One of the keys to succeeding in business is to maximise profits by reducing the costs of getting your goods or services to market. Of course, you need to do this in such a way that it doesn’t lead to a reduction in quality or negatively impacts customer satisfaction. The reality is that many businesses are wasting money on unnecessary expenditure or due to wastage, and here are nine reasons why this could be a huge mistake.
1. Money Wasted could be Better Spent Elsewhere
It doesn’t matter how well you are doing, your business is always only going to have a limited amount of resources and money is always going to be wasted on things that aren’t really necessary. Your job is to make the most of these resources, so you can be as successful as possible. If you invest money where it isn’t needed, it means you won’t have it to use for those parts those parts of the business where more cash would improve things.
2. Financial Liquidity Could Save Your Business
One of the dangers of waste in business is that it reduces your financial liquidity – these are the assets you have in cash or that can be quickly turned into cash. You never know in business what is going to be around the next corner and financial liquidity can be vital if you are facing some unexpected expenditure. Your inability to get your hands on cash quickly could ultimately cost you your business.
3. Your Goods and Services Won’t be Competitively Priced
If your overheads are unnecessarily high, you are probably going to have to pass this extra cost onto your customers. This means charging more for your goods and services. The popularity of online commerce means it has never been easier for customers to find the best deals, and if you are charging too much, it could make your products un-competitive.
4. Wastage could be Harming Your Green Credentials
“There is a simple rule about the environment. If there is waste or pollution, someone along the line pays for it.”
Lee Scott (Walmart)
There is an increasing number of customers who want to make greener choices when it comes to choosing companies they want to do business with. If your business is wasting a lot of energy (e.g. you have heating on in rooms that nobody is using), it harms your green credentials. So not only are you going to be losing money due to the wastage, but it also makes your business look wasteful as well.
5. You Won’t Be Getting the Most Out of Your Equipment
Electrical stuff like computers are expensive to buy, and you have to use them efficiently in order to get the most out of them. For example – if you have computer monitors switched on all the time, it is not only wasting energy, but it is also shortening the life of the device. It only requires simple actions to extend the life of your office equipment, and if you are not taking these actions, you are throwing away money.
6. Wastage Sends the Wrong Message to Your Employees
It could be that you have created a business environment where wastage feels acceptable to your employees. They see that you don’t seem to care about losing money, so it becomes permissible to carry this wastage-ethos into other areas – e.g. changing ink cartridges long before they are fully empty or using petty-cash to buy frivolous office items that aren’t really needed. If you want your employees to keep wastage to a minimum, you need to lead by example.
7. You Are Reducing Your Profits
If you want to have a more profitable business, the simplest thing you can do to make this happen is reduce your wastage. This is money that could be used to make your home life a bit easier or to keep your shareholders happy – can you really afford to be just throwing it away? Struggling financially because of the economy can be a harsh reality, but struggling while your business is wasting money is just unnecessary.
8. It is a Big Turn Off for Investors
Most serious investors are savvy people, who will quickly spot any signs of wastage in your business. It can make you look like too much of a risk, and it can cause these investors to question your business-smarts. You want to show investors that you run a tight ship because this is going to reassure them that you have what it takes to achieve great things.
9. Wastage is the Achilles Heel of Your Business
So long as there is any wastage in your business; it is going to be eating away at your bottom line. It weakens your operation, and this is probably not something you can afford to be happening. Some business owners throw up their hands and say “there is always going to be some wastage”, but this is not an excuse for allowing your company to hemorrhage money. It often only takes some simple changes and more careful reflection on your expenditure, to greatly improve the situation.
Remember – the more wastage you remove, the strong your business becomes.