Photo credit iStockPhoto
If your faucet is leaking, into the sink, that may be annoying, but how much damage is that doing really? Your water bill goes up some undetectable amount…big deal. Yeah, you should probably get it fixed so that constant drip will stop. But what if you had a leak in a pipe in the wall??? Now that is a different story. It could leak for a long time before you even noticed anything. Those are the kinds of leaks that can do real damage because the leak isn’t so obvious. Money leaks can be like this too.
If you look through your expenses to see where you are spending money, most of the time you are just identifying the leaky faucet type of things. Maybe you are paying for some kind of service that you aren’t using any more. Or the office supplies seem to have gotten a little out of hand…but really, is that going to matter much? Yes, they should be fixed, but the damage they are doing is pretty minimal. To really make a difference, you need to think about the not so obvious places that the money leaks out. So I came up with a few ideas to get you started in your thinking.
Underutilization of assets
What do you own? Are you using it to its fullest potential? How else can this item be used to create value? Get creative. Do you have additional space that you aren’t using that you could rent or you could use more effectively? Maybe you bought a delivery truck that you only use a fraction of the time. You still have all of the cost associated with maintaining that truck, like insurance and depreciation that are fixed no matter how many hours you use it. How else could you use the truck that will provide value? Do you just need to try to get more customers who want delivery and will pay for that added value?
Underutilization of people
Staffing is one of the hardest things to get right, especially if you are a small business. Everybody has to constantly wear multiple hats. It is important to evaluate periodically if the skills of your staff and the jobs they are doing are really the best match. Can the person be performing higher level tasks? Are you paying for skills that you aren’t really using? Are the tasks they are performing worth what you are paying? Is there a better use of their time? Are there things that could be more effectively outsourced?
Systems and processes
Are you constantly reinventing the wheel, or making the same decisions over and over again, or training on the same tasks? All of these problems can be solved with systems and processes. There is an upfront cost to this, but it is an investment if done properly. It effectively can multiply your time. It also adds consistency to your business…something that customers really like! If your service is hit or miss, your customers will be constantly looking to replace you.
Reduce friction, get paid
Any experience that you have with your customer should have the least amount of friction possible. Don’t make things hard for them. Look for friction points that you can reduce. How easy is it for your customer to set an appointment? Or buy your product? Or pay you??? My rule #1 in business is DON’T MAKE IT HARD FOR YOUR CUSTOMER TO PAY YOU! That seems like such a simple rule but I can’t tell you the number of times I have seen this. Businesses have some kind of janky system where the customer struggles through to figure out how to pay…really?!? That is just an invitation to be paid last…or for them to never buy from you. Everyday that an account is outstanding, is money leaking out of your business.
Pay for Value
The old saying “you get what you pay for” is so true…that is why people keep saying it! Buying the cheapest thing is fine if the cheapest thing will do the job, and you don’t really need it to last. But often times that cheapest thing ends up being really expensive. Try to think about value instead of price. That janky (my word of the day) system you are making your employees use might seem cheap, but what if they spend half their day complaining about it…or trying to figure out how to use it. All of that time costs money too.
The same is true for equipment. If you are constantly broken down, how much are you really saving…let alone all the frustration you are adding. Yes, sometimes you have to make do with what you have, but most of the time, it pays to think in terms of value rather than cost.
Pricing
When was the last time you looked at your pricing? It should be reviewed on a regular basis. Are you in line with the market? In line with your costs? Often times we are hesitant to raise prices because we are afraid of losing customers. But you need to keep up with inflation and changes in the market. If you wait too long, you may need to make a huge adjustment, which is probably going to be hard for your customers to swallow and an invitation for them to shop around.
These are just some of the ways that I think about money leaks. What ideas do you have? Where have you found leaking money?
Comments
Share this Post