Profit destruction – 5 unexpected hidden costs of poor business processes

Profit destruction – 5 unexpected hidden costs of poor business processes

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Time and time again I come across systems that have either been implemented by entrepreneurs or by ineffective service providers (aka bad).

Red Adair, the oil well fighter has a brilliant saying by which I live…

“”If you think it’s expensive to hire a professional to do the job, wait until you hire an amateur.”

“Amateur hour” is the main issue I encounter when entrepreneurs are implementing new systems, processes and ways of doing business.  They implement like Irish Mine Detectors – stamp the foot down until it explodes.  What they don’t realise is the impact on the value chain of an unsystemised business.

Here are 5 hidden costs of inadequate value chain mapping.

  1. The cost of reconstructing the processes because the ‘existing system’ becomes so embedded in the business that change becomes difficult and expensive. It is further compounded by a patchwork of ‘fixes’ which need to be deconstructed.  I’ve seen this wipe out the profits for years.
  2. People cost – the stresses in a business are potentially enormous!. If the whole business does not run smoothly the adverse impact, once again, can obliterate profits;
  3. Time – THE most precious resource and is often the first casualty and its NOT replaceable;
  4. Cashflow – bad processes and systems can wipe out the lifeblood of the business – natural progression – death of the entity;
  5. Ill health – yes, the stresses in the business can cause health issues for the owner and employees

Some surprising impacts don’t you think.

What to do…

Map your systems using journey maps and put right the blocks in the processes – the best examples I’ve seen are Scott Klosovsky fpov.com

Review processes often and good luck.

 

phil@philolsen.com

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