Although nowhere near the dumpster fire that was 2020, overall, 2021 has been a challenging year for the business services sector. The post-pandemic economic recovery has been slower than predicted, and the great migration to hybrid work environments has placed extra stress on new businesses. Many startups have likewise seen their runways shrivel up, putting more pressure on founders to become financially solvent.
That’s why, heading into a new year, efficiency is the name of the game. Service business leaders need to stretch their hard-won capital as far as possible.
With buyers keeping a closer eye on expenditures and the supply chain in a state of crisis, revenues are harder to come by. Your company might or might not be able to survive another tough year. But if you are going to keep the lights on and the payroll active, then it’s likely because you’ve found successful ways to scale back on spending and curb wasted efforts without sacrificing on your ability to drive business growth. It’s a delicate balance indeed.
Here are five key areas that entrepreneurs and business owners may need to consider for efficiency improvements.
1. Stem the bleed of shadow IT
Cloud-based SaaS tools are simple to implement, but they make it too easy for employees to introduce software without the knowledge of IT teams. Businesses risk hemorrhaging money on an inefficient jumble of software known as “shadow IT,” paying fees for apps no one uses, duplicate tools that do the same job, or expensive individual monthly subscriptions instead of discounted annual, bulk licenses.
Non-compatible tools can stall projects half-way through when someone can’t transfer crucial resources. Dean Fogarty, Director of Information Technology at Absolute, warns that shadow IT can harm productivity when departments adopt tools that don’t integrate with other software.
“Finally there is the cost of lost productivity when little islands form around the company only able to share and communicate with a single department,” he notes, effectively only adding to the silo effect. “For example, Marketing and Graphic Design start using Slack to collaborate, but so does Product Development—except they don’t share an account.”
The solution is multi-faceted, requiring you to regularly audit your organization’s tech stack for non-approved tools, as well as establishing automated approval and rejection policies to make it easier for employees to request permission to add apps.
2. Curate an efficient workforce
An optimized headcount distribution, with effective division of labor, is startup gold, but inefficiencies abound when hiring and retaining talent. HR pitfalls can include over-staffing, and hiring employees with “sexy” titles like “data scientist” when you really need workhorse business analysts.
Sometimes startups outsource tasks to fancy agencies that could be run more cheaply in-house, while keeping hold of jobs that could be performed in half the time and to a better standard by external specialists.
Failing to spot in-house talent that could be trained up for hard-to-fill positions is another mistake that can cost thousands of dollars monthly while neglecting to invest in employee training programs can result in disgruntled, disengaged staff who leave to join your competitor.
Startup leaders need regular organization-wide dialogue to ask for employee feedback and listen to their answers. It’s also critical to strategically examine the market and business needs, and maintain employee training to promote a positive corporate culture and support employee professional development.
3. Stop losing money on supply chain waste
Whether you’re in the tech hardware business or e-commerce, a large swath of startups relies on supply chains for raw materials and to distribute finished products. Over-extended and over-complicated global supply chains, meanwhile, with multiple handovers between players, are common areas for waste to creep in.
Improving supply chain efficiency isn’t just about cutting costs, but also about meeting consumer and business demands for fast, reliable shipping. It’s particularly crucial when dealing in fragile or perishable goods, where supply chain waste can cause items to arrive damaged or ruined.
Small startups may think they can get away with paper records or spreadsheets because volume is low, but digital supply chain management delivers multiple benefits. As Logmore CEO Niko Polvinen points out, integrated supply chain data improves visibility into shipment progress, enabling you to optimize shipping routes, handling and storage, and it also enables you to reveal where problems arise so that you can adjust operations to prevent them.
“Years ago, companies used to use sustainable supply chain management as a competitive advantage. But now, it’s become a necessity,” he says. “More than ever before, data is being collected from all sorts of different operations. Company leaders are then using their data to become as resource-efficient as possible.”
4. Improve HR time use on what matters
Building on the earlier point that cultivating in-house talent is arguably more important than recruiting, in today’s cutting-edge startups, employee experience (EX) reigns supreme.
With an estimated 96% of HR teams agreeing that it’s becoming more important, HR managers are investing in EX measures and promoting corporate culture, while at the same time juggling recruitment, training, and onboarding.
But less strategic work, like chasing up employees for timesheet records and calculating payroll, benefits and overtime are still sucking up hours of HR time. The rise of blended workforces of full-time and part-time workers, contractors and freelancers only adds to the complexities when it comes to overseeing payouts.
Replacing these tasks with digital tools saves time and effort, making teams more efficient and reducing frustration. “By integrating with services like Quickbooks and PayPal, these tools can handle the job in a few clicks.” notes Neil Patel. “You can forget about long spreadsheets and good ol’ human error.” Startup HR managers who are available to focus on EX preside over happier and more productive employees, which in turn impacts on the bottom line.
5. Save money on soaring energy costs
In the US, advances in shale gas and fracking have driven down energy prices, but in Europe, energy costs are soaring. Chemical processing companies, for example, can see half of their expenditures go towards energy, while energy costs make up 55% of the total operating costs for all types of European refineries.
Reducing energy waste is crucial for cutting overall expenses – even in the US, and even for companies that aren’t in the manufacturing or refining industries. Today’s consumers are increasingly concerned about buying from “green” companies, researching environmentally-friendly businesses and shaming those with a high carbon footprint.
Clearly, cutting energy consumption is in the best interests of every startup.
Beyond replacing energy-inefficient equipment, companies can use predictive analytics to track operational efficiency across facilities. These tools produce early alerts about anomalies that reveal bottlenecks or impending part failures, which in turn drag down production processes and waste energy.
Greater efficiency is the goal for 2022
Today’s B2B firms need to cut waste and maximize profits in order to survive, recover and rebuild momentum.
By cracking down on wasted time in HR departments, improving supply chain management, refining tech stacks, cutting energy use, and optimizing workforce capabilities, your enterprise can cut costs and ramp up profitability for the long term.
