Is your business leaking profit, but not sure how or where? Fix these four bad business habits to plug those costly leaks.
Unbeknownst to even the savviest of small- and medium-sized business (SMB) owners and operators, some common and seemingly insignificant business habits can creep into day-to-day work. All told, these bad habits can seriously impact a business’ longer-term profitability and viability.
Maybe you’re dealing with tangible, finance-related issues. Or less visible but equally destructive business practices are taking a bite out of your profits. Whatever the case, you have the potential to reduce the costs and build your longer-term profitability.
All it takes is some fine-tuning of your business processes, to shore up these four all-too-common money leaks before they throw you off track.
Leak #1: Poor Delegation Practices
You’ve put in the hard work and your company’s flourishing. But just as your business has grown, so have the number of things you need to keep tabs on. And you’re at the point where you know those 80-hour work weeks aren’t sustainable for much longer. Because, realistically, it’d be nice to have a life outside of the office, too.
Your friends, family, team members—and yes, your business’ profit margins!—will thank you if you learn to effectively delegate projects and responsibilities to others. This is especially the case for specialized work that is beyond your area of expertise. It could also apply to any small tasks that distract you from achieving your bigger picture responsibilities.
For instance, enlist a trained in-house professional or on-demand service to deal with IT issues and for any activities that require focused attention on a regular basis. This could include scheduling, monthly bookkeeping, payroll and tax return preparation. Or, take advantage of the automation features built into most cloud-based platforms. You’ll win back the time you’d take to send invoices, payment reminders, marketing messaging and other manual notifications.
And above all, remember: Just because you can technically do “it” (where “it” = a random task that distracts you from your mission) doesn’t mean it’s not more cost-effective in the long run to delegate to someone else. Especially if “someone else” has the time, attention and functional know-how to get it done faster, better and with less money out of pocket.
Leak #2: Paying Too Little or Too Much Tax
The good news is that your company’s grown by leaps and bounds. The bad news is that with increased scale comes new and ever more complex accounting rules that are far beyond your capacity to keep track of.
The result: Even with the best of intentions, your estimates for your quarterly tax payments are off, and you find yourself in the situation where you owe penalties for underpayment. Or, in contrast, the growth you’ve achieved has opened up a whole new set of potential deductions. But because you don’t know about them, you’re actually leaving money on the table come tax time.
Paying too little or too much money for your taxes is a huge loss for small businesses—and it’s something that can be avoided, given proper planning.
First, be sure to maintain regular communications with your financial advisor and accountant. As accredited professionals, they’re responsible for staying up to date on the ever-changing accounting and tax rules, so you don’t have to.
Second, consult with them often, as even small changes to your financials can have significant implications for your taxes.
Leak #3: Hiring for Cost over Quality
Too many SMBs play too small and look at their staffing needs in the here and now. However, real growth and scalability come from taking a longer-term view of where they want their company to be in three, five or even 10 years down the road. As a result, they’re likely to trade off quality for cost, sinking good money into hiring the least expensive contractor or freelancer who may help them “get by.” But it will cost more time, stress and money in the long run, when their skills and abilities don’t scale to meet the business’s future staffing needs.
Yes, small businesses need to watch their spending… Of course, you’d like to always be able to hire the superstar on the roster of potential candidates, but finances are tight. Yet, especially in an ultra-competitive job market, the fact is: You’re throwing good money after bad if you’re hiring for cost over quality.
With the average cost of bringing on a new employee estimated at a whopping $240,000, and the typical cost to replace an employee set anywhere from 16% of the annual salary for low-paying, entry-level roles to 213% for high-level, executive positions, your small business now and in the future simply can’t afford to make bad hiring decisions based on near-sighted thinking.
Instead, hire for the company you want to have three or five years down the road. Particularly, seek out and persuade those rockstar hires to help you shape your business to meet those longer-term goals.
Leak #4: Not Protecting Important Business Data and Information
Small business owners face a paradox when it comes to their data safety and security, and they’re probably not even aware of it. On the one hand, because they tend to run lean and mean organizations—that’s to say, efficient and successful, but with fewer bells and whistles—SMBs generally have limited resources on tap. This makes it more difficult to prevent cybersecurity issues, like malware, data breaches and ransomware attacks.
Yet, SMBs seem to be increasingly attractive targets for cybercriminals, with a reported 57% upsurge in attack volume over the past 12 months. Based on a new report from security firm SiteLock, the average small business website is attacked 44 times per day.
Cybercriminals are on the hunt for vulnerable systems and no company, regardless of size or industry, is safe from the practical costs. Reportedly the cost is about $1.3 million per data breach for enterprises and $117,000 for SMBs. And this doesn’t include the less tangible but still significant impact to the company’s reputation, credibility and long-term prospects for growth.
If your company’s cybersecurity protection could use a reboot, the following three steps can help:
- Take your data and information to the cloud: Cloud-based technology is one of the safest systems that SMBs can invest in. Security protocols are constantly being updated by the service providers to ensure real-time protection for its users.
- Establish better security protocols: One of the most common sources of cybersecurity breach is staff members who unwittingly open the door to hackers and malware via downloads or poor password control. The key is to document your cybersecurity policies. This includes conducting regular back-ups of all data and instituting a safe password practice that involves multifactor authentication on your network and emails. Then, drive the policies home with regular and frequent training, and regular updates on new protocols as they’re developed.
- Bolster your network security solutions: Typical home-office security solutions simply won’t cut it as your business scales. Instead, install next-gen network security features, including an internal firewall, as well as, firewalls on any systems that employees use while on the go (especially their mobile devices!). This not only provides foundational security against breaches and malware but also ensures business continuity and stability should a breach occur.
At the same time as you’ve been keeping your eye on the bigger picture priorities that have helped your business to grow and thrive, your company may have become susceptible to some pesky little bad habits that have poked holes in your profits and caused some capital to leak out. What’s worse, this is probably happening without you even realizing it!
The good news: If you take these steps to fix these problems, you can reduce costs and put that newfound money towards areas that will actually help you maximize revenues.