Most of the actions performed at any business are undertaken to achieve one of three goals: increasing profit, increasing margin or decreasing risk. You probably know this if you’ve checked your inbox lately, because every service provider is trying to explain how upgrading to their premium product will somehow lead to more money in the bank. If you bought them all, you’d be broke.
Still, there are definitely areas where going cheap is going to cost you a lot of money. Here are three of them.
There are plenty of ways to “go cheap” on employees, only one of which is to pay less than your competitors. It takes time and money to keep interviewing (for months, potentially) until you get the right candidate. It’s not cheap to provide a great working environment, whether that’s a nice building or the personal space for them to be comfortable. And every “perk” you offer, from free snacks to professional development libraries, has an administrative cost.
You don’t need to offer the highest pay in the Triangle to be successful. Money’s ability to increase happiness declines as salaries get higher, and at some point, more money even decreases happiness. But you shouldn’t go cheap on your employees, especially when it comes to non-monetary perks. Many owners focus on the fact that they pay employee salaries, but few of them focus on the fact that employees pay their salaries. When employees run short on motivation, your business will run short on money.
Farmers insurance has the Hall of Claims, a few outlandish claims they’ve covered which show just how crazy life can be. In one case, a vehicle went airborne and landed on the roof of a customer’s house.
Given enough time and enough employees, events will happen during the course of business that you can’t possibly be expecting. Some of these cases will be humorous inconveniences, and others will be something your business cannot recover from. And in many cases, the difference between these two outcomes is whether you have insurance to cover the event.
The more successful your business is, the more that you, your employees and their families have to lose from a random twist of fate. Of course, there’s also plenty to lose due to employee error or malfeasance. To protect yourself from this, purchase professional liability, property and business interruption insurance with adequate coverage – and make sure you’re making an informed decision on whether to purchase cybersecurity insurance as well. It’s not worth an extra couple percentage points of profit to put your life’s work at risk every day you walk into the office.
Investing in better business process is frustrating. It’s hard to make a conscious decision to forfeit today’s profit in order to improve tomorrow’s margins, but that’s exactly what you do when you ask managers to focus on improving operational efficiency.
It’s critical for continued growth and sustainability, however. Any of your competitors that are investing in improved efficiency can use that to raise their margins (when the economy is booming) or to lower their prices (when the economy is sinking). This makes bad economies even worse for companies that don’t invest in process improvement. They’re forced to sell at a loss or lose customers to better pricing. That’s why process improvements are called investments – they provide something to fall back on when times get tough.
In fact, if you’ve put away enough money to survive a few slow months of business, then those months will be the best times to focus on improving business processes. Your employees will likely have time at work that isn’t focused on serving customer needs because of the drop in business – and instead of panicking or laying people off, you can focus those employees on improving their processes, raising margins at exactly the time you need that most.
To learn how WingSwept can help your company make better use of technology, call us at 919-460-7011 or email us at Team_WingSwept@WingSwept.com.