A simple way to increase the profits of a business is to increase employee productivity. Each business and industry is unique, and here are several simplified illustrations to show the impact. The assumption is that if productivity increases by 10%, then sales will also increase by 10% due to extra capacity as long as there is demand for services.
Example #1: A service business that also has product costs, such as a tradesman, landscaper or other service provider that also sells products to a customer.
| Example 1 | ||||
| Current | 10% Increase | Diff | % | |
| Sales | 1,000,000 | 1,100,000 | 100,000 | 10.0% |
| COGS | 350,000 | 385,000 | 35,000 | 10.0% |
| Gross Profit | 650,000 | 715,000 | 65,000 | 10.0% |
| Expenses | 500,000 | 512,500 | 12,500 | 2.5% |
| Net Profit | 150,000 | 202,500 | 52,500 | 35.0% |
Example #2: A professional services business such as a consultant or architect, that does not sell products.
| Example 2 | ||||
| Current | 10% Increase | Diff | % | |
| Sales | 750,000 | 825,000 | 75,000 | 10.0% |
| Expenses | 450,000 | 461,250 | 11,250 | 2.5% |
| Net Profit | 300,000 | 363,750 | 63,750 | 21.3% |
The big question to ask is how can this be accomplished? Here are 3 ways:
- Having the Right Employees: Making sure that an employee is a good fit for your business is crucial. There are traits beyond technical capabilities that you should look for, such as attitude, ethics, loyalty, and energy levels.
- Training: A highly trained employee will be much more productive because they will know what to do and how to do it correctly. Mistakes and lack of training cost time and money.
- Better Scheduling: Virtually every business needs to schedule their jobs, appointments, meetings, work, etc. Proper scheduling can easily be implemented and yield a very high return with usually little to no cost.