Operating a lean business today means creating an adaptable business which runs in the most efficient and effective way to deliver the most value in products or services to customers, while generating maximum profits.

Five Steps to a Lean, Successful Business Machine

1. Streamline, Automate And Integrate Your Back Office With Technology

Using technology to optimize, automate, streamline and integrate as many steps of your company's bookkeeping and accounting processes as possible will reduce your back office burden immensely and improve your financial data.

With cleaner, up to date financial information, you can track your company's key performance indicators to perfect your business plan and operations.

When you pair a core accounting system, like QuickBooks, with smart time-tracking, expense tracking, payables and invoicing software and applications, your back office transforms from a compliance and tax machine to a strategic financial center.

Equipped to help you make smarter business decisions, your bookkeeping and accounting department can help you strategically cut costs, optimize pricing and processes, make the most of your marketing dollars, improve profitability and grow your business.

2. Pursue Customer-Driven Concepts

Listen to your clients or customers. Let their pain points, requests, and feedback help you to develop your next concept or iteration of your business strategy.

This is the group of people who will provide revenue and can help your business grow. Give them what they want rather than telling them what they need. This also helps your business evolve and improve the services you offer. They can also help you test new concepts before you go to market if it’s something they want.

Click here to download: The Guide to Outsourcing Your Bookkeeping & Accounting  for SMBs

3. Anticipate Change and Be Ready to Adapt

While businesses operating in some unique marketplaces (like storage or supply delivery service companies) have not had to evolve or change much over time, others (like engineering and development companies, or digital agencies and technology companies) face constant volatility and change.

It’s important to continuously anticipate potential shifts in your marketplace or consumers' demands and be ready to adapt or pivot your business plan to meet the ever-changing desires of the market.

4. Use Cascading Goals as part of your Management Strategy

Assigning smaller but related goals and objectives to departments, teams, and individuals that all contribute to achieving the overall operational goals and objectives for the business, are referred to as cascading goals.

When determining cascading goals, it’s critical to keep the line of sight in mind. This means your employees should be able to clearly see how their individual objectives contribute to the greater company goals.

Senior Executive goals are generally equal to the company’s goals. Managerial goals are typically 80 percent related to their own personal activities relevant to company and team goals. Employees with a clear line of sight and specific goals understand how his or her objectives directly affect their team, department and the overall company goals.

Since satisfied employees are key to convincing clients to purchase more of your service, specific personal goals are directly and clearly relevant to the overall operational objective.

5. Make Better Decisions with Management Reporting

Never go with your gut. If you don’t already, start basing business decisions and strategic plans on your financial data. Successful, growing businesses use advanced bookkeeping and management accounting to get actionable financial intelligence for making data-driven decisions.

The actionable financial intelligence you’ll have at your fingertips with management reporting will help you to evaluate client relationships, optimize pricing, identify and pursue effective revenue streams, measure marketing campaign strategies, make better research and development decisions and to implement more efficient operations.

Profit Margin Magic: Why Cutting Costs and Saving Money Is Still Essential to Increasing Profits

Just because the term "lean business" has taken on a broader, more modern meaning does not mean you should toss out the old principle of reducing waste and eliminating inefficiencies in your business's operations and expenses. The fact remains that profit margins have a strong hold over your company's actual profitability. So, the less you spend to generate revenue the more that revenue is truly worth.

For example, if you operate with a gross profit margin of 30%, you spend 30 cents for every dollar you earn. In other words, each dollar of your revenue is only worth 70 cents. Every dollar you avoid spending, however, is worth 100% of its face value. Thanks to profit margins and the inability to operate your business for free, money saved is worth more to your business than money earned.

So, while you focus on leading a modernly lean business, do not forget to also concentrate on operating a fiscally efficient company.

Bolster Your Back Office to Become a Lean and Financially Fit Business

The key to making better decisions for your business can be found in your back office. At GrowthForce, our highly trained and experienced bookkeeping and accounting professionals work with you to implement intelligent bookkeeping and accounting strategies and tried and tested technology tools to streamline the process.

We can help you identify and track the key performance indicators which will empower you to drive business growth, increase profits and make the data-based decisions that will forge a truly lean business, in every modern sense of the term.

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