Where Businesses Lose the Most Money

businesses lose money

Running a business in this unpredictable economic climate is challenging to say the least. Keeping customers happy while balancing the books is a trick that many SMEs simply can’t manage, even if sales forecasts look promising.

Why? Because many business owners don’t realise where they lose the most money, and they don’t take into account issues with payments or cash flow. They underestimate areas like staff turnover and training, and focus on market trends and finding cheaper suppliers, which only makes a slight difference to revenue.

The statistics for small businesses are not great. An infographic from Smallbiztrends.com reveals:

50% of small businesses fail within a year

95% of small businesses fail within the first 5 years

30% of small businesses are constantly losing money

Only 30% of businesses are breaking even

Regardless of the size of the company, it’s a fact that in many businesses cash is leaking out of every seam without being properly monitored. Make sure that every aspect of the organisation is properly costed, analysed and reviewed on a regular basis so that money can be saved in all departments. Read on to find out where the majority of businesses lose the most money.

These things can cause you to lose money

Cutting Corners

We’re all guilty of cutting corners now and again – usually to save money or time. However, in the long run, cutting corners can only damage your finances. If you’ve opted for a product of lesser quality, then customers aren’t going to be impressed and will probably go elsewhere next time – hurting your profits.

Perhaps you’ve cut corners training new employees so they can start working sooner. Once again, this could come back to bite you in the future if they make a huge mistake because they weren’t adequately trained, or they decide to get another job because they don’t feel up to the task. Cutting corners will impact your bottom line at some time, so why not avoid it altogether.


Many businesses aren’t aware of the shocking cost of a disengaged workforce. It has been reported that these unmotivated employees who don’t connect with the company’s values cost the UK £340bn each year. Moreover, research from brand agency Maverick revealed that investing just 10% more in staff engagement could allow UK businesses to add £2,700 per employee per year in profits. This translates to an extra 3% of the nation’s GDP.

A business thrives on the quality of its people. Without engaged employees who understand the company values and appreciate their job responsibilities as part of the wider business objectives, the business won’t last long. Engaged employees are more productive and motivated, and more likely to have job satisfaction. This means they work harder and smarter (which can have a huge effect on profit and turnover). Which leads onto the next area where businesses waste money every day…

Staff Turnover

Staff turnover can be a problem in many sectors, but reducing turnover and improving training is essential if you need to save cash. It’s extremely costly having to replace employees on a regular basis, so consider how investing in learning and development opportunities along with culture and engagement could help you save money in the long term.

When a staff member leaves the company, not only are you losing out on skills, talent and the money you spent training them – it can often impact productivity for the rest of the team, as other staff will now have to work harder until a replacement is fully trained. It can also impact group morale and influence other employees to leave. Then think about the time and cost of advertising the vacant position, followed by the recruitment and hiring process. Companies with high staff turnover have to go through this route on a weekly basis.

The employer cost of replacing an employee has been calculated and stands at over £30k. Staff turnover is the place to focus all of your energy if you really need to start balancing the books.

If you’re looking to improve your turnover, look at where you’ve gone wrong in the past. Are staff leaving because they’re unhappy? If so, you need to look at the company culture. Are staff leaving because they’re overworked? If so, you need to look into workloads and time management. Are staff leaving because they’re under qualified? If so, you need to look at the assessments and checks HR staff do.

Fine-tuning your recruitment techniques can also help improve turnover too, as it’ll help you define a process and identifying people who have the right intentions, qualifications and culture should be made easier.

Cash flow

For small businesses, cash flow is a huge sticking point. You may not necessarily lost money through cash flow – but a bad management of cash flow can make budget and profit very difficult to manage.

Cash flow determines when you can pay people, when you can pay bills, and even things like rent. It doesn’t matter if you’re owed £40,000 by a client, if you don’t have that £40,000 when you need it, to cover salaries and bills, the business won’t survive.

Poor customer service

For product or service led industries, poor delivery or poor customer service can really make you lose money. Dissatisfied or unhappy customers are 10 times more likely to share their experience than a happy one, so you’re already fighting a losing battle if your business isn’t delivering what it should be.

With the added issue of the internet, bad news travels fast, and there’s nothing more damaging to a small business than bad reviews. BY focussing your efforts on delivering great service, and actively asking your customers to share their positive experiences – you’ll help get your business off the ground with a running start.

Spending money on the wrong things

It’s hard to know what to prioritise when you’re a small business, and a lot of small business owners find themselves ticking boxes for things they think they should be doing. For example, having a marketing budget is sensible if it’s helping to add to your overall sales and profits, but if marketing and social media is an indirect marketing channels for you – then spending thousands of pounds a month on an agency isn’t going to help.

Turning it all around

There’s no doubt that businesses are losing serious money in these areas, but many fail to realise how they can turn it around. If you’re determined to create a happy, engaged workforce and a company with a small turnover then speak to our culture specialists today. Team.admin@hunteradams.co.uk