It can take several years for small businesses to become financially successful. Even then, finances can swing to extremes based on a lot of outside factors, such as weather, local events, and new competition. While you can’t control these outside factors, there are plenty of ways you can keep your business from losing money.
Being aware of what factors affect your bottom line is the first step to stop unintentional money loss. That’s where this article comes in. Consider each of these points and do an internal audit. What steps do you already have in place to combat money loss and where do you need to keep improving?
Not-So-Secret Things That Affect Money Loss
They say time is money and that is definitely true when your employees are spending more time searching for items or misplaced files than they are working with your customers. Disorganization means your employees are less productive. If the front desk associate at your fitness center has to go searching high and low for copier paper or the wait staff at your restaurant can never find enough menus, that time adds up. Imagine if each of your employees spends even 10 minutes today searching for something lost. That can add up to hours of time not spent working. In addition, disorganization leads to poor customer service because your clients are kept waiting.
It is estimated that for every hourly employee that you lose, you end up paying about 16% of their annual salary in recruiting and training expenses. For a barista or desk clerk who makes $10 an hour, you would spend almost $3,500 to replace him or her with a new employee. And those numbers are just estimates. The true cost of employee turnover is hard to track. There are also intangible losses when it comes to employees frequently leaving your business. For example, other employees have to take over until you find a replacement. That can lead to continued dissatisfaction among your staff. In addition, with fewer people working, you have a lower staff to customer ratio which can lead to unhappy clients.
Poor Customer Service
When your clients are unhappy with the work and services you provide, it can affect your business’s bottom line in several ways. First, you lose money when a client does not return to your restaurant or cancels his or her membership to your fitness center. Second, when clients are unhappy with your service, they are unlikely to recommend your business to friends and family. In fact, they may actually suggest that people avoid your business. Your business’s reputation helps bring in money. If a customer is upset and posts poor reviews about your products or services, it can send you into debt quickly. Lastly, when customers complain and you have to make amends, you are giving away your services for free. For example, when you need to comp a table with a free dinner or drinks because food arrived cold or undercooked, your restaurant has to absorb those costs.
Scheduling hourly employees is a huge task. Hourly employees often have many outside obligations such as schools and families. You may not think that your schedule impacts your budget but when you look around and see that you’ve overstaffed for a slow shift, you know that you’re spending money on work that isn’t happening. You can tell if you’re overscheduling when you have to send employees home early or if you’re frequently calling them to tell them not to come in for their shifts because it’s too slow. When hourly employees get their shifts cut, it can cause them to be frustrated and want to look for another job. So not only does overscheduling cost money because you’re paying too much in wages, but it can also create friction and cause employees to leave.
Not Shopping Around for Service Providers
Your business has contracts with many vendors in order to provide your customers with the best service possible. When you don’t take the time to regularly review the money that you’re paying to service providers, it’s likely that you’ll be spending too much. For example, if you run a restaurant and you buy produce from a local farm, you should talk to them about seasonal pricing. You may want to consider purchasing fruits and vegetables that are in season and making small changes to your menu accordingly. In addition, make sure you’re shopping around when it comes to providers for Internet access, online programs, budgeting software, legal advice, telephone lines, and contractors. Don’t be afraid to negotiate new deals and services when you feel there might be a way for your business to save money. In addition, don’t forget to look for new providers who may have started up during that time you’ve been running your business. New companies might offer great prices in order to attract new customers.
If you are still running ads in the phone book or sending out paper mailers, you may want to reconsider your marketing plan. Word of mouth recommendations and a strong online presence are two of the best ways to market your business in a high-tech economy. If your marketing plan does not include finding your customers online and advertising to them there, you’re wasting money. Outdated, useless marketing can cost your business thousands of dollars. Find new and unique ways to reach your customer base, and you’ll put that money to better use.
When it’s time to tighten up the purse strings and figure out where your business can save some money, it’s important to identify some of the most common areas that can be costing your business. Get your business space organized both in person and digitally. Make sure items that you use frequently, as well as files that you accessed regularly, are easy to find. Keep your employees and customers happy so they’ll keep coming back. Use scheduling software to be sure you have just the right number of staff available during the shift. And look at ways to frequently update your vendor agreements and your marketing. Making changes to these six areas can save your business a lot of money.