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The Five Hidden Ways Small Companies Waste Money

Eric_Rudolf — Tue, 22 Sep 2009 13:26:33 +0000

At some point in our lives we have all heard the saying “if you count the pennies, the dollars will take care of themselves.” Although this advice might have helped your grandparents survive The Great Depression, this kind of small-minded thinking carries no weight when it comes to running and attempting to grow a business. This is not to say carefully watching expenses is not important. But business-related expenses should be treated no differently than sales opportunities, where dealing with the big ones first is almost always the wiser choice.

In many cases, however, the biggest expenses of all are also the ones completely hidden from the naked eye of management. Any manager with a second grade-level grasp of mathematics can figure out that the difference between a $300 flight to Chicago and a $200 flight to Chicago is a hundred bucks. But sophisticated managers also realize that a $100 savings on a business trip is almost never the company’s top financial concern . . . nor is it even in the top 10.

There are a number of ways in which money is sucked out of a small company each year, literally undetected. Five of the most common are outlined below.

Money-Waster #1: Under-Utilizing Employees

At a Fortune 100 company with 75,000 employees worldwide, one or two under-utilized employees can be easily overcome . . . if someone even bothers to notice. But at a small company, just one employee who is not being maximized—in terms of workload, skill set or effort—can mean the difference between a department’s profitability and loss. The number once concern of every small company manager should be to make sure that each employee is not only productive, but also being pushed in terms of the LEVEL of tasks and projects they are given.

Look around your company: does your Event Coordinator have a Masters Degree? Did one of your Customer Service people oversee 25 direct reports at a previous position? Is your Office Manager a published freelance writer in her spare time? All small companies have employees with under-utilized or ignored skills—skills which could be used to improve the bottom line by saving the company money AND generating new revenue streams. It is your job as a manager to find them.

Money-Waster #2: Contracting Out Functions that Could be Brought In House

Does your company spend $40,000 per year with a graphic design firm? $50,000 per year on an Accounting and HR consultant? $60,000 per year on outsourced IT services? If so, there is a good chance your company can save money, or at least break even, by bringing these functions in-house.

As a general rule, small companies should consider bringing a function in-house whenever the annual expenditure reaches about $20,000. At this point a company may realistically begin to weigh the pros and cons of either hiring a part-time employee to cover the function, or hiring a full-time employee who can absorb this responsibility and one or more others. If there is one universal truth at small companies, it is this: there is ALWAYS more work to be done than you think. Although hiring a new, salaried employee is one of the larger risks a small company can take, a lack of labor resources is easily the number one barrier to small company growth. More often than not a new employee will pay for him or herself many times over, even in the first year of employment.

Money-Waster #3: Re-Investing in Ineffective Marketing Campaigns

Given the limited amount of time and resources (and in some cases skills) small company marketing departments possess, it is not uncommon for them to re-book and re-execute the same initiatives over and over again, with no consideration of how they are actually performing. Do you know how many sales were generated by the trade show you attend each year? Are you measuring response to the full-page ad your company places in the main industry rag every month? When was the last time someone reviewed—much less changed—your Google Pay-per-Click ads?

If you have come to the realization your company purchases the same ad space, uses the same messaging or exhibits at the same trade shows year after year, it is time to demand measurement of these initiatives. Simple metrics like inquiries, leads, downloads, clicks, names collected or even sales can be assigned to almost any kind of marketing campaign. Once metrics are assigned, repeated instances of the same campaign can be tracked and compared over time—allowing adjustments to be made in messaging, frequency and budget.

Money-Waster #4: Adding Friends and Relatives to the Payroll

Whether your small company has 10 employees or 100, odds are good that someone on the Executive Team has championed the employment of least one friend or relative. Small companies are littered with spouses, siblings, in-laws, children and friends from college, to a degree that would make an HR Director at a Fortune 500 company seek therapy.

In situations where the employee has specific skills that could not otherwise be acquired, this move can be extremely valuable. But in most cases, hiring friends or relatives does a company much more harm than good. In addition to the risk of wasting money directly (these employees can be overpaid and/or under-qualified for their positions) they can be a significant de-motivator to other employees; especially when they are brought in as management. And even when these types of employees are not brought in at a high level, the person who made the hire does not always have the objectivity to manage them . . . or the foresight to allow someone else to do it.

Also, when personnel issues arise—and they absolutely will—the issues are seldom resolved. Instead, the non-relative or non-friend employees are forced to suffer in silence, eventually leaving the company for less stressful work environments. As tempting as it is to do so, hiring friends and relatives to work is not always a good idea, unless your company goals include de-motivating employees and increasing the company’s turnover rate—neither of which make a positive impact on the bottom line.

