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The Cost of 1 System Not Working

3/27/2019

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The goal is not efficiency. The goal is productivity. Completing a process that doesn’t need to be done at all, efficiently could be wasting your business thousands of dollars. Here are a few real life examples of efficient processes that waste money.

Hiring Process

If you are hiring and firing employees at a high rate, you are absolutely losing money. If you have an efficient system that brings in 10 new hires a month but you are losing 10 employees monthly because there is no system for retention. You are losing potentially $80-$100,000 a month. Even though your hiring system is efficient.

The cost of recruiting, on-boarding, training and then removing, covering for and retraining an employee are high. One study shows the cost of losing an employee to be ~$8,000. Other studies indicate the cost of employee turnover to be in the tens of thousands  of dollars per employee. This is especially true in the skilled fields and managerial roles. Even slight improvements in this area will yield significant financial gain and improved morale.

Creating a repeatable system that ensures you hire well, train and on-board for the right fit employee so that they stay with your company saves 10’s to 100’s of thousands of dollars.  

Invoicing

Utilizing effective systems to invoice clients automatically always pays off in dividends. This is one area I see the most that owners hold on to. The owners have become efficient at creating and sending invoices such that they spend no more than 4 hours a month on this process. However it usually happens on quiet weekend mornings or in the evening while watching TV. While that may not seem like a big deal, it is cutting into deep work and personal time.

Creating a system that can be automated such that you are paying software to invoice and follow through on payments can bring the cost down to a negligible amount. Creating a system that a bookkeeper can implement brings the cost to $140 month for 4 hours at $35/hour. If the owner remains involved and they bill at a rate of $300/hour (that is typically a low amount for what the owner can bring into the company) the cost is $1200/month. You are losing approximately $1,000 a month on this task alone.

Client/Lead Followup

Again, if we imagine that the owner of the company bills at $300/hour, which is low, they may create an ‘efficient’ process that allows them to complete follow-up in just 1 hour a day (~25 hours a month or $7,500). Many owners enjoy this process as it keeps them in front of new potential clients and existing clients. However, this efficient process could be implemented by an administrative assistant bringing the cost down to $1,250. Parts could be automated or eliminated and the cost could be under $500 a month.

Report Creation

This one is easy to overlock because the workarounds seem so small and inconsequential. And, if you don’t know the tools you are using, you may think that solving the problem is more difficult than it really is.
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Your Goal - Have the information in hand to see what invoices are paid (or not). In the example below, there is a 10x cost savings to automating the process (in the example, that savings is $9,161!!)
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  • Zapier Subscription is $20/month

I challenge you to look at the tasks you are completing in your business. Are these tasks in your unique skill set? Do they absolutely require you? Could a team member do them more efficiently for less? Could the tasks be even partially automated?

A deep dive into your systems and processes will always yield a high return.
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Not sure where you stand? Let’s chat. Schedule a 15 minute CEO Call here.
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    Author

    Being an entrepreneur and business owner is hard!  Once you have your business up and running it's not uncommon to hit a few snags: scalability, staff retention, launching growth projects, getting enough sleep!

    Hi!  I'm Nettie Owens, Certified Professional Organizer in Chronic Disorganization and Productivity Consultant. 

    I'm here to help you create your BIG vision and make it happen without burning out or getting a "job".

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