Don’t Allow These 10 Profit Leaks to Drain Your Bottom Line
In the fast lube business, increasing sales is not always the road to increasing profits. In fact, invisible profit leaks in your business could convert increased sales into decreased profit.
Here are 10 costly profit robbers, along with advice on how to keep them from harming your business.
1. Forgetting That Electricity is MoneyDon’t look at that big electric bill every month as an unavoidable evil. Failing to adopt procedures to save energy can mean a costly profit leak. While operating an auto service business does require a lot of electricity use, there are steps that can provide significant savings in your monthly bill. For example, swapping incandescent bulbs for LED bulbs can help cut electricity usage. Wherever possible, switching regular incandescents for low-energy LEDs, despite the higher initial cost for the bulbs, can provide big savings over the projected 10-year life of the bulbs.
If you’re in one of the states where the industry is deregulated, you can shop around for your energy supplier. In some cases, making a switch could save as much as 5-10 percent of your electric bill.
Another potential for lowering electricity cost is an annual inspection to make sure your HVAC system is operating at top efficiency. Leaking ducts could reduce energy efficiency by as much as 20 percent, according to Ronnie Kweller of the Alliance to Save Energy.
2. Out of Control Communication ExpenseAs for keeping yourself reachable, you’ve never had it so good. With your cell phone, Internet access and regular telephone service, you’re never far from anyone you want to reach (or anyone who wants to reach you).
Unfortunately, you’re probably paying a lot more than you need to for all that techno-communication. Contact your primary provider to see what bundled plans are available in your area. You may be surprised at how much you can save by giving all of your communications business to one company. In addition to saving you money, dealing with one supplier will greatly simplify your bill-paying procedures.
If you are already giving all of your business to one company, give them a call and ask for an analysis of your account. Companies are constantly coming up with new bundling plans, and one of them might save you a bundle. But don’t expect them to come looking for you; you’ll have to ask.
3. Wasting Money Paying BillsNo one enjoys paying bills. That’s why we sometimes postpone that unwelcome job to the point of risking late payment fees and blemishes on our credit reports. Paying bills may never be fun, but new technology has made the task quicker, easier and less costly.
Nearly all banks are online these days, and most offer free online bill paying. Once you sign up and choose a password, you log on to the bank’s website where you enter the payee’s name and address, phone number and the amount to be paid. The bank takes over from there, either by mailing a check to the payee or by making an electronic transfer of the money.
You need enter the name and address of a payee only once. The next time you need to make a payment, you need only click on the payee’s name and enter the amount. The system will enter the rest of the needed information.
You save precious time, the cost of postage at nearly a half a buck for every check you mail, buying checks and trips to the post office. What are you waiting for?
4. Drowning Under All That PaperWith all the paper you’re required to slog through for business purposes, you don’t need to add to the burden by hanging on to reams of paper because of the worry that you might need it some day. Most of it will never see the light of day.
If that sounds like you, organizing guru Maria Gracia suggested two guidelines to help end the nightmare of out-of-control paper. First, use the four Ds: do it, delay it — file it in an action file or archive file; delegate it; or dump it. Second, open your mail over the wastebasket. Immediately get rid of mail you don't need, such as catalogs or advertising offers of no interest. Then, use the 4-D system on what’s left.
5. Paying for Insurance You Don’t NeedThe cost of insurance is a major burden for business owners these days. That’s why it’s important to cut through the smog generated by the insurance industry. In addition to business liability and fire insurance, there are only five types that you must have: life, health, disability (as long as you’re working), homeowner’s and auto. For most people, the rest are a waste of money.
Life insurance on your kids is a classic example of insurance you don’t need (unless you’re raising a future Justin Bieber).
Never agree to credit life insurance or to car rental insurance. Your own auto policy or credit card will probably cover that base.
Once you’ve pared things down to those five types, look into consolidating some of the remaining policies with one company. That’s often a money saver.
6. Failing to Guard Your Most Precious Business Asset“Pay your best employees good salaries and treat them well,” said Sally Mounts, Ph.D., president of Auctus Consulting Group in Washington, Pennsylvania. “Successful business owners know their most valuable resource is the people they employ. They reward them liberally and encourage their growth. They look for ways to affirm their value to the company through personal attention and acknowledgement. The result is employees who stay with the company for years, saving thousands of dollars the owner would otherwise be spending in training a succession of new hires.”
7. Ignoring What People are Saying About You OnlineIn this technological age, the first place many customers who are unhappy about you will go is to the Internet. It’s human nature to vent after undergoing a negative experience, and the Internet provides an easy setting for people to tell the world about their unhappiness.
If you’re not staying on top of what’s being said about your business online, you’re missing a potentially harmful profit leak. Potential customers who come across a negative comment about you or your business aren’t likely to call you to let you know, but they are likely to look for another place to spend their money. Most people place a high value on what other people say about a business. If someone says they were unhappy with your business, potential customers are likely to assume they will be unhappy too. All of this is a good illustration of how what you don’t know can hurt you.
Doing your best to encourage positive feedback can help to protect against a nasty profit leak. Equally important is responding to a negative comment in a helpful and positive way in an effort to return a straying customer to your fold.
8. Failure to Keep a Close Eye on Your CompetitorsProspects and customers alike are well acquainted with your competitors. They know the level of service and products they offer, and the friendliness and professionalism of their employees — and you should be, too. In today’s competitive environment, your customers are ready and willing to switch to a competitor for the least of reasons. Your job is to make certain that you don’t give them that reason.
9. Destructive Broken PromisesSurveys show that broken promises are always among the most prominent reasons why customers abandon a business. You probably know from your own experience just how frustrating it can be when a business breaks a promise to you.
Should you find yourself in a position of having to break a promise to a customer, any promise — no matter how seemingly harmless — always contact the customer as soon as you learn about the problem. An early explanation and a sincere apology will go a long way toward easing the customer’s frustration.
And it works the same way with employees.
“The workplace is full of unwritten psychological contracts,” Mounts said. “One is that bosses must act with integrity, keep their word and follow through on things they've promised. A boss who breaks this vital precept will never be viewed in the same way; the damage to the work relationship is virtually irreversible. Don't fall into that trap. Keep your word — literally, figuratively and psychologically. It will pay huge dividends in employee loyalty.”
10. Failure to Grab Your Share of the Best Publicity of All — Free PublicityAdvertising professionals know (but usually won’t admit) that free publicity is usually more effective than the best paid ads. Most of your prospective customers will be far more receptive to a simple news item about your business than to a typical advertisement.
So, how do you go about getting a piece of the free publicity pie? First, you need to learn what makes a good story. Then you need to learn how to sell it your local news media.
Your news item doesn’t have to be of eye-popping importance to gain a free spot in the media, it just has to be “newsworthy.” That simply means there is something about your business that the public might find interesting. Even simple things like interesting news about you or an employee, changes in your business, charitable activities or accomplishments can be the seeds for free publicity.
To get free publicity, you have to seek it actively. The media isn’t going to come looking for you. While it isn’t necessary to have a “contact” in the local press to get your share, it doesn’t hurt. Besides, contacts are easy to find these days — just head to the media outlet’s website and click on “contact us” or go to their Facebook page and post a comment with your lead for a reporter.
While banishing these harmful profit leaks won’t solve all of your operating problems, it will help to boost your bottom line now and in all the years to come.