Week 5 Business Efficiencies and Effectiveness

2. Operational Margin
 Your operating margin is a metric that reflects how
effectively your business runs. Operating margins that
increase with economies of scale indicate a business with
the capacity to scale. Scalable businesses are attractive
to potential acquirers.
 Potential buyers will compare your operating margin to
other businesses in your industry. If your business has a
lower operating margin it will be less attractive to
potential buyers. An operating margin that is lower than
the market rate reflects a business that:
 can’t scale and/or
 will require additional investment to increase operational
efficiencies

3. Invest
People + Processes + Technology = Optimal
Operational Efficiency

4. People
 Invest time and effort in recruiting the right
individuals into executive roles.
 Leverage their experience in establishing ‘been
there done that’ processes and systems.
 Enable succession so that you’re attractive to
potential buyers who will need executives to stay on
and manage operations after you leave.

5. Processes
Identify best practices and industry
standards.
Implement those that are most relevant to
your business.
Consider all aspects of your business:
financial, legal, marketing, sales, customer
service, etc.

6. Technology
 Assess functions, tasks and areas that can be
automated.
 Consider the importance of remote & centralized
access to data, files and information.
 Ensure the right technology is implemented at the
right time (consider the size, scope of what you
require and how long it will take you to outgrow the
infrastructure).

7. Implement
 Assess functions, tasks and areas that can be
automated.
 Consider the importance of remote & centralized
access to data, files and information.
 Ensure the right technology is implemented at the
right time (consider the size, scope of what you
require and how long it will take you to outgrow the
infrastructure).

8. MEasure
 Any changes implemented through investments in people, processes or technology
should be evaluated using Key Performance Indicators (KPIs).
 KPIs can be used to measure the success (or not) of the changes made. The KPIs
used to measure projected results against actual results can vary based on business
sector or model. However, what is consistent across any business is that KPIs are
used to assess your company’s performance against your strategic and/or corporate
objectives. In other words, your business’ key objectives drive what you measure.
 Increasing operational effectiveness and operating margin should be an important
objective if you want to exit from your business successfully. There are many
different KPIs you could use to measure performance but here are a few examples:
 number of customer support calls
 rate of client attrition
 client acquisition cost