It’s often difficult to truly assess how your business is going. On the surface, things look great. Sales are up, revenue is up and your business is scaling as projected. But often times, the numbers on the bottom line don’t match the success that you’re feeling. The truth is uncontrolled spending culture and money sinks can cause your business to hemorrhage money.
So how do you know if you’re losing money? And how can operational check-ins help to identify the cause of the leak?
In today’s blog, we’re talking about potential money sinks and how annual operations meetings can help plug the holes.
WHAT IS A MONEY SINK?
A money sink is exactly what is sounds like. A place in your business where money goes in and nothing ever comes out. They’re areas that provide little to no value in your business but disproportionately burn funds regardless.
It could be something as small and trivial as an outdated software subscription, all the way to funding of an entire department that is no longer relevant. Whatever the case, money sinks take a serious chunk out of your bottom line.
Its not always obvious where these money sinks are, especially in a large enterprise, so its important to always rule out the most common offenders.
WHAT ARE SOME COMMON MONEY SINKS?
As business owners and CEO’s, we all tend to fall into the same traps when it comes to out-of-control spending and irresponsible resource management. When it comes to identifying where you’re hemorrhaging money, here are some places you should look first.
ACCOUNTING & FINANCE
Twenty years ago, you could justify a bustling accounting or finance department in control of everything from payroll to expenses, reporting to approvals. These days, accounting software has automated much of the know-how and procedural function of a business’ accounting. Additionally, remote and virtual accounting is both lean and affordable for all size businesses.
RECRUITMENT & ONBOARDING
The cost of a new hire is a lot more than most people realize. Businesses can waste a lot of money in both the hiring and onboarding process. This can happen for a variety of reasons. First, the job being filled doesn’t have a detailed job description and KPIs to measure success. Second, there isn’t enough time and energy put into choosing the right people for the job. Third, expectations are not set and training isn’t sufficient. Tightening up and optimizing where and how much you spend on recruitment can make a massive difference at the end of the year.
Its universally accepted that you need a website in today’s world to be taken seriously. But if your industry isn’t online and it exists only to direct people to call you, there’s no need to spend obscene amounts of money developing a custom website. Spend an appropriate amount relevant to the traffic you’re expecting. This goes for SEO and custom digital marketing as well. More often than not, you’re oversold on features or optimizations that you don’t really need.
There are a whole suite of automated platforms and software applications that can make life easier and so much more productive in your business. However, subscription costs can start to eat into your bottom line, especially when left unchecked. Any ongoing costs should be monitored and reassessed annually.
SALES & MARKETING
While every business needs a robust sales and marketing team, you can’t just throw money at a department and pray they deliver results. Sales and marketing should account for around 10% of your revenue, if your sales team is overpaid and underperforming, its time to rethink their budget.
The pandemic opened up the benefits of remote working and the once exorbitantly expensive office spaces are making way to smaller central hubs powering an army of remote workers. With so many empty desks in office spaces across the country, it makes sense to look at downsizing official headquarters.
It may seem like a bygone form of advertising but companies still spend millions of dollars per year on printing physical paper advertising. It’s an obscenely overpriced industry, especially when you consider that the majority of your material ends up discarded. Digital ads have a far greater ROI and reach than print advertising.
STATIONERY & PRINTING
Some might see it as another casualty of the move towards the digital age, but does your office really need that fully-stocked stationary cupboard? When all our work is done online, there’s a huge opportunity to ditch that office printer and go paperless. Imagine the savings on not having to service, stock and maintain multifunction printers every month?
As the CEO or business owner, you probably have a hard time judging what your time is actually worth. If you’re constantly answering emails or putting out fires at the department level, you gotta ask yourself, are these things really worth your time? At the end of the day, if you’re needed elsewhere to grow the business it might be an idea to bring in an assistant for those emails or a COO to take care of the day-to-day. Yes, its an expense, but it’s a cost that will eventually pay for itself.
THE END OF YEAR OPERATIONS CHECK-IN
Just as important as your quarterly planning sessions, operational staff should meet annually to review the past year and discuss any concerns or opportunities coming up. This is the perfect time to tighten the belt on all expenses, examine costs and discover where the money truly is going.
Profitability will suffer unless your team has a strict culture around expenses and spending. The operations meeting is the perfect channel for holding a meaningful discussion around corporate spending and expense approval.
When discussing each project, ask detailed and probing questions about each and every expense. This will also help promote using a critical eye when spending both time and money on behalf of the company.
One final task you can incorporate into your end-of-year operations check-in to save money is the “three broke wishes” challenge.
Pick three things that will cost absolutely nothing to implement but will save you money, even if it’s only a handful of dollars per month. It could be something as little as swapping lightbulbs out to energy efficient ones or changing to generic branded cleaning products – if you can implement it right now and it costs nothing to get done, you’re already taking positive action.
If you’re looking for help planning and strategizing for the future, the right advice is priceless. Contact us today and we can go from there.
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