Outdated operating models damaging business



Advice | Hot Tips | Managing | News | Small Business

By Stephanie Zillman

Call it laziness, call it a sheer shortage of time – or perhaps a combination of both – but many Australian business owners haven’t updated their business model since the GFC.

The problem is, a stagnant business model ensures potential growth is kept at a standstill.

Tony Kabrovski, Business Advisory partner of HLB Mann Judd Sydney said he sees many businesses with a completely outdated model.

“Business and consumer sentiment is now markedly different [since the GFC], and proprietors need to address this if they are to take their business to the next level,” Kabrovski said.

“For example, the pricing model in Australian businesses has changed significantly over the past few years and many businesses in the service industry have gone down an hourly rate model. We encourage our business clients to move away from that approach and adopt an ‘option based’ pricing system instead.”

In the case of a cleaning contractor for an aged care facility, this involved moving the business to an option based pricing structure, rather than simply providing cleaning services for a set number of hours.

“The services were broken down into a Bronze, Silver and Gold cleaning packages, with each package representing a particular level of included cleaning tasks. By moving away from an hourly rate based service, the business was able to operate more efficiently and within the time frame that suited it.”

Using an airline analogy, Kabrovski pointed out there is no point providing first class service to clients who are paying an economy class price. “Process effectiveness, and breaking a job up into individual components, is an area where efficiencies can often be introduced,” he said.

“When a business is running profitably, the proprietors don’t always analyse what is leading to the businesses current success and whether it is sustainable. But those businesses that allow their model to stagnate are risking their future success,” Kabrovski said.

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