10 ways that businesses lose money and how to avoid them
Your Business Could Be Losing Money Without You Even Realising
Keeping a small business running profitably can be quite a challenge for most business owners. With the constant pressure of chasing sales, paying creditors, managing staff and the countless day to day tasks associated with running a business, it can be very easy for money to slip through the cracks and eat away at profit margins. With this in mind, here are common ways that businesses lose money. Keeping an eye on these practices will have a positive impact on your bottom line.
1. Improper Use and Application Of Technology. Many businesses either try and “get by” with antiquated technology that slows production, sales or processing, or go the other way and invest in the latest and greatest technology that really has no real use in their business operations. Proper application of technology in your business will have positive affects upon your productivity and profitability, but you need to consider what it is you want to do and what technology will produce the most profitable result. Purchasing high- tech software that has all the bells and whistles may not deliver real benefits to your business. Know what you want, what quantifiable benefits it delivers and how to maximise its benefit.
2. Poor Customer Service. There is an old saying in business that if you give good service the customer tells nobody, but if you give bad service, they are liable to tell at least ten of their friends. People remember poor service and they love talking about it. The problem is that often you never know why a customer ceases to use your service – they just disappear and take their business elsewhere. Maintaining your customers is much easier than winning new ones.
3. Poorly Trained Staff. Neglect of properly investing in staff training has major impacts on your ongoing business. People who are half trained tend to look for short cuts and ways to get the job done without understanding the proper implications of their actions. Training in key areas of your business is not a cost, it is an investment that in the medium to long term will deliver productivity savings. Poorly trained staff, through no fault of their own, will create constant problems and cost blow outs.
4. Lack of organisation Interlocking systems that streamline processes and deliver services save and make money.
Ad-hoc processes and procedures that seemingly run in opposition to or despite other processes within a business cause bottlenecks, frustration and confusion. A well organised, coherent system is worth investing in to ensure that your business and your people work efficiently.
5. Saving a few dollars on marketing presentation is being penny wise and pound foolish. In this modern age, image is everything.
Poorly designed or presented marketing materials say a lot about your business and are likely to turn customers away rather than attract them to you. If it’s worth doing, it’s worth doing right.
6. Procrastination. Quick decisions are crucial in business. Sitting on things and worrying too much about which way to go will harm your business more than deciding on a course of action and pursuing it. Ultimately you need to be able to recognise good opportunities and act upon them quickly. If an employee is right for your business the chances are they’re right for somebody else’s – don’t leave them hanging – make the job offer.
7. Not empowering staff if all decisions have to come through you – you run the risk of creating a serious decision making bottleneck. Your staff have the potential to be your greatest asset. Once you have them trained and skilled – give them authority to make decisions within their areas of expertise. This not only will remove that bottleneck around you but it will make staff feel valued within your business.
8. Being too rigid with hours. It’s your business and it’s up to you to do what it takes to get customers and sales. Businesses need to do what needs to be done to make the sale or meet that important customer. That doesn’t mean that you have to work sixteen hours a day – it means that you have to be flexible with the hours you work. Importantly you need to communicate what you are doing to your team members.
9. Prejudging Your Prospective Customers. Appearances can be deceiving and it’s easy to prejudge a prospect’s worth to you by allowing your own prejudices (we all have them) to influence you. Every customer should be treated with dignity and respect – all too often this does not occur and customers are aware of your attitude. Making them feel unimportant won’t help you make sales.
10. Poor stock control often manifests in buying too early and carrying unnecessary stock and the associated costs. This has an obvious drain on cash flow. Conversely not having enough stock in hand results in lack of supply and lost sales.
Business management is a constant process of trial and analysis. Keeping an eye on these ten money losers can help you put a stop to unnecessary profit losses.