Small business productivity: Simple ways to work smarter

Published Friday 24 October 2025

Table of contents

• What is productivity?
• Types of productivity
• Why productivity matters
• Small business productivity strategies that work
• Better work tools
• Smarter methods
• Skilled workers
• Entrepreneurship
• Team productivity: getting more from your people
• Measuring your productivity improvements
• Common productivity mistakes to avoid
• Increase productivity checklist
• Productivity is an ongoing journey
• FAQs on small business productivity

Key takeaways

• Prioritize tool investments by calculating ROI and choosing upgrades with the highest annual savings divided by total cost to maximize your productivity gains.

• Document your current work processes and identify bottlenecks like double handling, poor task sequencing, and skill misallocation to systematically eliminate inefficiencies.

• Implement comprehensive employee training that includes clear job descriptions, tool proficiency, and regular two-way feedback sessions to maximize your team's productivity across multiple responsibilities.

• Measure productivity improvements using simple metrics like output per hour, revenue per employee, or project completion time to track progress and identify areas for continued optimization.

What is productivity?

Productivity is how efficiently your business converts resources into sellable products or services. Higher productivity means you get more output from the same inputs—whether that's labor, capital, or materials—which directly improves your profit margins and competitive position.

Types of productivity

Labor productivity measures how efficiently your team delivers products or services to customers.

• How it's measured: Output divided by hours worked
• Why it matters: Helps you see if your team is working efficiently or spending time on low-value tasks

Capital productivity measures how well your business generates revenue from equipment and asset investments.

• How it's measured: Revenue generated divided by capital invested
• Why it matters: Helps you decide which equipment purchases pay off

Materials productivity tracks how efficiently you convert raw materials and supplies into sales revenue.

• What it includes: inventory, energy costs, office supplies, and production materials
• Why it matters: Helps you identify waste and negotiate better supplier deals

Why productivity matters

Higher productivity gives your business critical advantages:

• Better profit margins: You generate more revenue without increasing costs
• Economic resilience: You can weather inflation, slowdowns, and price wars
• Competitive edge: You can offer better prices or higher quality than competitors
• Growth capacity: You can scale without proportionally increasing expenses

Remove this sentence or combine with the next for clarity.

Although small businesses are often thought to lag behind larger ones in productivity, a recent Xero report challenges this idea.

Small business productivity strategies that work

Boosting productivity is about working smarter. Focus on a few key strategies to streamline your operations, save time, and grow your business.

Invest in better work tools

Tools are made to amplify your efforts. For example, a carpenter can do more with an electric drill than with a hand drill. Find the tools that will amplify your work. Sometimes, a simple piece of software can cut down on double-handling, like a booking system that schedules jobs directly into your calendar. Accounting software that integrates with important business systems like payments or point of sale can also help.

Why you haven't got better work tools yet

Most small businesses know they need better tools but struggle to make the investment. Research by Professor Marc Cowling identifies five key barriers:

• Investment paralysis: Considering too many upgrades at once and not prioritizing the best return
• Unclear value: Not calculating expected ROI, making it hard to justify new tools
• Risk aversion: Only investing if payback happens within two years, avoiding bigger projects
• Financing challenges: Difficulty securing loans or federal funding
• Technology intimidation: Worrying that new tools will be hard to learn or won't work with current systems

How to make a move

To prioritize your tool investments, follow these steps:

1. List potential investments: Write down every tool or equipment upgrade you've considered
2. Calculate true costs: Include purchase price, training, setup, and ongoing maintenance
3. Estimate returns: Project how much time or money each investment will save annually
4. Rank by ROI: Divide annual savings by total cost to find your best opportunities
5. Start with winners: Choose investments with the highest ROI and shortest payback period

Smarter methods

Outdated processes silently drain productivity as your business evolves. What worked when you started may now create bottlenecks, errors, and wasted effort.

Process optimization systematically identifies and eliminates these inefficiencies. Here's your step-by-step approach:

Write down your processes

Record the steps you follow to complete jobs. Set aside a little time each week and ask your staff to help. Their perspective will be valuable.

Use templates to capture the same information for every job. This helps everyone understand what to do, when, and how. Writing it down also highlights inefficiencies and missing information.

Look for blockers

Review your documented process and look for bottlenecks and roadblocks. Ask your employees for honest feedback. Mapping your workflows visually can also help you spot issues.

Common workflow problems to watch for:

Double handling: Repeating tasks or passing them between people, wasting time and causing confusion

Momentum loss: Work stalling at specific points, causing backlogs and missed deadlines

Poor sequencing: Tasks happening in the wrong order, causing rework or delays

Quality issues: Repeating mistakes, leading to customer complaints and extra costs

Skill misallocation: Experienced staff doing administrative tasks instead of high-value work

Redesign your workflow

Go through your list of inefficiencies and fix the issues. You can often make big improvements by clarifying roles, resequencing jobs, and improving communication. Make sure everyone knows where to find the information they need.

Look for opportunities to outsource tasks that are outside your core strengths. Outsourcing can help your business stay focused and efficient.

Consider digital adoption

Software can give your business a big boost in efficiency. Use it to request and track jobs, centralize information, speed up communication, and automate repetitive tasks. There is a learning curve, but it frees you to focus on what you do best. You can find software for invoicing, paying bills, managing inventory, managing staff, bookkeeping, and reporting.

