Seven ways you are losing money in your business
Is your business leaking money? Read seven common ways businesses are losing money – and how you can fix the leaks.
It’s natural as a business owner to be preoccupied with sales and marketing, and finding ways to attract new customers (and profit) to your business.
But what about the places where you’re leaking money? Most businesses have a few holes in their buckets. We’ve picked seven of the most common ways businesses are losing money, and share tips on how you can stop the leaks.
1) Not invoicing properly
All too often we spend a great deal of energy, attention and effort on winning over customers – on marketing, sales and PR. But what happens once we secure their business?
It’s just as important to have a rigorous system in place for invoicing. If you don’t, you could end up working for free!
So what do you need to take into account? Here are 10 questions you need to answer:
- Do you have terms and conditions? Before you begin working for a client or customer, you need to ensure they have accepted your terms and conditions. These can be as simple as how soon after invoicing you expect payment. If a customer does not accept these before you begin work, they are not legally binding.
- Do you keep a record of work in progress? Once you begin a new job, do you keep records for it? Do you record how long you spend on it, and how much you are owed to date? Don’t assume you’ll automatically remember. As soon as you start a new project create some way of keeping a record – from opening a new invoice to a simple spreadsheet.
- Do you confirm any verbal agreements in writing? Sometimes clients change their mind or add new requirements part way through a job. If they make requests face to face or over the phone, aways confirm by email. This way you’ll have a written record should someone dispute any extra charges when you invoice.
- Are your invoices correct? If you haven’t invoiced a company correctly, they may not tell you until you chase non-payment. So before you fire off an invoice, ensure it contains everything it needs to (you can read a list here). Remember to also check whether you need to include a purchase order number.
- Do you check your books weekly? The easiest way to stay on top on your finances is to check them weekly. Allow even just 15 minutes on a Monday morning to check what invoices need to go out, and what’s due in this week.
- Do you invoice on time? As soon as a project is finished, get your invoice out. Every day you delay is an extra day you’ll have to wait for your money.
- Do you chase late payments? Some companies hold on to payments for as long as they can. And the people who get paid earliest are those who chase. So as soon as a payment is overdue start chasing. (If you want to be really organised, you can even send a reminder a week before it’s due.)
- Do you check you’re chasing the right person? Sometimes the person who has a real say in when your payment is going out, is not your initial point of contact at the company. So when chasing, ask if there’s someone else you should be speaking to, and ask for their contact details.
- Do you have a system for late payers? Don’t wait until an account is seriously overdue before investigating your rights – and having a system to enforce them. At the very least, understand what your legal rights are, and plan how and when you’ll act on them.
- Do you chase persistently and politely? The best way to hurry along payments is to be a polite pain. So be persistent in chasing payment – for example if the accounts department say a late payment will go out on Tuesday, call to check it has indeed gone. But never be rude. Rudeness will not speed up your payments. Indeed, it might even delay them further!
2) Not including calls to action
So you have a professional logo and brilliant website. You’re all over the right social media accounts, and you have an active email marketing campaign. You’ve even invested a small fortune on online adverts. So why aren’t you making more sales?
One of the most common mistakes we see businesses make – a mistake that is costing them a LOT of money – is also the simplest to fix. It’s a lack of call to action.
Wherever your potential customers come across you, make sure you let them know what they need to do next. It’s really that simple!
If you have a bricks and mortar business, tell people on every page of your website where you are (or how they can contact you) and encourage them to visit. If your business is online, include a link to your website or online shop.
Put very simply, if you want someone to take an action them tell them what that action is (and give them a great incentive to take it) and how they can do it.
Don’t assume your customers are psychic. Or that they’ll care SO much that they’ll hunt out your contact details. Make it as easy as possible for them to take the next step in buying from you.
What can you do now? Go and check every single place where your company appears and make sure there’s a call to action there, with a link or details of where they can go to act on it.
3) Not checking your subscriptions
Many businesses today couldn’t run without subscriptions for services – many of them online. These can include:
- Social media management tools.
- Accounting software and systems.
- Sales pages and online course builders.
- E-commerce stores.
- Domain name and website hosting services.
But do you really need all the services you are paying out for every month or year? Go through your bank statements (or Paypal activity) for the past 12 months and make a note of any regular payments going out.
Then cross check these against your daily/weekly activity at work. Are you genuinely using the tools? And if not, what gap would they leave if you cancelled them? If none, then you can cancel them without further thought.
If they are useful, is there a way you can get the same benefit for less? For example, do they offer a free version that would suffice? (Most social media management tools, for example, offer both free and paid levels.) Or can you shop around and find a competitor offering a similar product or service for less, or free?
