The Cost of Inefficiency: Why Your Profitable Business Might Be Losing Money
What makes a trades business inefficient? A very easy way to define it is as unprofitable. But a lot of the time a business can be profitable but still have inefficiencies that stop it from being as profitable as it could be. In this article we cover some of the signs that can indicate if your business is not running as efficiently as it could be. Again, you may be very profitable but if you see these signs, you could be even more profitable so always be on the lookout for these signs.
The first sign to look for is to check the profitability of your crews. Now what is unprofitable. If they cannot cover both their costs and the cost to acquire each client they work on, they are unprofitable and until they have the revenue to cover that and have remaining funds afterwards, they are not profitable. Usually this leads to them wasting time. The best way to get a crew to be more profitable is increase the amount of revenue generated over the time spent working, so if they can do jobs quicker it’ll increase that ratio for them. We’ll get to quality control in a later part but of course it is pivotal that they do not make quality errors when doing jobs quicker, being more efficient is not sacrificing quality, it is keeping the same exact quality but with less time or money spent. That is efficiency.
The second sign to look out for is that you struggle to scale. You are always “too busy” to take on new clients. This is a massive sign of inefficiency, it’s not that you are so good that too many people want you, it is that you have a massive restraint in how many customers you can work with at 1 time or how quickly you can get done with each customer. Your quality may be exceptional but this restraint is a massive limiter on scaling your business. It’ll be really difficult to scale in this situation since no one has enough time to take on new customers and you as the owner probably don’t have enough time to hire either. This is the perfect moment to take a look at the efficiency of everyone in your business and find ways to improve it.
The third sign you need to be looking out for is callback rates. Callbacks are the definition of ineficient. It is work you are doing for second time (or more) that is completely free. Efficiency and quality are the same thing. If you have efficiency but not quality, you aren’t efficient, you are rushing. The time and reputation saved by reducing callbacks is worth much more than 5-10 minutes every job to make sure everything works as it should. If you have a lot of callbacks, you need to see how you can improve the quality control of your business in an efficient way.
The forth sign is low margins at standard prices. You charge just as much as everyone around you but your margins are just not good enough. This is one of the biggest signs of inefficiency. You can always charge more, but that could reduce your conversion rates and sales so it is extremely important in these situations to improve your efficiency.
The last sign and one of the most bizarre but unfortunately common is that money disappears. This is something we come across, owners have no clue where the money that comes in goes. This is the sign to hire a bookkeeper but also a good moment to take a look at your efficiency. You may be losing a lot of money due to inefficiencies at this point with no way of knowing. If you do not track things, you won’t be efficient with them, and in this situation nothing is tracked, so if you are efficient somewhere it is by pure chance, chances are that you are inefficient everywhere.
Those are the signs to look out for, if you see any of these in your business, talk to us. We improve your efficiency for no money upfront and only a small part of the savings we bring you in the first 3 years. So you’ll know exactly where you are losing money from and exactly how to fix it and get those savings in your bank before you pay us anything. You can contact us here or book with the button below.
Improve Your Efficiency
Get all the solutions to improve your efficiency and the savings from those solutions before you pay us anything. We only charge a small part of the realized savings for the first 3 years.
