Finding the disadvantage dollar in your business.
Continuing on from last week discussing your disadvantage dollar. A refresher on what that is… It’s the money your business is missing out on through all sorts of channels and avenues. Sometimes it’s things that are costing your business money.
Last week, I shared an example of a business that was having problems with staff time and approach to work. This week, I’ll talk about a business that was missing quotes (resulting in missed business), and one which had mistakes made too often that were causing stress or overtime on the part of the owner and causing him/her to miss out on things like valuable family time.
I worked with a landscaper who had plenty of leads, but was only winning 1 in 5 of the quotes that he was quoting on. He was submitting on average 5 quotes a month. Each took him about 5 hours to do and the average value of each of the quotes was around $11,000. So, winning 1 in 5 meant that he was leaving $44,000 on the table every month. That’s $528,000 a year. Being realistic, he said that even winning 50% of his quotes, he’d still be leaving 2.5 times $11,000 times 12 months. That’s $330,000 a year on the table. Not knowing a better way to win quotes he realized was costing him $201,000 a year, which is what he would be winning if he could increase his wins to 2.5 wins a month.
Having those figures staring him in the face was enough for him to realize that he needed a better quoting system and a better lead conversion system. We worked on it and had it in place within a week. The result was that his winning quotes went from 1 in 5 to 2.5 to 3 in 5 in a matter of months. Actually less…it was about 6 weeks.
Before he analyzed and quantified it, he was just putting it down to the market. It’s the way things are. You win some, you lose some. There’s not much I can do about it. When he saw how much he was leaving on the table over a year, he was galvanized into finding a better way, which is what we did.
Another example of someone I worked with was a plumber whose people kept messing up jobs. Every time they did, he usually had to step in and fix it, either after hours, in the evening, or on the weekend and/or he had to compensate the client or give them a discount.
He found it hard to measure. One week, it took him two hours after hours to fix up a job that had been messed up. Two hours of his time that he costed at $100 an hour was $200. But how does he put a cost on the stress, the reputation of his business, the possibility of losing that client, or missing out on time in the evening with his family? When he thought about it like that, he got quite angry. He said if he put a notion value on all of those things, he would save thousands of dollars. That’s what he thought it would be worth to him to have it fixed and not have it happen again. His guess was that it was costing him about $50,000 a year.
The missing systems were to do with accountability. Believe me, they were developed, worked on, and introduced in quick smart time. The staff were actually grateful for them and welcomed the accountability. The truth was, they wanted responsibility, but because the owner had always taken the responsibility and never actually given them any, they began to just shrug their shoulders about it and not care because the boss always looks after it and he doesn’t really trust us to do it.
It was a very interesting learning experience for the plumber.
While these examples are from different business owners, they all could very easily have been from one. Let’s say they were. Let’s add up the disadvantage dollars.
If we add up those disadvantage dollars, $13,500 (in Part One) + $201,000 + $50,000 = $264,000 over one year. What difference would $264,000 make to your business? I think there’s hardly a business that would say that’s insignificant.
What difference would having those problems and issues solved make to your life? The thing is, being human, we’re all happy to let them keep existing…those frustrations and problems…because we think it’s just the way it is and we can’t do much about it. Until you measure it and translate it to dollars. That’s the wake up call to say, “Hey, this is more serious than I thought. I need my business to be more efficient than that. I need to find a way to address it.”
Now there are some frustrations, issues, problems that when you measure and quantify them, have only a minor impact. Hardly enough to measure. So clearly, they won’t take priority on your “need to fix” list. Nevertheless, there will always be symptoms of missing systems that should be addressed so they no longer irritate you. The fewer irritations in your working day, the better so let’s deal with them soon.
Until next time…
P.S. Learn more about working ON your business–talk to the coach! Click here to connect with me!