TL;DR
- Profit Parasites: These are hidden issues within a business that drain profits – from system inefficiencies to reporting errors. They often go unnoticed until significant damage occurs.
- Wrong Assumptions: Thinking you’ll always sense problems, relying solely on your bookkeeper to find these issues, or believing your business is immune are common pitfalls.
- Bad Reactions: Slashing spending, creating overly rigid policies, or simply ignoring the problem are not effective solutions.
- The Right Approach: Proactively leveraging your data is key. Turning your data into actionable insights can help identify, eliminate, and even prevent profit parasites.
Just because you don’t see it…
Not-so-surprising news… Businesses are in business to make money. However, it might shock you how many businesses are bleeding profits without realizing it.
Gaps in systems, inaccuracies in reporting, misunderstandings of terminology, and a horde of other seemingly insignificant “pests” go undetected. And all the while, they’re siphoning off your hard-earned revenue.
We call these pests profit parasites.
Profit is the name of the game when it comes to leading a successful business. Driving profit takes creating great customer experiences, marketing knowledge, maintaining IT systems, managing internal issues, and much more. The daily demands of running a company and taking care of customers leave little (or no) time to recognize these parasites, until significant damage has been. It’s a bit like the mynocks siphoning power from the Millennium Falcon when Han and crew were trying to leave Hoth and… sorry, got carried away there. The point is, you never know when they’re going to show up.
At Resplendent, we’re not about data for data’s sake. We’re about using your data in new ways that lead your business to success. That’s why we’re dedicating the next several weeks to identifying potential hazards in your business that could be eating away at your profits over time. Resplendent exists to provide you with invaluable data that propels your business forward. And part of moving forward and growing is knowing how to maximize profitability.
Common (wrong) assumptions about profit parasites
We get it. As business owners, executives, managers, or employees on the frontlines, our attention often goes to the most visible things. Who has time to think about things we aren’t even thinking about? And that’s precisely our point. Here are a few common misconceptions about profit parasites.
“I’ll know when something is off.”
Parasites are often unseen, so “knowing” when something is off is quite difficult.
To be direct, businesses that believe they have a sixth sense of knowing when something is going wrong without proactive measures in place are exceptionally susceptible to profit parasites.
Combating this requires intentionally searching out and implementing systems that identify issues that aren’t readily visible and allocating additional time to root out the problem.
“My bookkeeper will recognize any issues.”
While bookkeepers can help identify financial irregularities in your business, they often cannot diagnose the root cause of the issue.
Simply put, solely relying on a bookkeeper to identify and solve these issues will leave your business treating symptoms rather than eliminating the parasite completely.
“My business is too big/small for those issues.”
Believing that your company is immune to profit parasites is a steep path to profit loss.
No matter the business size, age, expertise, or any other qualifying factor, these issues can still arise. Parasites, both real ones and those found in businesses, thrive on going unnoticed. Falling for the trap of thinking your company can’t have them is exactly what they need to slowly drain your profits.
How NOT to deal with profit parasites
Usually, by the time someone realizes there’s a problem, they’re in damage control mode, creating as many problems as they’re trying to fix in the process. Let’s talk about some common responses that don’t work so well.
Slashing Spending
Businesses have expenses. There is nothing problematic with that. So cutting costs and eliminating necessary resources in an attempt to slow the bleeding can create new (sometimes bigger) problems in the future.
Cutting spending is sometimes a temporary fix to treat symptoms instead of the core issue. So while there are times that it’s necessary to get things back on track, make sure it’s actually getting to the source of the problem.
Implementing Overly Rigid or Complicated Policies
“The more you tighten your grip, the more star systems will slip through your fingers.” – Princess Leia (we’re on a roll with the Star Wars references, huh?)
More simply, don’t rely solely on creating stricter guidelines for your business to stop or slow profit drains. The added cost of creating, implementing, and enforcing these policies can easily end up costing more than the profit leak in the first place, and they aren’t guaranteed to stop the bleeding.
Ignoring Them
Similar to thinking your business is above or beyond contracting profit parasites, ignoring their presence is a steep slope to financial loss. Although some parasites may seem small, they can grow and multiply over time, leaving your business struggling to keep up.
More than just data
When you fully leverage your existing data and tailor it to your business needs, it becomes more than simply data.
Synchronized data points, specific calculations, intentional organization and visualization, and systematic checks and balances create a data landscape that helps identify and eliminate profit parasites in your business. And can often even prevent them entirely.
Over the next several weeks, we’ll share specific examples of how businesses like yours are using data to eliminate and prevent profit parasites. And thus be more profitable.
