As business owners, we like to think that our profits are controlled by the simple balance of revenue and expenses. But did you know there are some critical mistakes you might be making in your day-to-day operations that could actually be to blame for dwindling profits?
Even if you’re an experienced professional in your industry and you’ve been in business for years, these 5 day-to-day profit-killing mistakes are surprisingly common. What’s worse is that not only are they draining your margins, they quite possibly cost you customers and your reputation as well.
Read on to learn how these mistakes impact your business’s bottom line and how to avoid them.
Mistake #1: Hiring the Wrong People
Have you ever heard the expression ‘you get what you pay for? Well, the same can be said when it comes to hiring talent.
Oftentimes hiring managers and business owners try to save money by hiring less expensive talent. Some managers take the approach that they can hire almost anyone and train them into handling all the duties of their job. While this might be true in the case of a non-technical position, it rarely works out on a job calling for real skills and know-how.
You will almost always be better off hiring more competent candidates, even if you have to pay a bit more to attract them into your organization.
Consider the following statistics concerning bad hires:
- 34% of CFO’s in a survey reported that bad hires not only cost them productivity but required managers to spend 17% of their time supervising the poorly-performing employee
- 75% of all companies making a bad hire reported an average of $14,900 in wasted money
- 74% of managers confessed that they had hired the wrong person for the job.
Mistake #2: Investing in the Wrong Kind of Advertising
Whether it’s a fear of trying something new or just a reliance on old-school thinking, many managers continue to invest more market spend in traditional marketing channels instead of spending more on cost-effective marketing tactics that might yield as much as 10 times their original investment. The trouble is, it is challenging to measure your return on investment (ROI) from traditional marketing channels.
On the other hand, digital marketing is highly targeted. There are endless ways to analyze the metrics behind your digital marketing campaign, allowing you to determine your ROI more accurately.
- At least 32% of modern marketers state that traditional marketing techniques are the most over-rated in the industry.
- Advertising in printed newspapers has dropped by more than 75% since the year 2000
- 46% of Google searches are for local businesses. Still, only 50% of small businesses actually claim their Google My Business listing, meaning those that do have a chance to stand out.
Mistake #3: Choosing the Wrong Payment Processing Solution
If you plan to accept credit card payments at your business, a payment processing solution is essential. There are, of course, a great many options available to choose from. Unfortunately, some of the most visible and well-known solutions also happen to be the most expensive.
The good news is that business owners have an opportunity to save on the high fees that payment processors sometimes charge by spending just a bit of extra time researching alternatives.
Thinking outside the box could potentially save a great deal of money, especially if your business happens to be considered a high-risk business. Remember that literally every dollar of every transaction is affected by payment processing, so it pays to take your time when choosing a payment processing solution.
Mistake #4: Improperly Pricing Products & Services
Many business owners, especially those that are new to the world of entrepreneurship, fall into the trap of improperly pricing their products and services. Usually, these products and services are priced much too low. It’s an easy enough trap to fall into. After all, when you’re just starting, you want to get your products into as many hands as possible. As counterintuitive as it may seem, lowballing your product’s value actually has the opposite effect.
The same can be said for excessive sales and discounts. Sales are a great strategy for a one- time event or special occasion. But if you’re relying too heavily on slashing your prices, your bottom line is bound to take a hit.
Pricing your products and services correctly is something between an art and a science. If you don’t get it just right, you could find yourself in the red.
To ensure you’re pricing your products and services adequately, make sure you have a thorough understanding of your profit margins. This will allow you to plan strategic sales or discounts occasionally while still maintaining overall profitability. If you don’t take the time and effort to do this, you’re doing yourself a great disservice, and your profits will either be nil or far less than they could be.
Remember to stand behind the products and services you provide by having a clear understanding of their value and pricing them accordingly.
Mistake #5: Ignoring Negative Feedback & Reviews
These days, customer reviews are critical to any business’s success because they are frequently consulted by shoppers who are trying to make up their minds about a purchase.
In fact, over 85% of shoppers have as much confidence in online reviews as word-of-mouth recommendations from friends and family. And nearly 70% of all shoppers won’t even bother visiting your website without first having consulted customer reviews about your products or services.
Favorable reviews can do a world of good for your company, but of course, not all reviews can be complimentary. As tempting as it may be, please don’t fall into the trap of avoiding negative reviews, or even worse, responding to them in the same negative tone in which they are originally delivered. Either of these two approaches can end up costing your business loads of profits. They can paint your company in a bad light and give the impression to other readers that either you don’t care or that you’re argumentative and hot-tempered.
Even bad reviews about your business can provide you with a chance to impress potential new customers. Keep in mind that when you respond to a really negative review, you’re basically not even responding to the individual who wrote it – you’re actually responding to the vast audience of readers who might be impressed by your professional, level-headed response to an unhappy customer. In fact, you can completely turn the tables on an unhappy reviewer by adopting a reasonable and even tone.
Fixing These 5 Mistakes is an Opportunity to Maximize Profits
While there are many ways a company can accidentally be hemorrhaging profits, fixing these common day-to-day mistakes offer a simple way to reduce profit loss and build a sustainable, thriving business.
Do you have any tips and tricks you’ve learned as a business owner to maximize profits? Let us know in the comments!