Is Your Business Leaking Money?
November 20, 2007
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Yesterday I explained how you can increase your profits by 35% if you charge 10% extra. And although increasing your sales is the best way to make more profits - you need to make sure you’re not giving those profits away.
Think of it this way. If your profits are $100,000 a year and you cut your costs by 5%, that’s another $5000 for you.
Here’s a few ways your business could be leaking profits:
1) Two legged paper shufflers: Many people believe that their business will look bigger and better and attract more customers if they have more staff. But, more staff isn’t always better. Towards the end of my last business, I had two staff too many. And unfortunately, more staff doesn’t always equal more sales. Make sure your business isn’t over staffed.
2) Know that you are not Buckingham Palace: It amazes me how many business owners think their office needs to rival the Queen of England’s. Some people seem to think that if they have expensive stuff in their office it impresses customers. It doesn’t. In fact, it usually has the opposite effect. If your office is expensive, they usually think you’re passing the costs onto them. So, keep any office furnishings as cheap as possible, rent a cheap office and if possible, work from home at first.
3) Stop the happy shoppers: Don’t let anyone order a single paper clip without a purchase order number. People like shopping - even for office sundries that you don’t need. It makes them feel important and happy to splash your hard earned profits on 100 boxes of ink.
4) Kill unneccessary perks: Don’t give out work mobile phones, or company credit cards - unless they are essential. And if employees have to stay in hotels overnight, make sure they’re the cheapest ones possible. Also, put a limit on their food expenses.
5) Understand you’re not here to keep the Royal Mail in business: Most letters don’t need to get there the next day, but office staff can be lazy and they’ll send everything first class unless you stop them. Make sure your franking machine is set to second class postage. If an item is urgent - write first on the envelope.
6) Don’t pay top dollar for everything: Every few months, examine your costs. Are you overpaying for supplies? Check delivery costs carefully, as they are often over-inflated. If you’re paying too much, negotiate a better deal, or move onto another supplier.
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6 Responses to “Is Your Business Leaking Money?”
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Number 1 really struck a chord. Having re-started a business, I’m determined not to fall into that trap.
I’m looking into outsourcing things that add value to the business and can be done without it affecting performance.
One of our challenges is operational. We have helpdesk engineers who end up answering most of the calls. When they are busy, there’s nothing worse than getting a sales call.
At the other end of the scale, when you’re finishing off one support job, it’s really difficult not to switch to another job just because that person is on the phone. That means the poor engineer can end up starting too many jobs at once and not finishing as many.
And the call may not be that urgent.
So (today in fact) we’re going to try a call centre. Instead of extra people, we’ve invested in a piece of software. Because it works over the Internet, the call centre (in Scotland) can take the call, log the incident, and then at our end, hey presto! The support call appears.
And we can deal with it in order. The only calls we will get are when the client needs to speak to an engineer straight away in which case we’ll take the call.
Another advantage is that during busy periods, we inevitably fail to log all the calls. The engineers end up just doing the work and not recording what they have done.
So a nice side-effect of having the calls registered is that we will be able to reflect the time we spend better in the contracts at renewal, knowing we have recorded every call.
And because every call is logged, it helps us manage the volume better.
Too often the outstanding work walked around in people’s heads rather than recorded somewhere centrally so everyone was aware of every issue with every client.
That will be a huge boon to us.
So the extend these excellent tips, mine would be to outsource as much as you can.
No disrespect to staff - you do get some great ones. But often, you can outsource for less particularly when you can only pay for the work you receive.
Outsourcing typing for example. You can dictate into a digital recorder, email your work and get the typed document back. Nicely presented on your own templates.
And you only pay for the dictation time. Not the square footage on office space. No salaries. NI Contributions. Dealing with holidays and sickness/absence.
It all makes sense!
Only hire people who are absolutely essential for the expertise that makes your business unique. You can’t outsource that!
Hi Ian - that is a great idea. I have used call centres before and I’m considering using one again.
It didn’t work out for me when I was with Rainbow, but I think it will now. The trouble was, when there was a claim surge, many of the call centres were also dealing with the calls of other franchisees. And they couldn’t deal with it, as the surges were unpredictable, and they only had the staff to deal with normal call levels.
But, I think it would work for most businesses.
We take all our out of hours calls at the moment, but it is a nuisance as you have to have the phone diverted to your mobile all the time.
I would be really grateful if you could send me the info for the company you will be using Ian. Cheers.
They have impressed me on day one. The whole thing worked like a dream - the support calls were appearing on screen - pre-logged and it was far easier to deal with them and get them done.
I can see this making a huge difference.
I’ve emailed you their details, feel free to publish if you use them and have the same experience.
Catherine,
These are all great tips. Too often new businesses feel they need all of the bells and whistles, only to find out they don’t have the income to pay for it all.
Like Ian said, outsourcing has many great advantages.
I also agree, it is important to review the amounts you are paying for different goods and/or services on a regular basis. Often, prices increase, and you are assuming they are the same as they were six months ago.
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