How to Uncover and Reduce Hidden Costs in Your Small Business
As your small business grows, you want the latest technology and ERP solutions to keep operations running as efficiently as possible. It is important to have data at the push of a button so you can make quick, informed decisions.
But companies can become too inundated with the “best” and “newest” solutions which end up causing more work and costing more money. Many companies fall into the trap of using multiple solutions to generate extensive data, but still aren’t able to easily produce meaningful information.
The many solutions and platforms your company uses could waste valuable resources you aren’t aware of. You invest in new systems to provide insight and efficiency to your operations, but they may be costing more than you’re aware and not achieving what you need.
The Hidden Costs of Inefficiency
Money
Revenue drives success for every business. How that revenue is used to cover costs for your business will determine how profitable your business becomes. Inefficiency can eat into twenty to thirty percent of your revenue every year. Thirty percent of your business revenue is a lot of money that could be better utilized in customer service, marketing or business development.
If you are spending money on various systems to produce large amounts of information but they all provide you with the same outcome, you are operating inefficiently.
Are you using products that don’t work as you expected or as promised? Get rid of them. Don’t continue to pay monthly or annual fees for something you aren’t receiving real benefit from.
Many platforms require you or your employees to input the same data more than once. Determine which solutions provide you with the most value and phase out the ones that your business doesn’t need.
Time
You can control costs, but you can’t control time. Time can be squandered in a variety of ways. Waiting for a job to be completed, or an employee waiting for a manager to tell them what to do next is not time well spent. Duplication of effort is also time wasted. These are common examples that happen so frequently we become blind to the true cost of wasted time.
The value of time isn’t just related to lost minutes and hours, but also in lost potential. An employee who feels they are wasting their effort is not going to produce the same quality of work as an employee who feels engaged and fulfilled.
The way your employees feel about your small business will have a big impact on its organizational efficiency. Putting effort into streamlining your systems for connectivity, simplicity, and ease of use can be valuable. Employees who feel their time is well spent are likely to be more productive.
Quality
Every mistake or missed KPI is a sign of inefficiency. Outdated equipment and unmotivated employees will cause more errors than newer systems used by motivated and fulfilled employees. If you don’t have adequate quality control processes in place for the product your business produces, you won’t be able to catch errors before they reach your customer.
No businesses strives to produce quality products or services most of the time. Your business success depends on always producing quality products. While you are streamlining and upgrading systems and procedures be sure to look for how the new system will improve the quality of the product or service you sell.
Happiness
Another cost of providing a subpar product or service is employee frustration. It’s human nature to generally want to do good work. If your employees are trying to do their best work but are sabotaged by inefficient systems or processes, they won’t try hard for very long. And they probably won’t stick around very long either.
Your employees will not only experience frustration with inefficiency, they are likely to lose trust in the judgment of you and your management. Often companies announce projects for improvements and the projects become an added inefficiency. The improvement process drags on and eventually loses steam having accomplished nothing but more aggravation.
Encourage your employees to discuss ways to improve your processes and systems. They are the ones dealing directly with the information daily. It is in the best interest of your business and your employees to develop and maintain systems and processes that provide top quality information. Engaging employees in improvements will let them know how much you value their opinion and allow them to feel vested in the success of your business.
Always Strive for Improvement
Don’t sacrifice value and quality as you continue to innovate your small business. Try to focus on the overall picture of what you are trying to achieve with the platforms you put in place for your business. Don’t become distracted by the “newest” and “best” unless it will make your business more efficient and easier to grow.