Productivity is the backbone of strong economies and successful businesses. It determines how efficiently resources—such as labour, capital, and materials—are used to produce goods or services.
In Australia, according to the Xero Small Business Insights 2023 report, wholesale trade had the highest productivity at $214.20/hour, while hospitality lagged at $40.20/hour. Despite an overall decline, 10 sectors, including manufacturing, agriculture, and construction, surpassed the national productivity average of $100.30/hour. Western Australia emerged as the most productive state at $102.50/hour, while Tasmania ranked the lowest at $89.00/hour.
What is productivity?
Productivity is a measure of how efficiently a business converts inputs into outputs. It can be broken down into three key areas:
- People productivity – Measures how efficiently employees deliver services or products, often expressed as hours worked per dollar earned.
- Financial productivity – Assesses how well businesses monetize investments in capital (machinery, technology, etc.), often measured by return on capital invested.
- Materials productivity – Looks at how efficiently businesses use materials (inventory, energy, etc.) to generate sales.
Why productivity matters
Businesses with higher productivity generate more output with fewer resources, boosting profitability and enabling them to better navigate inflation, market slowdowns, or increased competition. In today’s digital age, small businesses no longer lag behind large enterprises when it comes to productivity tools and processes. Many now have access to the same digital solutions that enhance efficiency.
How to increase productivity
- Better Tools (Capital Investments)
Upgrading tools and technology is essential for boosting productivity. Digital tools, such as scheduling software that integrates with payment systems or point-of-sale technology, can reduce inefficiencies. However, many small businesses struggle to prioritize investments due to uncertainty, risk aversion, or difficulty in securing loans. Conducting financial analyses to estimate ROI and seeking advice from accountants can help make informed decisions. - Smarter Methods (Innovation)
Businesses often fall into routines without reassessing whether their methods are still effective. To stay competitive, review your processes regularly. Start by documenting workflows, identifying bottlenecks, and streamlining tasks. Engage your employees in this process—they often have valuable insights. Digital tools like Asana (project management) or Zapier (automating repetitive tasks) can enhance efficiency. Outsourcing tasks you’re not proficient in can also free up time for core business activities. - Skilled Workers (Capabilities)
Even if small businesses can’t afford to hire specialists, they can set up their employees for success through proper onboarding and training. Ensure that each role has a clear job description and that employees are trained in the tools they need to use. Regular feedback, both given and received, is crucial for continuous improvement. When employees understand the business’s broader goals, they’re more likely to make decisions that improve productivity. - Entrepreneurship Mindset (Optimization)
Productivity isn’t just about maintaining efficiency—it’s about constantly optimizing processes. Entrepreneurs increase productivity by effectively combining resources, even if that means taking calculated risks. Scaling up operations, acquiring complementary businesses, or narrowing focus to specialize in a profitable niche are all ways to improve productivity. Regularly reevaluate your supply chain to ensure you’re working with the best suppliers and empower entrepreneurial thinking within your team to foster innovation.
Productivity checklist
- Better Tools: List potential investments, estimate their ROI, and prioritize the most impactful options.
- Smarter Methods: Document workflows, identify inefficiencies, and consider using software to automate low-value tasks.
- Skilled Workers: Ensure clear job descriptions, provide thorough training, and establish a regular feedback loop.
- Entrepreneurship Mindset: Explore opportunities for scaling, acquisitions, specialization, and supply chain improvements.
Boosting productivity is a mindset
Small businesses have enormous potential to improve productivity. By adopting a mindset of continuous improvement, businesses can refine processes, invest in the right tools, and eliminate inefficiencies. Though it requires upfront investment in technology and staff, the long-term benefits often include reduced delays, clearer communication, and greater profits. Efficient businesses also tend to enjoy higher employee satisfaction and improved customer experiences
Take action
Boosting your business’s productivity starts with the right guidance and tools. At DFK Benjamin King Money, we specialize in helping small and medium-sized businesses unlock their full potential through smart financial strategies, process improvements, and capital investments. Contact us today for expert advice on how to enhance your productivity and achieve sustainable growth!