Money-Waster #5: Tolerating Under-Performing and Negative Employees

With as much focus as small company executives put on concepts like Excellence, Dedication and Teamwork, the reality of working for a small company is often equivalent to ‘employment for life,’ meaning even employees who put forth a minimal level of effort can have their jobs as long as they want them. Every small company has at least one: the employee who refuses to work one minute more than published hours, is completely void of any sense of urgency, and snaps whenever asked to do something not specifically listed in their job description. At times they can be amusing, and often they make for great conversation at Happy Hour. But they are also hurting your company in ways too numerous to count.

Although many have tried, the fact is you can’t grow a small company by filling the employee roster with people who contribute the absolute minimum—and complain while doing it. Even if these employees have been around since the beginning, as a manager you need to understand that your company is changing; and if growth is the goal, there is no room for unmotivated, perpetually grumpy ands short-sighted employees.

Conclusion

Wasted money at a small company doesn’t always identify itself with a bright red bow and a blinking card that says “look here.” In fact, more often than not a company can come out farther ahead in the end by better utilizing its existing resources than it can by cutting costs and expenditures. There are a number of non-traditional ways that small companies under-use or mis-use its resources, and although this document has outlined five, there are obviously many, many more. If you have identified a different hidden way that small companies waste money, please feel free to reply to this post.

Also, a Retweet, Facebook Share, LinkedIn Share or other type of social share (handy buttons provided) would be greatly appreciated. Thank you!

The Myth of Social Networking and Revenue Generation

Eric_Rudolf — Mon, 24 Aug 2009 16:22:08 +0000

As anyone who was once a member of an electronic bulletin board knows, social networks have been around for decades. Twenty years ago, only a handful of businesses had the forsight or the technical knowledge to consider utilizing something like a BBS for marketing purposes. But today, social media technology is much more accessible and easier to use; and the minute the first luminary claimed social networks could be monetized, the world was off and running. In short order, executives and marketing people were frantically chasing the millions (if not billions!) of dollars that would inevitably be awarded to companies who could harness the power of social media.

What happened after was both predictable and expected. Companies large and small began hiring Internet marketing consultants, and adding social networking-related line items to expense budgets. Quarterly management meetings were dominated by social networking-related strategy conversations, and revenue projections were assigned to things like company blogs, FaceBook communities and Twitter accounts—projections which were turned into marketing goals. For the first time since the invention of the corporate website, executives were excited because their destinies were finally clear: figure out a way to monetize social media!

Fast-forward to today, and the first round of reality checks are beginning to set in for some firms. As companies continue to rack up massive amounts of time and money blogging and Tweeting and managing online communities, financially-savvy Executives are noticing something: bottom line revenues are not improving. The question “Where is our social networking income?” is finally being asked, and the answer—as painful as it might be—is now clear.

The social networking revenue they were chasing never actually existed.

You see, something interesting is happening right before our eyes. Business-related social networking is slowly being exposed for what it was originally meant to be: a communication channel. A channel designed to distribute information, increase corporate visibility, and build a community around a company and its products. A channel that can be used alongside—not in place of—things like SEM, SEO, PPC, e-commerce, direct email, telemarketing, outside sales, speaking events and trade shows.

So what is my point? That social networking is not a tool designed to generate sales, but a tool companies can use to shorten the sales cycle. Are there a few exceptions to this? Of course. Part-time bloggers who make 50 bucks per month driving people from social networking sites to affiliate ads (OK, you got me . . . and feel free to click on a Google ad or buy something from Amazon while you’re here) are obviously proof that once in awhile, social networking can generate a few pennies. But executives and marketers at REAL companies—firms with things like employees and health insurance and stock certificates—need to understand the difference between e-commerce and branding. And social networking is much, much closer to the latter.

Comments? Questions? Feel free to reply to this post. Otherwise a Retweet, Facebook Share, LinkedIn Share or other type of social share (handy buttons provided) would be greatly appreciated. Thank you!

How I Became a Mediocre Blogger for Only $9.95 per Month

Eric_Rudolf — Wed, 22 Jul 2009 14:47:06 +0000

Although it has only been a year, it seems like an eternity since I made the semi-life changing decision to become a blogger. I had always dreamed of writing for the masses—showing people how smart I was, how clever I could be, and how many things I learned during my years in the working world. Blogging appeared to be the next logical step in a career as storied and successful as mine, and I was ready to pass on my experience to anyone who could benefit. After all, no one on the planet had seen what I had seen, or done what I had done. At least that’s what I told myself.

