3 Current Business Trends for Profitable Small Businesses

When you’re a business owner, there are very few things you can depend on to stay the same. In fact, change is one of the things you can always depend on! As such, it’s essential to keep an eye on market changes and trends in business – this will allow you to more confidently make the decisions that will keep your business healthy.

Attending conferences is always a great opportunity to hear the various trends of what people are experiencing, changes in the industries, and reminders of what is working for other people. I recently spent several days at a large conference where there were some big picture reminders such as “AI is here” and needing to focus on numbers to tell you the story. I was also reminded that every day brings an opportunity to do more and be better.

Here are three key takeaways that I believe are relevant to all industries. Business owners can make great inroads by setting a little time aside to work on these areas.

Takeaway #1: Understanding your Utilization Rate, Realization Rate, and Collection Rate

In plain English, your utilization rate is merely the number of hours in a day that you have open to work on a specific project or element. Your realization rate is how much of your day you actually spend on that item. Finally, your collection rate is how much you actually get paid for the work you do perform in your day.

Here is an example of this: you may have 8 hours in a day (your utilization rate), but only actually spend about four hours working on the thing you’re supposed to be working on. If we stop here and look simply at this comparison, we can recognize that there are many ways in which we can be more productive – by getting low lying tasks and interruptions off of our plate and by staying focused on the things that matter.

For instance, in my law firm days, I as owner might only be able to spend a few hours a day on legal work. However, my paralegal or associate attorney would be able to spend their entire day just focused on legal work. That gives you a clear illustration of where the utilization rate to realization rate is much different for an owner versus a team member.

The next breakdown is how much you actually get paid, or your collection rate.

Your collection rate helps you recognize where your lost opportunities to get paid immediately might be, or to illustrate more value to a client for what you are doing so that they are happy to pay your bill and excited to move forward with you.

If you have a huge gap between your collection rate and realization rate, that’s a massive problem and needs to be fixed immediately. We often look for a 90 to 95% collection rate and as a business grows even more, we push that towards a 97 or 98% collection rate.

These are critical numbers that every business should recognize, analyze, and identify to improve.

Takeaway #2: Orchestrate Your Payment Process to be in the Right Place at the Right Time

The first part of this involves understanding that how and when you get paid often correlates with where you present your bill in the client’s gratitude curve.

The Foonberg Gratitude Curve is one that has been illustrated for years to identify how a consumer’s happiness level with their service provider increases as they are progressing through the process of solving the problem, but quickly decreases once the problem has been solved.

The key is to get the bill out to the person right at the top of the gratitude curve, when they’re happy and excited to pay your bill. It is often not as successful as to send the bill months after the services have been performed, when the person no longer is as excited to pay that bill.

An essential part to all of this is having a good process in place to bill and a billing clerk to crank that wheel so that the owner and other parts of the team are not clunky in sporadically sending bills or approving information to go out the door. Having clear policies, procedures, examples, templates, and workflows is a vital part to success in business. This is an area we can all work on improving.

Takeaway #3: Automated Workflows

Another key area that is being discussed in all industries is the need to automate your workflows so they happen in a regular, organized fashion.

Gone are the days of manually utilizing checklists and relying on human memory to get things done. Using technology to create automations based on each event being completed allows a team to work more efficiently and effectively. It also allows a team to be happier seeing production of work in a consistent fashion and less frustration.

While different industries have different types of automations they can utilize, there are many general items from e-mail rules to calendar reminders that are universal. These can be used in every business with great efficiency and greater productivity.

Regardless of where a business is in their growth process, understanding the trends in the business industry and taking strides to improve their business in these areas will increase their bottom line.

An interesting reflection is that all of these require that we have good processes and procedures in place so we can be intentional about setting up our team for success so they can do more in less time and feel productive. If we can help you implement these systems, please let us know – we have resources to fit your needs!