Small Business Operations Consulting
An investment makes sense only when you get more in return than you invested. If you hire an operations consultant, this Return on Investment might be not easy to calculate.
This blog posts outlines what the ROI for hiring a small business operations consultant is.
What is small business operations consulting
Small business operations consultants are experts in how to run a company. Other than their strategy consulting counterparts, they don’t focus on product, market, positioning, competition and pricing.
They focus on everything that happens inside of the company.
They help small business owners and CEOs to
- Understand bottlenecks
- Save time and money
- Ensure high product or service quality
- Stabilize growth
- Implement efficient and effective processes.
To understand the value that operations consulting generates, let’s look at some example ROIs below.
Monetary return on investment
In many cases, there will be a direct, monetary return on your investment in a consultant. Here are some examples for the field of process improvement.
Process improvement work can have different types of outcomes:
- Decreased process time
- Better results, increased quality
- More results, increased quantity
- More consistent results, increased stability
Now what does that mean for your return on investment?
Decreased process time
Depending on resources that are bound by the process, your return on investment could be triggered by cost savings.
Assume you have a person saving 2 hours a week on an improved process. This person’s average hourly cost is 70 USD. This will mean that you save 140 USD per week, or around 5,000 USD per year.
Paying a consultant 5,000 USD to accomplish that would pay off in the first year and would create a return after this.
Another outcome could be that you can service more customers in a given time, e.g. in a service business.
If you can serve 20% more clients because you decreased processing time, you not only make your clients happy, but also increase revenue by 20%.
Assuming you’re doing tax returns for you clients and develop a tool to speed up information and document collection. You’re now able to process 120 instead of 100 tax returns.
If one tax return generate 1,000 USD in revenue, you’re able to earn an additional 20,000 USD. Provided you have the leads.
If you pay a consultant the same 5,000 USD for that process improvement, you’d have a 400% ROI right away.
Also, consider that the cost of the consultant is one-off, but you reap the benefits on a recurring basis.
Better results, increased quality
Quality can mean many different things.
If an improved process allows you to better meet your clients’ requirements, you might be able to charge more. Again, divide the added revenue by the cost of the consultant to arrive at ROI
Or it might mean that your product, service or shipping process produces less customer support or warranty claims. Assume you can eliminate 50% of your customer support tickets. How much would that be worth?
More results, increased quantity
Closely related to the decrease in processing time, increasing quantity of your output ca
More consistent results, increased stability
You might have a super capable team. But you if your process aren’t right, you rely on the stability in individual performance to reach your desired outcomes.
Improved processes can stabilize outcomes. The benefits are similar to the ones above, yielding direct financial returns.
Indirect return on investment
In addition to the direct financial returns, there are indirect returns. They can be monetary or non-monetary in nature. A few examples:
A well-designed org-structure will increase role clarity for each team member. This will reduce stress and improve results.
It’s hard to measure that directly, unless you have a numerical assessment on the harm done by unclear roles. A happy team is undoubtedly a good thing.
Another benefit is easier and quicker recruiting, which will reduce search cost and speed up realization of growth and revenue potential.
Adding team members in the right seats will also take away workload from the existing team and leaders, which will improve well-being. A non-monetary result.
IMPLEMENTING EFFECTIVE COLLABORATION STRUCTURES
Better collaboration software or better meetings might not have an immediate financial return, but will undoubtedly increase the companies efficiency and effectiveness.
Also, employee engagement will rise when the work and work tools are fun.
DOCUMENTING STANDARD OPERATING PROCEDURES
Making your companies knowledge available to everyone in the company is important, nobody would argue that. But what’s the return on investing time and resources into doing that?
Well, you could look at it from different angles:
- The time people save searching for information is saved. That has a dollar value.
- Also, SOPs are the basis for future process improvement and the foundation to onboard new people and train them effectively. In that sense, SOPs might rather be an operational necessity than a cash-flow positive measure.
Investing in operations as a necessity for growth
Lastly, there are many operations-related topics that don’t produce a measurable ROI, but are still necessary. They serve to keep your organization functional as it grows and complexity increases.
Increased complexity means that you have to implement structures to manage that complexity. You could choose not to, but then your growth stops right then and there.
When thinking about hiring a small business operations consultant, be very clear on the monetary or non-monetary return you expect from the measure.
This will help you understand what a reasonable investment in the consulting service can be.