Fast-forward to today, and it appears I am not exactly taking the blogosphere by storm with my 1300 Twitter followers, 2100 RSS feed subscribers and 10,000 monthly page views. But on the bright side, there are plenty of people doing worse than me. Hopefully. So to celebrate my first full year of blogging I decided to take a look back, in an attempt to answer the question “How did I become the extremely average blogger I am today?” This roadmap is short, easy to follow, and absolutely free to anyone striving for blogger mediocrity.

Step 1: I Chose a Domain Name.

This step was not only the easiest, but also the most fun. I spent about two hours messing around with the domain name search function at GoDaddy.com (top right-hand corner), until I finally came up with a domain that wasn’t already taken. In retrospect, I wish I would have chosen something a bit more creative (read: less obvious). But domain names are cheap, and I can always pluck someone else’s great idea off of the expired domain name pile some time down the road.

Step 2: I Found a Host for My Blog.

Let’s get something straight: I enjoy ogling Danica Patrick in a tank top as much as any other guy who is attracted to short, bitchy, high-maintenance women. That said, I had some concerns that GoDaddy.com might not be able to properly host a website that doesn’t involve girl-on-girl action, cork-heeled stripper shoes or massive amounts of cleavage. So I chose the Standard Hosting Package from Network Solutions, for the low price of $9.95 per month. Pros: quick setup, easy FTP access, and a proactive and knowledgeable customer service department. Cons: slow Wordpress upgrades (still forced to use v2.5), sorely inadequate web stats, and separate logins for EVERYTHING.

Step 3: I Started Writing.

For those of you who have never dipped a toe into the raging river that is the blogosphere, trust me when I say that a blogger’s three worst nightmares are as follows and in this order: 1) having your blog crash BEFORE you back it up, 2) watching your content get ripped off and monetized by some dirt bag affiliate advertiser, and 3) running out of things to say. In an effort to avoid number 3, I cranked out two months worth of articles before I actually activated my blog, on the off-chance that a nasty case of writer’s block was headed my way. In retrospect, this was one of the better decisions I made as a blogger. Not because I eventually suffered from writer’s block, but because I often lack motivation to write. Maybe this blogging thing wasn’t the best idea . . .

Step 4: I Switched to a Better Theme.

After running the wheels off of ‘Wordpress Default’ for the first six months, the blogging world literally opened up to me when a friend turned me on to Wordpress Themes. Between hundreds of themes available for free on the Wordpress site and thousands generally downloadable on the web, I was able to find six themes centered around my favorite color orange, and narrowed it down to one that had all of the features I wasn’t getting in Wordpress Default—like configurability, a header graphic, a color palette with more than one color, and general visual appeal. If I made one mis-step here, it was underestimating the amount of time it would take me to switch themes. Depending upon the structure of a blog, uploading a new theme can be the equivalent of a full-scale site redesign. Don’t ask me why I know that.

Step 5: I Installed Some Useful Plugins.

One of the best parts about using a Wordpress blog is there are literally thousands of people out there developing little pieces of functionality that can be ‘plugged in’ to your blog with very little effort. Sure, there are plenty of stupid plugins out there (the plugin that replaces a spammer’s Avatar with a douchebag is one of my personal favorites) but there are also many with legitimate business uses. In my case I started with the All In One SEO Pack, which all joking aside has made a HUGE difference in my web traffic. I then added plugins for Statcounter (a free web stats tool) and Sphinn (a social bookmarking site for web marketers), and finished it off with one of the most popular plugins of all time: YARPP (Yet Another Related Posts Plugin). After running all of these together for a month or so, I eventually hacked the Sphinn plugin and added code for Retweets and Stumbles . . . which shut down my RSS Feed for 16 days, AND locked my Wordpress editor in “HTML Mode” for almost two months. Did I mention I’m still in the process of learning PHP programming?

So in a nutshell, that’s how I did it. If you have any additional tips for becoming a mediocre blogger in the first year, please reply to this post. Otherwise a Retweet, Facebook Share, LinkedIn Share or other type of social share (handy buttons provided) would be greatly appreciated. Thank you!

The REAL Reason Banks Won’t Lend Any Money

Eric_Rudolf — Wed, 08 Jul 2009 14:46:34 +0000

If you were looking for a sure-fire way into an argument, your most likely adversary these days would not be a neighbor, or an in-law, or even a customer service person at your local mega-retail establishment. More likely, your difference of opinion would lie with a banker. Utter the words “banks aren’t lending any money” around someone who works for a financial institution, and the next 20 minutes will be filled with phrases like “unfair claim,” “media bias” and “completely untrue.” But where there is smoke there is almost always fire; and the fact is, when it comes to lending money to individuals and small businesses, banks are walking a VERY thin line between keeping the country liquid and hoarding the nation’s capital. To make my case, I offer the following true story.

