Efficiency relates to the quality of your work, and might include creating output with less waste, using fewer resources or spending less money. If XYZ LLC sold $100,000 in May but spent $80,000 on expenses, while ABC Inc sold $90,000 but only spent $50,000 it’s a more efficient business and creates a larger profit, and is valued higher by the market. This is a case in which increased efficiency may justify less productivity.
Companies can become more efficient and cut costs by making it a practice to analyze data generated from every expense and then reducing requirements, minimizing waste, maximizing time and resources. This is not to say that certain outputs are not necessary, just that as your business grows, costs tend to as well. It’s extremely important to compare where your investing with the potential ROI elsewhere.
Without knowing where the business money is being used, its virtually impossible to understand how inefficient it may be – collecting data solves this challenge.
If a company can get 20% more sales from its current budget, its bottom line profit skyrockets. That means knowing where to allocate capital (people and money) and what the strategy and tactics are around them is crucial.
Test. Adjust. Optimize. When you have the data, the strategies, and the tactics, its time to execute.