Maximise business value through automation
Automation offers significant operational, scalability, and evaluation benefits. It can reduce costs, enhance employee satisfaction, minimize errors, and capitalize on new opportunities.
Happy automation Friday!
There are many areas where automation could impact your business. Most business owners see the advantage in only one of them, but in many cases, it is a combination of different percentages for each of them.
Operational Value
Firstly, automation is an operational advantage for many businesses. You can see the benefit of reducing the costs of running a specific process. There are several formulas to correctly measure the process optimization cost; the easiest one is by calculating how many hours you save per employee multiplied by their cost per hour.
A simple example would be if you automate the contract signature process by adding a tool such as DocuSign. Let’s say that you reduce the time for each contract from 2 hours to only 30 minutes, and the average number of contracts for your company is five per month.
Number of contracts * Reduced Time * Hourly Cost * Number of Months
5 * 1.5 h * 25 euros * 12 = 2,250 euros yearly
Alex Hormozi talked about the math behind the cost of automation. His theory sounds good when it’s presented by him. But a specialist in automation should also consider other standpoints such as:
How you can reduce the cost of automation using other methods, not custom development (I’ve written about various methods of integration in this article).
Employee Satisfaction - A person who works 4 hours weekly on a repetitive task is unlikely to be a happy employee.
Cost of Error - It’s impossible to have a 0% error rate in this type of activity. An error could cost you almost nothing if it’s a small error, but if it’s a payment approval or a missing payment from the financial department, it could have a big impact on your cash flow.
Opportunity Cost - What would this colleague do with their new free time? Are there some new opportunities waiting?
Scalability Value
Another reason to start an automation project is when you want to scale the business without scaling the costs with it.
We tend to think that costs are linear (they scale with the business), but there are 3 different types of costs:
Fixed Costs: such as subscription software, or financial and bookkeeping departments, or fixed costs like internet providers.
Linear Scalability - proportional to the number of clients: such as the cost of project management software with a payment model based on the number of users
Logarithmic Scalability - like in account management, if you hire 4 more project managers or account managers, you would probably need to hire a manager for them. Let’s say that for 10 customers you would have 2 account managers but for 30 customers you would have 6 account managers and 1 manager, which is an extra cost.
Using automation, you can reduce costs in the logarithmic scalability category. The goal is to have a small and manageable team; automating some of their activities will let you keep your team small and agile.
Evaluation Value
The third benefit of process automation is using it in your evaluation. It’s true that it depends on each valuation method, but you can gain some leverage with your automation.
If you are considering attracting an investment or selling the business, you should pay attention to the automation aspect, especially these main pillars:
You’re using one of the first 3 ways of tools integration: Direct Integration, Third-party aggregators, or User Interface Automation / RPA. In most cases, written code is a liability (due to the high cost of maintenance and low adaptability). You should consider avoiding custom automation development at any cost.
Process Documentation: It doesn’t matter where you store the data (Notion, Coda, Google Docs), but it’s important to have documentation for any of this automation.
Automation Owner: Be sure that a specific person from your company is familiar with the automation processes you’ve built. It’s even better if that person is trained in Product Management or in any automation tools (there are some free courses such as the one from make.com).
Finance Traceability: Keep all the automation investment in a dedicated account in your financial analysis. Consider adding the costs of automation from your team and any external development costs.
The reason for developing automation in your business could vary from one business to another, but as with any other feature, it is important to define the scope from the beginning. Building with that scope in mind, you can enhance the value of your business using automation.