My Story

Back in mid-March of this year, I began to pursue the idea of borrowing a small amount of money for business purposes. I contacted the local branch of what has been my bank for the past 18 years, and eventually two more branches in the surrounding area, until I finally received a call back 30 days later (a sign of things to come?).

My meeting at the bank was scheduled for the end of April, and by all accounts the meeting went very well. I have a stable job, no credit card debt, money in the bank, equity in my home, and a credit score in the 800s. I was told by the loan officer that these were all very good signs, and if anyone should be able to get a loan, it was me. The next steps included appraisal of my assets, a check of my financial history, and a few levels of approval. When I was reviewing the papers to start the process, the loan officer penciled in a loan closing date of June 18th, but assured me things would need to go ‘horribly wrong’ for the process to take that long. With this in mind I signed the paperwork, locked in an interest rate, and handed over a $500 check to get the ball rolling.

Fast-forward to today, and you might be surprised to know that I still have not seen a dime. The last 12 weeks have been an absolute comedy of errors, delays, and oversights on behalf of my banker and the institution he works for. Although this is not an all-inclusive list, some of the more notable issues included the following:

During the review of my assets the appraiser pulled the incorrect map for my primary residence, and noted that my house was in a flood zone. Based on this information, the bank attached a requirement to my loan that I immediately acquire a VERY expensive flood insurance rider. After making my banker aware of this obvious mistake, it took him 13 days to return my call, and another five to tell me there was nothing he could do to fix it.
When I requested (multiple times) to see the closing summary in advance, I received the papers less than one hour before the scheduled closing. I quickly printed the papers and reviewed them in the car on the way, only to discover the loan amount—the whole reason I went to the bank in the first place—was off by 92.5%.
After already being scheduled for the ”worst case” closing date, I was forced to wait yet again and apply for an extension on my locked in rate, because my banker took a last-minute week of vacation.
Regarding the previous bullet . . . when I contacted my banker’s manager and asked if he would kindly sit in on my closing so I could keep the original date, the manager quite literally laughed in my face. Then he told me my loan was “not quite that high on his bank’s list of priorities.”

At this point, it is important to note something: I don’t bank at Pawn America. My bank is one of the largest, healthiest, and longest-standing financial institutions in the country. In fact, this particular bank sleepwalked through the recent “stress tests,” and has never been in serious financial trouble in its long and storied history. So this begs the question: why can’t I (or anyone else) get any money? Based on my recent experience, and a number of conversations with employees and customers within the financial industry, I believe the answer is threefold:

Reason #1: Banks are Finally Doing All of the Things They Should Have Been Doing 15 Years Ago. Gone are the days of loan officers encouraging people to push for 80/20 loans, sign variable-rate ARMs, and use their homes as cash machines . . . while encouraging them fudge their loan applications. Today, asset appraisals are being double-checked, employment histories are being triple-checked, and good credit ratings are no longer optional. The downside to the consumer? All of these checks take TIME.

Reason #2: Banks are Choosing to Remain Understaffed. At this point in time, there are statistically more people and businesses trying to get money than in any other period. Between historically low interest rates, unheard of home buyer credits and re-fi requests from struggling families looking to rework existing loans, there are nearly THREE TIMES as many customers in the banking pipeline. Yet for some reason, banks are not looking to hire additional staff. Why? To keep overhead down and stock prices up.

Reason #3: Lenders are Making Even More Stupid Mistakes than They Were Before. The lack of qualified people mentioned in #2 is causing bank employees to rush, which in turn results in an incredible number of mistakes during the loan application and approval process. This year, among my smaller group of friends and colleagues I have seen everything from typos to gross miscalculations—some of which caused loans to completely fall apart. The worst story? A couple who was 9 months pregnant showed up to close on their first home and was turned away, because their banker forgot to lock in an interest rate. Three weeks, $2,000 (unexpected) dollars and one baby later, the home is finally theirs.

It might not be fair, and it certainly isn’t right, but until interest rates move higher and the majority of foreclosure homes clear the market, you and your business must unfortunately expect slow, inaccurate and uncaring service from your lender. And the worst part is, they will continue to collect the same outrageous fees they’ve always been collecting.

THEsmallCOMPANYBLOG » Money

The Five Hidden Ways Small Companies Waste Money

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