In a recent blog I used a little bit of doggerel from renowned copywriter Gary Bencivenga's to emphasis that unless your advertising and promotions gives the reason why your prospect should buy NOW and why they should CHOOSE YOU your promotion will be ineffective.

And ineffective promotions are a waste of money and your time. In short, a profit leak.

But advertising and promotion are not the only areas in which I come across profit leaks draining business's future. There are many other such profit leaks. In this blog I thought I should identify a few more from across a range of industries to see whether they strike a bell with you.

Do you know the profitability for each customer/account, line of business, or business unit by product, customer or deal? Or do you know only their sales?

Have you benchmarked your business? Do you know how your performance compares to averages in your industry?

Do customers walk out of the door without buying, sales call bear no fruit; lost sales opportunities are a profit leak

Do you have a "sales conversation"? Without a sales conversation you will miss many a sales opportunity. "Can I help you" is not enough?

Are you charging the right price? Could you charge more without losing sales? If you increased your price by 5%, how many sales could you afford to lose before the increase cost you money? You might be surprised at the answer.

Do you leave money on the table by not up-selling or cross selling?

Do you have payment options? Do you have a merchant account that allows you to offer full credit card services? If your competitors are making payment easier than you, they will be picking up sales at your expense.

Are there costs directly attributable to your product or service which should be in the price but are being hidden in your overheads?

What processes don't add value from the customer's perspective? Working from the perspective of the customer, "value" is defined as any action or process that a customer would be willing to pay for.

Can you reduce the time to process orders, allowing you to process more orders in the available time?

Is there waste in your business - tasks that have to repeated, on-going errors that are not fixed, premium freight costs, scrap, re-work, customer returns, complaint servicing etc. They all contribute to leaking profits.

Do you have labour or material overruns, or excessive stock levels? Are you reordering "lost" stock you already have on hand?

Do you accurately allocate income and expenses for each job and track expenditure?

Do you know your real hourly cost of labour? Most businesses don't.

How do you control, and recover non-billable time?

How long is it since you have done a thorough review of your business costs - for supplier related general expense categories such as printed matter, stationary, telecommunications, courier, insurance, cleaning services etc.

Did you find yourself answering "I don't know" to any of these? Then may be it's time to:

1. Take action! Identifying profit leaks is one thing. Plugging the leak is another. So make sure corrective and preventative measures are taken. Implementation is the name of the game. Many good money-saving ideas are lost simply through a lack of action and the leak continues.

2. Measure - Do you have regular, accurate reports on key areas of your business, and on your overheads? If you don't, how do you know whether you have a leak or not? Without measurement there will be no change. Measurement is at the core of all improvement.
If you would like to discuss these further leave your comments below.


© Copyright 2010 Adam Gordon, Profits Leak Detective


#1 website 2016-01-26 08:17
Do you mind if I quote a couple of your articles as long as I provide credit
and sources back to your site? My website is in the exact same niche as yours and my visitors would genuinely benefit from a lot
of the information you provide here. Please let me know
if this alright with you. Thanks!

Add comment

Security code

Opt in above and get instant access to our exclusive report including…

Some profit losses are pretty obvious - so you fix them.
BUT, what if you don't know profits are leaking, cash out the door?
Possible leaks could be anywhere.
Are there some clues or symptoms that are tell-tales?

  • Get 21 Questions that help identify tell-tale clues of a profit leak.