work smarter not harder
Work Smarter, Not Harder

Work smarter, not harder. Why working harder just doesn’t cut it as a small business owner.

You’ve heard the saying work smarter, not harder, but what does it really mean?

Many small business owners are working harder than they ever have and yet making less money than they ever have.

Most small business owners are exceptional technicians. They have undertaken all sorts of training to make them good at what they do, whether that be through university or an apprenticeship, on-the-job training or formal external training.

However, once you become the owner of a small business, your job changes from someone who just “does the job” to someone who has to:

  • Price jobs
  • Manage the job or workflow
  • Employ team members
  • Keep up to date with bookwork
  • Lodge and pay taxes
  • Manage business cash flow
  • Create Culture
  • Design new products and services
  • Marketing of your business
  • Sell your business’ products or services
  • Ensure customer satisfaction
  • Understand profitability
  • Understand and apply the ever-changing law

There is generally no training for these things, and so, often, how a small business owner runs their business is by winging it or in the same manner their previous employers managed their businesses.

What I see in almost all cases is a default mindset of “if I work hard, my business will be successful”.

And to a point, this is probably true.

My observation is that there are two crisis points where this mindset no longer works:

1. When staff become a factor (Cashflow Issue)

Prior to the employment of staff, the cash flow requirements of the business are relatively easy to monitor and manage.

It’s very much the mindset that, provided you pay your business costs and put some money aside for your end-of-year tax, whatever is left over is yours to spend.

If the business is running short of cash, working harder or longer hours to sign up new customers or complete more jobs will often solve the problem.

The “Bank Account and Gut Feel” form of cash flow management generally works up to this point.

However, once the business employs staff, there are several issues that arise that the business owner never had to worry about before, including delegation, quality control, leave management, increased administration burden and, most importantly, cash flow issues.

Once staff are employed, the business owner has to lose the “whatever comes in is mine” mentality because they have to manage the cash flow associated with employee net pays, PAYG Withholding payments on the business’ Business Activity Statement and quarterly employee superannuation contributions.

Further, the employment of staff often means that the business is growing in terms of turnover.

With that increased turnover often comes an increase in debtors in absolute terms (i.e. the amount customers owe the business for work done increases).

These factors mean that the “Bank Account and Gut Feel” form of cash flow management no longer works.

It is simply impossible for the average person to accurately forecast their business’ cash flow requirements months or quarters in advance.

Work smarter, not harder.

2. When the owner can’t be on or across every job (Efficiency Issue)

When a small business begins, it is normal for the owner to be the key worker in the business. The owner either does every job themselves or works on every job.

As a result, the owner either knows exactly where every job is up to because they’re completing the job or is acutely aware of where every job is up to because they are working on the job or are on-site and supervising what is being done by their employees.

Over time, the business grows and potentially gets to a point where the owner can no longer work on every job.

When this happens, the owner’s first-hand knowledge of where jobs are up to, how efficiently they’ve been run, how much wastage (i.e., both time and materials) has occurred on the jobs and whether the jobs are profitable disappears.

Without implementing systems and reporting mechanisms, this can be the death knell for a small business.

If you cannot precisely answer the question, ‘exactly how much profit did you make on the last job you completed?’ you’re flying blind and are succeeding by luck or are on the road to ruin.

You need to install software or some other reporting mechanism so that you know whether or not you are profitable in every job.

My experience is that many businesses actually make a significantly lower profit margin on jobs than they think, some making losses on many of their jobs.

Unfortunately, this issue is often a slow burn.

Unlike the previously mentioned cash flow issue, which can hit within a month or two, this problem usually slowly creeps up on you over an extended period.

However, when it catches up with you, it can be much harder to fix because of the lag between when you price a job and when the job is completed.

Working harder won’t solve this issue and, in reality, can make it worse because the more unprofitable jobs you do, the worse the business performance will be.

To ensure that your small business is profitable and has a strong cash flow, you must work smarter rather than harder.

You need to know your numbers, both past and budgeted future numbers, on an intricate level and understand what they mean.

If that is not your strong suit or if you don’t have the time to be across the numbers, find an accountant who will take the time to help you understand your business, what makes it tick, and what needs to happen for it to be profitable.

It will be the best investment into the success of your business that you will ever make.

Need more help? Read the following blog on The Power of Pricing your Products and Services Correctly –

Without a doubt, pricing is the number one factor in determining the profitability of your business,