Cash flow is an important aspect of any business. And, it's particularly critical for a small business growing on a shoestring and a prayer. In the hectic day-to-day operation of a business, it's common to overlook the many holes in your small business through which your cash is leaking.
Most small business entrepreneurs are familiar with money lost from ineffective pricing strategies, including underpricing. But, did you know you could be forfeiting more money in seemingly insignificant ways?
Here are the most common unattended circumstances that are draining your piggy bank:
1. Disorganization. When you, your staff, your service providers, and/or your subcontractors are disorganized, it costs you money -- unnecessarily. For example, if you have a subcontractor who is lacking systems, critical leads can easily fall through the cracks and get missed (which is what happened recently to one of our clients). Thousands of your dollars are lost due to disorganization.Solutions:
- Set up systems to prompt consistency and foster quality.
- Rid yourself of service providers or subcontractors who resist building in systems or support.
- Hire a professional organizer to help you get a grip on your office.
2. Not paying attention to detail. You've heard the saying, "the devil's in the details", right? One thing we know for certain -- there is money in the minutia.
Here's an everyday illustration. You're rushed. You scan a client's email rather than read for detail. Consequently, you miss a critical piece of information about their project. This makes you look bad in your client's eyes and adds to your expenses in unintended costs.
When missed details are a normal part of business operations, you lose money in the additional time required to fix what was missed.
Did you know you could be causing your client to lose money as well? Yikes! Every time a client has to repeat and/or request what initially was overlooked, it takes time away from their growth initiatives.
Time is money -- for both you and your client.Solutions:
- Hire additional help to create more capacity in your small business.
- Schedule regular times to check email when you're not rushed.
- Stop multitasking (i.e., checking email) while on phone calls.
3. Allowing scope creep to go unchecked. Ding! Ding! Ding! This is a huge cash hole. Have you ever kept track of your unbilled hours as a result of scope creep? Wow! You only need to do that once to "get" how much money is draining from your bank account.Solutions:
- Develop a more accurate bidding system to allow for client changes.
- Communicate your "change order" policy clearly at the front end of any project.
- Initiate a conversation with your client at the first sign of scope creep.
For instance, let's say you're a member of your local chamber for which you paid annual dues. You attend two events a month at a nominal fee. Even if you have an intended goal for the return on your investment in your chamber membership, have you considered your time in the equation?
A business owner's time is seldom considered an expense that gets included in return on investment calculations although it's an important -- and pricey -- component.Here are the numbers:
- Owners time to attend event: 2 hours
- Owners travel time to/from event: 1 hour
- Total time to attend 2 events/month: 6 hours
- Cost of owner's time: $75/hour
- Total soft costs: $450/month x 12 months = $5400.00/year
Add in your hard costs like membership, gas to and from, and event cost, and your budget -- and ROI -- may look very different.Solutions:
- Include your time when planning marketing initiatives.
- Reset your return on investment goals to ensure a good rate of return.
- Value your time. It comes with a price tag not reflected in your paycheck.
5. Lack of strategic thinking. Time not allocated for strategic thinking opens the floodgates and costs most small businesses their greatest loss of money.
A recent strategic coaching conversation with "Katherine" (not her real name for the sake of confidentiality) is a perfect example of how strategic thinking helps you keep more of your dollars!
Katherine had invested a lion's share of time and money into her growth initiative. As results failed to materialize, her initial frustration turned to irritation. Finally, in total exasperation, she decided to move forward with a project that would be a substantial investment of cold, hard cash.
Before doing so, we decided to put strategic thinking to the test. We took a peak at her performance metrics to glean whatever insight was available. What we discovered was hopeful!
Ultimately, our strategic thinking skills cracked her performance metrics wide open to reveal a set of actions Katherine could take immediately to beef up her business success -- before heading out with a substantial investment.
Whew! Unnecessary expense averted!Solutions:
- Schedule a daily, weekly, monthly appointment with yourself for strategic thinking.
- Hire a strategic business coach for an objective look at your business.
- Get that time investment in strategic thinking is the best ROI any small business can have.
Time to pull out the glue gun and plug some cash holes in your piggy bank? We think so, too!
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