5 Tips for Running a Lean Operation
The best things in life are simple.
The same concept applies to running your business! Running a lean operation correctly is the most efficient way to foster growth without adding a ton of stress to you, your employees and your pocket book. The less moving parts needed to keep your business running efficiently, the better. If you feel your business is spiraling out of control, you’re tired of staying up all night just to get your work done for the day, or you feel like there is just way too much on your plate, it’s most likely because you’re trying to run a “flashy” operation, not a lean one.
The rule that small business owners must live by is innovate or die. If you aren’t consistently looking to make your business operate more efficiently, even in periods of expansion, you can’t expect your business to stick around for the long game. Regardless of the industry that you are in, these same rules apply. You must always be on the search for new ways to streamline your processes.
The good news is that achieving a lean operation is much easier than it may initially appear. Small changes will add up over time. Before you know it, your business will be back on track – minimizing costs and maximizing profits at every turn. Most importantly, you’ll be able to use the time you get back on establishing a healthy work-life balance.
How can you achieve a lean operation? Let’s discuss some tips and tricks you can use in your business to identify and remove unnecessary and wasteful processes. But first, it’s important to fully understand the meaning of a lean operation.
What is the ultimate goal of lean operations is to have?
The principles of “lean operation” were born in the manufacturing sector by Toyota in the 1980s. They were wasting far too many parts in their manufacturing process and decided to make a significant move: instead of building to meet specific sales projections, they began to manufacture vehicles as orders were placed.
Following these same principles, running a lean operation refers to removing unnecessary processes, products, or anything else in your business that may be causing additional financial stress. It’s all about keeping only the things that you need and getting rid of anything you don’t. Running a lean operation is a never-ending journey. It is not something you do one weekend.
The motto you need to commit to heart as a small business owner is “innovate or die.” If you aren’t innovating, one of your competitors is. Don’t be left in the dust, and consistently look for ways to improve and simplify your operations.
Tip 1: Make Time for Improvement
This first and most crucial step is to dedicate time to focus on finding operational inefficiencies. We recommend that you schedule time at the beginning of every month to sit down and focus solely on ways to innovate and improve your processes.
We recommend around 10% of your total working hours should be devoted entirely to this innovation process. It may seem like a lot, but using this time to focus on improving your business as you expand will pay off in the long run. Once you find the time to do it (maybe on days you know your workload is less) mark it on your calendar and hold yourself to it.
Tip 2: It All Starts with A Solid Strategy
Now that you’ve scheduled your monthly operational assessments, you must come up with a strategy to make the required changes each month. This is the time to set goals for your business—tangible financial metrics to measure your progress.
Do you want to increase sales without hiring additional employees? Or would you like to automate certain aspects of marketing your business, freeing up time for you to focus on other areas? Whatever your goals are, write them down and hold yourself to them.
Tip 3: The Pareto Principle
Also commonly referred to as the 80/20 rule, the Pareto Principle created by Vilfredo Pareto in 1906 after he noticed that 80% of property in Italy was owned by 20% of the population. He then began observing this same pattern in almost everything. The principle specifies “an unequal relationship between inputs and outputs. [It] states that 20% of the invested input is responsible for 80% of the results obtained,” according to Investopedia. Obviously, this principle is especially applicable to business operations.
Based off this principle, the Pareto Chart was created. The chart is a great way to visually represent which 20% of inputs are responsible for 80% of the outputs. It is a hybrid between a bar graph with a line plotting the percentage each of the inputs makes up. The y-axis of the chart is for frequency, and the x-axis is for your inputs. It can be a little tricky to figure out at first, but once you have a solid understanding, it can be incredibly useful in finding the snags in your operation.
Once you start thinking with the 80/20 mindset, you will immediately start to notice the biggest sources of your problems. It could be that one employee is responsible for 90% of the accounting errors, or that two clients are responsible for 80% of your sales.
Tip 4: Improve Efficiency from the Bottom-Up
Changing your overall systems isn’t something that should start at the management level. Instead, your most significant improvements in efficiency should begin on the front-lines of your operation – with your outward facing employees and the day-to-day processes they follow.
It is also important to empower your employees to make suggestions instead of ruling with an iron-fist approach. Your employees are the ones that work every day doing the same tasks, helping customers, and making sales. If they have an idea of how their job could be more efficient and save them time, take the time to listen to them and be flexible.
Give every reasonable idea a chance, and you might notice huge effects on the amount of time you spend managing, the number of sales they’re making, and how much less stress you have knowing your employees are working in a system they helped to create.
Tip 5: Cut Out ANY Inefficiencies
We get it – your business is your life. You’ve spent years coming up with the perfect product or service; dedicated vast sums of capital to getting it off the ground; and (most important!) your time and energy to make it work. Making changes to your business can feel like you’re dismantling your livelihood. However, to make your business operate more efficiently, you’re going to have to rip off the band aid.
Nothing is sacred in your operation. It doesn’t matter if you’ve invested hours in coming up with what you believe to be the perfect financial reporting system—if it isn’t working, get rid of it.
Making your business thoroughly efficient is a never-ending journey and is a constant balancing act of managing existing processes and finding new ways to optimize them. As you grow, continually optimizing your operations will become even more critical to your business’s success. A larger business can make it more difficult to control every operational aspect and you might need to seek out expert advice from industry leaders. Whatever the case may be, always be on the lookout for new ways to streamline your operation. This will lead to a healthier bottom line, less financial risks, and new core company strengths.