Losing money can result in a slow, painful death for businesses. However, losses are the default mode of operation unless you’re intentional about your finances.
Remember the idea that things left to themselves tend to degenerate? Your business is not immune to this reality, unfortunately. Growing your business – adding new customers, hiring more staff members, expanding into new territories – is wonderful and should be celebrated. But even as you “grow,” make sure you’re not losing cash due to factors within your control.
So, how can you combat the hemorrhaging of resources? I’m glad you asked.
If you’re like most business owners, it’s possible you’re paying for an array of services, subscriptions and supplies. This is expected, and kudos to you for taking advantage of resources available. However, it’s crucial to assess these recurring expenses on a periodic basis. Are there any that you A) no longer need, or B) never quite provided the ROI you’d hoped for? Perhaps there is a service you’re paying for in the pre-COVID-19 world that doesn’t make sense now, for example. Take a hard look at your spending and trim the fat to avoid paying for things that don’t serve you well.
Eliminate interest payments as much as possible. Pay the full amount of your credit card on time and pay down any accruing interest. It’s that simple. Interest is a leech. Stay as far from it as you can.
3. Shop vendors
When’s the last time you compared pricing for possible suppliers? Businesses aren’t static, as you know. Rates can change and new options altogether enter the market as new companies are established. You’re paying someone for everything from Internet access to uniforms. Tag someone on your team to investigate your options so you can be confident you’re resourcing your company wisely.
Speaking of shopping around, don’t waste your time comparing prices to your competitors. Instead,
- Look at your conversion rates. If they’re high, it’s time to raise your prices.
- Look at the profitability of service fulfillment. If it’s low, it’s time to raise your prices.
- Look at the last time you raised your prices. If it was 2 years or more, it’s time to raise your prices.
If it is time for a cost increase, be strategic in how you announce this change to your customers (see #6!).
5. High employee turnover
Training new employees is a drain on money and efficiency. However, you might be tempted to shout back at me that you can’t help that employees are leaving. I’d push back (gently!) on that argument and share that certainly there are steps you can take to combat your staff resigning – and actually, they begin before you even hire them. How is your hiring process working for you? Make sure you’re beginning with qualified candidates whose references speak highly of them. Your team can make or break you, literally, so make sure you’re prioritizing finding the best possible candidates. Once they’re on board, make sure you’re investing in your staff, valuing their opinions, and equipping them with the tools and skills they need to do their jobs. Your employees can be your greatest asset, so this is not an area where you want to scrimp. Stately simply, you can’t afford to replace people frequently.
6. Poor customer service
There’s no way to sugarcoat this one. Not treating your customers well will impact the success of your business. It is more cost efficient to retain or even upsell a current customer than it is to acquire a new one. Make sure your customers feel heard, valued, and appreciated. That will look different for each industry, but it’s well worth developing a customer service strategy or potentially an employee rewards system. Plus, if you wow your customers, they’ll naturally refer people to you. Customers, if treated well, can be an extension of your sales team.
Delegating can be a problem two ways: you could be delegating too much, paying someone to do things you could do yourself. Or, you could be holding on to too many tasks yourself. This could result in a productivity bottleneck if every workflow involves you. Plus, if you’re trying to do it all, you could be missing out on an opportunity to engage an expert who could handle a particular task much better (and faster, probably) than you could. Keep productivity flowing, don’t overpay for menial work, and make sure the right tasks are matched to the right people.
8. Faulty equipment
If you’re relying on outdated or cheap equipment that tends to malfunction, you’re wasting time (which is money!) and possibly also cash on repairs. Investing in more efficient, more reliable equipment is a cost, yes, but it will save you in the long haul. Do your research and weigh your options. Make sure you plan your cash flow accordingly as you prepare to make a big purchase.
9. Real estate
It’s unlikely that you can ride the COVID-19 wave of working remotely, but it may be time to consider if it’s best to lease your space or if it’s time to buy. Consider saving up so that you have the funds you need to buy your own location in the future.
10. Sloppy bookkeeping
Oh, the stories I could tell about missed opportunities due to bookkeeping errors! It is essential that you have an accurate gauge of your business’ finances at all times. This is only possible if you’re keeping updated records and designating your resources into categories for specific purposes, a la Profit First. Part of solid bookkeeping is collecting all payments in a timely manner, so make sure you’re not allowing months to pass by before you collect payments for services.
As Keith Cunningham said wisely in The Ultimate Blueprint for an Insanely Successful Business, “Our problem is not that we don’t have enough opportunities to make money. Our problem is that we have too many opportunities to lose it.” He’s right. Fight these opportunities wisely, and schedule a call if you want to learn more about how to keep your profits in your pocket.