4) Ignoring your existing customers
As we’ve already mentioned, so much of our focus as business owners is attracting new customers. And it makes sense – to an extent. When it doesn’t make sense though, is when your focus is on new customers at the cost of your existing ones.
What happens after someone buys from you once? What customer relationship management strategy do you have in place to ensure they’ll remember (and buy from you) next time they need what you sell? Or recommend you to their family and friends?
If you don’t have an active customer relationship strategy, you’re losing valuable profits. Why? just look at these statistics:
- Repeat customers spend an average of 67% more per order.
- They’re also responsible for generating as much as 40% of an online store’s revenue.
- Someone who has bought from you once is 27% more likely to return.
- And if they then buy again they’re 54% more likely to return.
If you’re looking for an easy way to increase your business profits, take some of the focus off finding new customers, and fix the leaks in the bottom of your bucket – and make sure the customers you have already won over are happy.
Not only will you make easier sales from these people, but once you have fixed these leaks in your bucket, you’ll reap more rewards from the new customers you manage to attract in future. (If you want to learn more about fixing the holes in your bucket, we recommend buying the brilliant Watertight Marketing book.)
5) Not getting to know your customers properly
It’s very tempting, when you launch a business, to try to appeal to as many people as possible. After all, the larger your pool of potential customers, the more customers you’ll convert, right?
Wrong. When it comes to marketing, it’s often the opposite that is true.
Why? Because when you try to appeal to as many people as possible, you can’t help but water down your marketing message. After all, you want to connect with a broad cross section of people.
But a watered down marketing message is never going to convert as well as a highly targeted one.
When you define a very clear niche of potential customers to appeal to, you can get to know them much better, and create highly targeted marketing that appeals to a specific need they have. And your marketing will convert much better as a result.
So if you’re planning a marketing drive, take your broad target market and look for ways to narrow it down and create one or more niches. For example, you may identify a niche based on:
- Location of your customers.
- Type of person or business.
- Need that drives them to purchase.
- Time of day or year they need your product.
- Frequency of purchase.
Whatever your niche is, once you have identified it try to learn as much as you can about the people in it and create personas for them. The more you know about your customers, the better you’ll get at:
- Identifying new products or services they need.
- Planning marketing campaigns they’ll connect with.
- Using social media to attract and reach them.
- Working out the right pricing.
- Creating offers that they’ll love.
So if you don’t have a really clear idea about who you’re selling to – if you can’t imagine a specific person who buys your products or services – start identifying your niche now, and work on your marketing personas.
6) Not making the most of your list
Most businesses today have a valuable asset that they’re not making enough of. And that’s their list.
Your list is simply your mailing list – the email addresses of people who have bought from you in the past, or who have opted in for an offer or newsletter.
Clever businesses know that their list is a golden opportunity to:
- Grow their brand and customer loyalty.
- Showcase new products and services.
- Make new sales to existing customers.
- Stay front of mind to former customers.
- Tell new customers more about who they are.
- Get valuable feedback on their products, prices and service.
- And much more.
So how do you make more of your mailing list? At the very least you should be sending out a regular newsletter – weekly, fortnightly or monthly. (Read 14 things your newsletter needs to include here.)
If you can, it’s also a good idea to segment your list, or create sub lists for customers who are interested in different products. For example, if your business sells quite diverse products, you can have different lists for different product groups, and send out more targeted emails with offers and news of new lines.
Just make sure that you don’t put off customers by bombarding them with communications they don’t want or need. (Read tips on how to stop people unsubscribing from your list here.)
7) Working IN not ON your business
How wisely do you use your time in your business? When you look at your average working day or week, how much of your time is taken up with menial tasks that anyone could do? And how much time do you spend on tasks you don’t enjoy and aren’t good at?
If you’re running your business as cleverly (and therefore profitably) as possible, most, if not all, of your working day is spend on tasks that:
- Only you can do.
- Genuinely grow your business.
- You are good at and enjoy.
Any other tasks need to be, wherever possible, automated or outsourced. Why? Because it doesn’t make any sense for you to spend your time on tasks that someone else could do, when you could be growing your business instead.
So if your particular skill is product development, delivery of services, sales, marketing or any other area of your business, then focus on that. And make sure that as much of your working week as possible is spent on it.
Then find ways to take the rest of running your business off your plate. Yes it may take some organising and expense, but it will be worth it in the long run (think of it as an investment, rather than an expense).
Need more business money tips?
You’ll find more helpful advice to grow a financially successful business in these articles: