April 21, 2023 By Max Freedman

The most successful businesses are constantly finding ways to improve. Their improvements often involve finding and fixing bottlenecks that may linger virtually unseen in the background. So what is a bottleneck in business? And how do you fix it? 

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What is a bottleneck in business?

The term “bottleneck” is used to describe liquid in a bottle that flows toward and coalesces at its neck. The fluid’s velocity slows there, creating a backlog. A bottleneck in business is a slowdown due to a work process at full capacity receiving more inputs than it can take. There are two types of bottlenecks in business: 

  • Short-term bottlenecks are common and typically solvable. Examples include an employee leaving a business and their replacement starting a week later. With one fewer person on the team, there are now too many tasks for each team member, affecting the whole process. But when a new team member starts, this bottleneck may stop existing.
  • Long-term bottlenecks may indicate a systematic problem that can take more work to resolve. An example could be an outdated manufacturing belt that’s been preventing an automated industrial process from running smoothly. This old technology typically results in items spending much longer than necessary on the assembly line, yielding fewer products created per hour. Solving this problem may require considerable time and money that the bottleneck persists for a while.

What are the four main areas that cause bottlenecks?

Bottlenecks occur most often in the below four areas.

  • Engineering. Continuous improvement is generally a big part of designing, creating, and maintaining complex systems. Until the engineers behind these systems find ways to achieve such improvements, bottlenecks will likely persist.
  • Inventory. Businesses that carry stock should have an inventory-to-sales ratio between ⅙ and ¼, or an inventory turnover ratio of between four and six. Turning over larger amounts of inventory while yielding fewer sales – as in, achieving a lower turnover ratio – indicates an inventory bottleneck.
  • Customers or clients. When customers or clients keep demanding more from your products or services, you may lose time you could otherwise spend on other processes. Although it’s often best practice to heed these requests, they may become bottlenecks that slow other processes.
  • Management. Sometimes, resolving bottlenecks involves training your management team to communicate more clearly or delegate more effectively. Training your managers properly and creating process guidelines may address most of these issues. That, in turn, can lower wait times for finished products or services.

Common bottlenecks that prevent your business from growing

Below are some common bottlenecks that small businesses of all stripes commonly face.

1. Unclear processes

Just as a fully automated production line is standardized, you may want to consider the same for your internal processes. You should consider mapping your processes in writing so that new and old team members alike may be able to meet their objectives on a reasonable timeline. Consider providing a checklist alongside this map to help your team and projects move forward.

2. Poor communication

A team that isn’t clear on how to do its work might struggle to make progress. Clear instructions each and every time, whether via established process maps or newly written guidelines tailored to the task, are typically a great solution. So, too, is keeping yourself accessible and quickly responsive to your employees’ questions.

3. New management or leadership

Although new managers may be vital for a small business, they typically take some time to get fully onboarded and comfortable in their position. Their adjustment period may also create bottlenecks for the whole team and organization. 

Typically a good way to resolve process bottlenecks with new management is to provide hands-on manager training from the jump. You may also encourage the manager’s direct reports to give positive or constructive (and respectful) feedback. The manager may also consider giving feedback to employees to get everyone on the same page. From this foundation, your whole team may better learn how to perform to their fullest and keep your processes moving along.

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4. Knowledge gaps

A team that lacks the information or skills to perform your processes may struggle to reach the finish line in a timely manner. Resolving this bottleneck may require internal training, courses outside the company, or changes in hiring practices.

5. Poor hiring practices

Early in your business’s lifetime, it may be tempting to hire anyone who seems even remotely qualified for the work. This is generally understandable if you’re in a rush to staff your company enough to accommodate client or customer needs. It may also be understandable if your hiring budget is low and you can’t yet afford the best talent available. But bad hires may create bottlenecks large enough that you lose the time and money you’re trying to save.

Instead, slow down your hiring process and wait until you find the right fit. That said, if your team is too thinly spread and you need to hire someone now, hiring for contractor-to-full-time positions can be a happy medium. These employees’ full-time positions may be contingent on success during their contractor period. If they prove to be misaligned for what you need, you may consider hiring a better fit before the damage worsens.

6. Thinly spread team

Not hiring enough (or at all) may introduce just as many bottlenecks as hiring unwisely. You should develop standardized job postings, interview practices, and job candidate testing processes to vet for quality at every step of the way. This way, when your team gets busy enough that you need more help, you may be able to more efficiently find the right person.

7. Lacking delegation

As a business owner, you might be tempted to do it all yourself. Maybe you see this trait in some of your managers too. In either case, it’s typically a mistake – delegation is often a key business management skill that may free up bottlenecks.

When more people are working on the same set of tasks, each person has fewer tasks and thus less stress. They also have more time with which to truly focus on their work. The result can be higher-quality work than if one person – whether you or an employee – were to do it all. And if you’re worried about low quality when you assign work to someone else, you can consider leaving extra time for review.

8. Overabundant processes

Adding additional systems or technology to your workplace may worsen the problem you’re attempting to solve. Employees may lose precious time tending to an overload of systems, cutting back on your efficiency. Consider streamlining your current systems and processes instead. 

9. Mismanaged digital presence

Growing businesses may face increases in traffic to their websites, social media pages, and email addresses. Companies lacking the infrastructure to keep up with this traffic may experience bottlenecks. These bottlenecks could include delayed email response time or a website loading slowly since it’s not equipped to handle excess traffic. Tools ranging from social media management systems to websites with scalable cores may resolve these bottlenecks.

Tips to help eliminate bottlenecks from your small business 

There are generally three primary ways you can eliminate bottlenecks in your small business.

  • Increase your capacity

Bottlenecks wouldn’t exist in actual bottles if the neck were as wide as the rest of the vessel. Similarly, your business bottlenecks may disappear if all your processes were to reach similarly high capacities. To achieve this, you could consider hiring a new team member or upgrade to more efficient equipment. 

  • Restructure your workflows 

Some bottlenecks stem solely from how you go about your work. Maybe there are too many steps, or maybe there are faster ways to get through certain steps. Look at your workflows and see if you are able to identify bottlenecks, then plot out how to change your workflows accordingly. 

For example, maybe you’ve been sending your products through two rounds of internal review and getting them to market a week after production. But maybe the person behind the second review typically gets around to this step three business days after production. If that person’s approval has become unnecessary over time, consider removing them from the process. You’ll typically get your product to market faster and free up this person’s time for other tasks.

  • Obtain working capital 

They say it costs money to earn money, and it’s true – investing in more resources may eliminate bottlenecks. And when you’re operating on a low budget, a lack of resources might impede how much you can achieve in a certain period. Investing in new hires or upgraded equipment may be a near-instant solution to these problems. And with the right funding sources, obtaining this working capital may be affordable and convenient.

Obtain working capital through SmartBiz® 

Most bottlenecks may be solved, especially when you have enough money to cover the expenses of obtaining new resources. With SmartBiz, you can, if qualified, secure affordable financing, such as SBA loans, that you may use to resolve your bottlenecks. Check now to see if you pre-qualify* (it takes only five minutes) for business funding that can restore a smooth, seamless flow to your processes.

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