Tips to Increase Profits - Understand the Cost of Your Business Mistakes
Business mistakes are often handled in two distinct ways. Some business owners beat themselves (and often their teams) up about them and they end up focusing too much on what went wrong and not on how to stop it in the future. At the other extreme, too many people convince themselves that the mistakes didn’t really matter and that, as business owners, they are juggling so many things at once, that occasionally things are bound to drop. Neither of these approaches will help your profits one bit.
Yes, mistakes happen. The bigger you get as a business and the more you sell, the more chance there is that things will go wrong – some behind the scenes and some that the customer sees. Don’t spend too much time worrying about them after the fact – put your time and effort into making sure that you learn from it.
The important first step is to identify what your critical business mistakes are. Look at every element of your business and think about where things do not always work smoothly. If you get returned products, what are the most common ones? If you get complaints, what are they usually about? If you can’t get orders out to customers straight away, which part of the process slows you down. What are the repeat calls in your call centre? Which supplier regularly lets you down? You are trying to identify the big wins here, not every single mistake that has ever been made. Think about the ones that you see time and time again or that you constantly find yourself thinking “I thought we sorted that out once”.
Once you know your biggest few business mistakes, start measuring. If you work in manufacturing it’s easy to look at how many things you produce and how many are faulty. Many businesses are not so easy to measure – but you can still look at how many times these things happen, compared to how many customers you have and so on. Get yourself a benchmark of where you are now, so you have something to compare with in the future. Then, work out what each thing is worth to you. The impact of each one may be small but, if you look at it collectively, you may be surprised how much your profit is reduced by making these mistakes. If you could wave a magic wand and stop them, what would happen to your sales and profits?
You now have an idea of what you can afford to spend to sort these things out. It may be that the answer is to spend time working through something – put your own time, or your team’s time, to work trying to reduce the problems. If you still think you don’t have time to spare, look again at the cost of these errors and think about whether the other things you are doing will have such an impact on your profit in such a quick time. If it isn’t a problem that you can solve with your team’s time, be prepared to invest in it. Many businesses spend hours of time solving problems, but are not prepared to invest to solve them in the first place. Think about calling in an expert – and making it very clear to them what problem you need solving and what the performance levels are now. If they are any good, most will be prepared to commit to how much improvement you can expect and by when – then you can make the decision about whether that is worth it for you.
Most of all, don’t fall into the trap of convincing yourself that every case, customer or client is different and that you can’t reduce these errors. If you take that approach you will always remain as you are now – spending too much time putting out fires and trying to undo the latest mistakes – rather than building your profits.
So, take action NOW – identify your biggest business “error” and build a plan to measure and reduce it.