Penny Wise, Dollar Foolish: When Saving Money Costs Your Business More

Every business owner wants to keep expenses under control. However, there’s a difference between cutting costs and actually saving money.

Sometimes, the decision that looks cheaper on paper creates a bigger expense somewhere else. For portable restroom operators, that can happen with labor, fuel, supplies, equipment, routing and even customer pricing.

The key is to look beyond the obvious expense and consider the total cost.

When Small Savings Eat Up Labor

Take re-rolling partially used toilet paper, for example. Saving the remaining paper might seem worthwhile, but how much is that paper actually worth?

If an employee spends several minutes re-rolling it, you may be saving 50 cents in supplies while spending several dollars in labor. Multiply that across multiple rolls, and the “savings” can disappear quickly.

The same idea applies to driving across town because another gas station is a few cents cheaper per gallon. The lower fuel price may not make up for the extra mileage, vehicle wear and employee time required to get there.

Saving money on one line item doesn’t necessarily mean the business is spending less overall.

Cheap Can Get Expensive

The lowest-priced product or quickest repair isn’t always the least expensive option over time.

A cheaper chemical, for example, may require more product per tank to achieve the same results. Once you calculate the actual cost per service, the more expensive chemical could be the better value.

Equipment can create the same problem. Repairing the same component repeatedly may eventually cost more than replacing it, especially when you include labor and downtime.

Preventative maintenance can feel like another expense that is easy to postpone. But skipping routine maintenance to save money today can lead to a much larger repair bill when a truck or piece of equipment fails unexpectedly.

Revenue Isn’t the Same as Profit

A new customer is typically good news, but not every sale is equally profitable.

Consider the example of a small account far outside your normal service area. The customer will generate revenue, but the additional drive time, fuel, labor and vehicle expense may eat up most of it.

The same thing happens when operators avoid charging appropriately for distance or accept low-priced accounts just to win the business.

Getting the sale is only part of the equation. You also need to understand what it costs to provide the service.

Efficiency Has a Dollar Value

Routing is another area where hidden expenses can build up.

Keeping an inefficient route because “we’ve always done it this way” can mean unnecessary miles and labor every week. Likewise, skipping a scheduled service to avoid an extra trip might save money temporarily, but an overflowing unit, emergency call, unhappy customer or lost account can cost much more in the long run.

Being cost-conscious is good business. The goal, however, shouldn’t be to spend as little as possible in every situation.

Before making a cost-cutting decision, ask what you’re really saving and what that decision may cost somewhere else.

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