Is Saving Money Reducing Your Profits?
While there are times when we need to tighten the purse strings, sometimes spending more money can help you be more profitable in the long run.
I recently watched a webinar discussing what a company felt were some strategies that helped them be successful (they started very small and are now a multi-million dollar business). One of the points they kept coming back to was that “saving” money sometimes resulted in less profit. Sort of like the old “penny-wise, pound foolish”. Seems contrary, but I think many of us are guilty of this in a variety of areas in both business and our personal lives.
If you’re a contractor, then here are some areas he touched on
- When overtime might be less expensive than hiring a new crew
- When leasing or purchasing new equipment might help you save money or even make more money
- When paying someone a higher wage might be smarter than a lower wage – could help you attract and/or keep good help (high turnover is costly!)
- Investing in time tracking in the field so you’re not paying someone to do data entry (and run the risk of a mistakes and having to wait to get reports)
Whether you’re a contractor or not, there are areas in the office we decide not to spend money or even wait until we have no choice but to upgrade or make a change. And remember, overhead is a factor in the profitability of your business. Here are just a few areas
- Larger monitor/dual monitors – I remember years ago reading in a well-respected computer magazine that a larger monitor meant less scrolling so people were more productive. While I don’t remember the numbers, it made a significant difference – especially when multiplied by several employees.
- New computer – how long do you or an employee have to sit and wait for software to load or a page on the internet? You’re paying someone to sit & twiddle their thumbs while they wait! Or are you running out of storage space on your computer or using obsolete/unsupported software?
- Investing in new software or upgrading existing software can definitely be less expensive than doing it manually or with old outdated software. So often the new software has useful features so you end up being more productive and being able to do more.
- Training– Good training can pay back for years to come. Having untrained staff, whether office or field, impacts
- Getting work done on time (or early)
- Getting it done well or correctly, and
- Your reputation.
- Automating – While this can take time and money up front, it can save you later not only in the time to get the task done, but reduce errors which are often costly
- Reports – Are you or staff using a calculator or entering in a spreadsheet or waiting for someone to run the report? Perhaps it can be just a click away
- Investing in software that integrates with your QuickBooks. QuickBooks is an accounting software, so it can’t do everything you need to run your business like tracking leads. But wouldn’t it be great not to have to enter data manually or twice!
- Even “little” things.
- I remember having to replace my color multi-function laser printing and lamenting the cost. But my new one was faster, had more size settings, could do duplex – it saved me time and I was happy with the new features!
- My shredder “died” so I had to replace it. The new one was faster, quieter, could shred more sheets at a time, could hold more, and I didn’t have to keep waiting for it to cool down so I could do more shredding. Money well spent.
So take a look at your business and see where you’ve been tolerating or making assumptions. Perhaps it’s time to invest so you can improve your bottom line!