Variety in Offerings and Outdated Techniques are Draining Your Profits

Hello MSME business owners!

As business owners, all of us look at growth and profitability. Unfortunately, sometimes, profit leakages creep in where we least expect them, taking away our earned money. Today, I would like to talk about two areas that not many people look at closely that may be hurting the bottom line variety of offerings and the use of outdated methods.

1. Variety in Offerings

Having a wide variety of offerings sounds good, right? Providing several types of products; catering to various industries; or dealing with several technologies will be flexible, and you'll reach a larger market. But the catch is that it costs more for greater variety.

For instance,

• You need more people to design and manage all the different offers.
• Larger procurement teams for various parts.
• More inventories and storage of each type of product.
• Specialists for every industry or technology.
• Further vendors, documentation, and processes.

All these add to increasing the cost of operation. In the case of having fewer and standardized offerings, you can standardize processes, reduce inventory, and lower overhead costs. There is potential cost optimization through value engineering and batch purchases.

Of course, this doesn't mean you should limit your business forever. However, it can meaningfully cut down costs in the early stages. Later, when stability has been reached, you can gradually expand product lines, technologies, and markets.

2. Outdated Methods and Techniques

The other source of profit leakage is sticking to old, outdated methods—sometimes due to habit, ignorance, or simple resistance to change. Here are some areas where outdated practices may silently be costing you:

• Virtual versus Physical Meetings: In some cases, physical meetings cannot be avoided, yet besides that, they involve many unnecessary travels, accommodations, and time costs. Virtual meetings save an ample amount of precious time and money.
• Online Marketing vs. Traditional Methods: Traditional marketing strategies like cold visits, exhibitions, or large decentralized teams tend to be much more expensive than digital marketing alternatives. Start measuring your Cost Per Lead and compare it with newer, digital strategies—you’ll see a big difference.
• Value engineering: Most businesses still use their design standards, which date back 30-40 years without ever reviewing them. Haven't they ever wondered if these standards need to be so resource-intensive? Value engineering can optimize designs and eliminate costs that do not add value.
• Exploring Alternatives: The materials, specifications, or technologies you’ve been using for years may no longer be the most cost-effective. Sometimes, even a slight change in the materials or technology can lead to significant savings.
• Leverage automation: It requires a significant amount of time, and man-hours are just wasted. Such tools include design software, ERP systems or CRM platforms for the automation of saving time and labour and money.

There are so many leakage areas where profitability is leaked out of businesses, but it is identifying the problems that one can benefit from in enhancing profitability. If any of these sound familiar, take a closer look at your business practices and see where you can plug these leaks.

Plug these profits and let me know if this is helpful.