Photo by Startup Stock Photos from Pexels
You will have numerous goals when you are running a business. You need to make sure that you are keeping your customers happy and guaranteeing that you consistently deliver a high-quality product or service. Another key goal is to ensure that you keep your costs under control. Most people have heard that 90% of companies will fail on the market in their first year. That shouldn’t be unexpected because there are always going to be winners and losers.
However, it’s still worth identifying the key reason that companies tend to fail. One of the main issues tends to be a problem with high costs. When there are high costs for a company, a business is always going to struggle to remain competitive and efficient.
Let’s say that there is an economic shift in the market. If experts are to be believed the coronavirus pandemic is still on track to cause a massive market recession. When this happens, it will be vital for companies to lower their prices to ensure that they can continue to attract the interest of consumers.
You will only be able to do this if your costs are low enough to still continue to make a profit selling your products or services at a lower price. That’s why it’s worth identifying and exploring how your business could be losing money.
There are lots of common ways that a business can lose money over time but there are also issues that you might not expect or predict. Let’s take a look at some of the more weird possibilities.
Employee Churn
Have you heard of employee churn? This can be one of the most significant costs for any company. If you don’t know what this is it basically refers to the cost of losing and then needing to replace workers in your business. If you think about it, this makes a lot of sense. After all, the hiring process isn’t cheap. You need to work out the package that people leave with, advertise the position that is now open and proceed through the hiring process. Some businesses will also use a recruitment team. While expensive, they can be worth the cost for one key reason. They’ll make sure you get the right person for an individual position.
One of the biggest reasons for a high level of expensive churn is simply the fact that the person was never right for the position in the first place. They may not have had the skill, experience or expertise. They may also not have had the right goals in mind. Perhaps they say the position as a stop-gap whereas you were looking for someone to fill the role long term. There are definitely various issues to contend with here.
You also need to think about your office culture. This should be built up and become a key part of your hiring process. You need to ensure that new hires do fit into the office culture and that they are going to click with other people in the work environment including you.
Churn can also be effectively reduced by ensuring that you are providing benefits to employees who stick around. These have to be the right benefits and they won’t always be purely financial. For instance, you could ensure that the position is not a dead end. Instead, they should be able to grow and evolve in their career while remaining at your business.
Poor Performance
On the other end of the spectrum, it’s possible that you lose money in your business model because you keep a poor employee on for too long. One bad employee can drag your business right now. They will lose you sales, reduce levels of efficiency and impact general productivity for your business on a daily basis. This is why it’s worth completing temperature checks in your business model. You need to make sure that there are no issues with individual employees as well as groups too. As with other options that we have mentioned, you can automate this completely. Simply get your employees to fill out surveys at the end of each week and run the results. You can then provide a personalised level of support to anyone who is struggling in your business.
When you are having difficulty with an individual employee, there are two options. You can think about training them up or letting them go. Don’t forget letting them go is always going to be the more expensive choice. It will lead to that issue of churn that we mentioned above but sometimes it’s best to cut someone out then let them become an anchor for your business long term.
A Sharp Undercut
You might also find that you are struggling to get the profits you should be earning because another business or corporation is selling them instead. This is commonly referred to as the grey market. The times are sold legally but outside of authorised sale channels. So, every time a product is sold on the grey market, that’s a lost sale for your business.
Since the grey market is legal there are limited levels of power in terms of what a business owner can do here. You can’t simply report sellers on this market because they aren’t breaking the law. Instead, you need to educate your customers on buying from authorised sources. Ultimately, this is about ensuring that you create loyalty for your brand. It’s not always easy to do this but you should start by selling a quality product. Don’t give customers a reason to explore an alternative from the official seller by offering a product that isn’t worth the price. You should also aim to provide value in every consumer purchase decision. Value can be achieved in a variety of ways from a free gift with a purchase to the right level of engagement. It’s important to remember that these days customers want more from their purchase decisions. They want to feel connected to your business and they want to know that you care about them beyond just a source of profit.
To achieve that, you need to think about adding personality to your brand identity. It will be important to ensure that you are stepping away from the competition with a brand that is completely recognizable and entirely unique. You should always speak to a marketer about how to do this the right way from day one. If you don’t have a strong brand identity from the beginning then you will be quickly forgotten on the market.
Hidden Money
You might find that you have hidden money in your business model. This will usually be the case if you are not managing your books carefully. You’ll probably find that a lot of money is slipping through the cracks in smaller sums that you have not foreseen. If you are worried about this possibility, then it’s worth hiring an accountant. With the right accountant, you will have someone to manage your books for you and that’s always beneficial. A lot of business owners wrongly assume that an accountant is going to cost more than it saves. Well, that’s just not the case. Instead, an accountant can save you a lot more in the long term.
If you are worried about the additional cost, it’s going to be worth exploring outsourcing services. You don’t need to take your accountant on as part of your full-time staff. Instead, you can get the same quality service and just access a solution like this whenever the needs arise.
You might also want to think about exploring automated outsourcing solutions. With this option, you can simply check how your costs are yourself. You can make sure that you don’t have to worry about the costs slipping out of control.
Photo by Alexander Mils from Pexels
Bad Technology
Finally, it’s possible that your business is losing you money because you have fallen behind with technology. In 2017 a reported 50% of businesses were still dragging their feet with Windows XP systems. The reason? Companies wanted to avoid the costs of switching to new software and training employees. While new training does take time and money, it’s worth it because the tech will operate faster. You probably don’t think much about the few extra minutes it takes to load up the PCs in the morning or access a piece of software. But it all adds up eventually and the result could be that your business is dragging behind the key competitors.
If you are concerned about the short term costs of upgrading tech, it could be worth renting it instead. This will allow you to keep up and save at the same time.
We hope this helps you understand some of the hidden ways that your business could be losing money over time. It’s important that you take the right steps to prevent this type of financial leakage. If you approach this the right way, then you will make your company far more competitive on the market and a force to be reckoned with. You could also ensure that longevity of your brand.