Check your work actually matters

Make sure you focus on what your customers care about. Avoid spending time and energy on things that don't help your business. Use surveys or talk directly with your customers. If some offerings aren't resonating, consider investing less in them.

Skilled workers

Small businesses can't afford specialists for every role, but you can still maximize your team's productivity. The key is setting up generalists with clear systems, proper training, and the right tools to excel across multiple responsibilities.

Onboarding and training

Proper training and resources help increase productivity. Make sure each employee has a job description with clear roles and responsibilities. Explain how to do the job and provide supporting documents.

Train your employees to use all the tools they need, including software. If they can't use the tools, your investment is wasted. Regularly share your business values and priorities. When people understand the big picture, they make better decisions.

Giving and receiving feedback

Feedback is vital for productivity, and it goes both ways. When something isn't done right, explain the problem and the solution. Otherwise, you'll end up redoing work. Delegate with confidence. Listen to your employees, too. Their perspective can help you optimize how work gets done.

Effective feedback drives productivity improvements:

1. Start with strengths: Ask employees to identify what they did well and why their approach worked
2. Reinforce success: Share specific examples of excellent work to encourage repetition
3. Tap their expertise: Ask for ideas on streamlining or improving work processes
4. Collaborate on solutions: Work together to refine their suggestions and set measurable improvement goals

This approach helps your team build confidence and spot process improvements firsthand.

Entrepreneurship

Entrepreneurship is not just about launching a business. It's about optimizing it. Recent federal legislation for small business innovation programs calls for greater success rates in moving from research to commercialization. Entrepreneurs unlock productivity by combining resources in new ways. This often involves some risk, but the rewards can be great.

Harness your inner entrepreneur to boost productivity

• Scale up your output to lower costs
• Acquire or merge with another business to gain efficiencies
• Specialize in a niche to improve speed, expertise, and quality
• Rethink your supply chain to find better suppliers or services
• Hire and empower entrepreneurial people to foster innovation

Team productivity: getting more from your people

Your team is your greatest asset. Their productivity can make or break your business. Start with clear communication and shared goals. Make sure everyone understands their role and how it fits into the bigger picture. Give them the right tools and a supportive environment where feedback is encouraged. This helps your team's efficiency grow.

Measuring your productivity improvements

How do you know if your changes are working? Measure your progress. Identify a few key performance indicators that align with your goals, such as project completion time or revenue per employee. Review these metrics regularly to see what's working and where you can improve.

Common productivity mistakes to avoid

Even with the best intentions, you can fall into productivity traps. Knowing the common pitfalls helps you avoid them. Here are a few mistakes to watch for:

• Micromanage your team instead of empowering them
• Hesitate to delegate tasks and try to do everything yourself
• Stick with outdated tools that slow your workflow
• Ignore signs of employee burnout
• Hold unnecessary meetings that disrupt deep work

Increase productivity checklist

To recap, here are some steps to help increase productivity in your business:

Better work tools

• List investments that would improve productivity
• Price each solution
• Calculate the expected return on each investment
• Choose the option with the best mix of affordability and impact (consult your accountant or bookkeeper for certainty)

Smarter methods

• Write down and map your work processes
• Identify all friction points, such as double handling or delays
• Brainstorm solutions and clarify roles and responsibilities
• Use software or outsource admin tasks that distract from high-value work
• Check your process against customer preferences to use your time wisely

Skilled workers

• Create an accurate job description for each role
• Explain how to do each part of the job, in person and in writing
• Provide comprehensive training on the tools
• Share the business vision and values
• Meet regularly to give and receive feedback

Entrepreneurship

• Scale up aspects of your work
• Watch for acquisition opportunities
• Focus on a niche opportunity
• Review your supply chain regularly
• Work with entrepreneurial people

Productivity is an ongoing journey

Productivity improvements create a positive cycle for your business. More efficient operations reduce stress and free up time for strategic work. Your team stays focused, your customers get better service, and you gain the financial visibility to make smart growth decisions.

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FAQs on small business productivity

Here are some questions about improving your business' productivity.

How do you measure productivity in a small business?

Focus on simple metrics that matter to your business, such as output per hour, projects completed per month, or revenue per employee. You can also use your accounting software to track financial ratios like profit margin. These often improve with higher productivity.

What's the difference between efficiency and productivity?

Productivity is about the quantity of output you generate from your inputs (like labor or materials). Efficiency is about the quality of your inputs – doing things with the least amount of waste, time, or effort. You can be efficient at a task that isn't very productive for the business.

How long does it take to see productivity improvements?

Some changes, like automating a repetitive task, can show results immediately. Bigger shifts, such as adopting new software or changing team workflows, might take a few weeks or months to show a clear return as your team adapts.

What are the most common productivity mistakes small businesses make?

Common mistakes include trying to do everything yourself instead of delegating, using too many disconnected apps, and not investing in proper training for new tools. Another mistake is neglecting to review and update processes as your business grows.

Should small businesses focus on individual or team productivity first?

It's best to look at both. Start by making sure each person has the tools and clarity to do their job well. Then, improve communication and workflows to boost team productivity. Improving team processes often lifts individual performance, too.