There is an old saying that you need to “spend money to make money.” but what about “spending money to save money” or to capture lost revenue? It appears that many companies are unwilling to invest where there are direct and, in some cases, immediate savings.
We encountered this attitude frequently with Hreflang Builder. Companies come to us complaining that traffic cannibalization and shopping cart abandonment cost them between $ 100,000 and as high as $20 million per month in lost revenue.
They are looking for a solution, and despite one that is relatively easy, the reason not to move forward is that their company or department did not budget to implement the solution. While, in most cases, our software is not prohibitively expensive, it either disrupts or inconveniences someone if the implementation or fixing some of the underlying issues requires the time of their internal or agency resources to correct defects in their systems.
Sometimes, the delay is a only few months to a year to develop the business case and achieve alignment on spending. We had a client who was complaining that they were losing $3 million per month. It took 6 months to get approval, meaning that in the time it took to get approval for $ 3,000 in software licenses and $ 10,000 for their agency to map URLs, they had lost nearly $18 million.
I first encountered the concepts of line item budgets and cost centers during my first corporate job. During my first month on the job, I reviewed my department’s budget and found a line item of $50,000 for Records Management and Storage, which was increasing by $1,500 per month. I asked my boss about it and she told me that we needed to store old records and furniture from when they were a government agency. My five-year-old brain kicked in, asking a series of questions she wasn’t interested in answering, related to this nearly $ 600,000 annual expense. My curiosity got the best of me, so I dug deeper.
It turns out that we had multiple storage rooms filled to the ceiling with old office furniture, costing us $18,000 per month. We were storing it until the government told us what to do with it. We had been storing it for two years after converting to a not-for profit organization. Note that there was no reimbursement for storing it. I finally tracked down someone in DC who informed me that we should have returned it to the Government, and we can do so at our leisure to dispose of it at any government reutilization facility. I used my Marine Corps connections to sorted it out. The full cost to generate the required DOD documents, load the trucks and return the furniture would cost around $8,000.
Regarding record storage, I found that our contract requires us to maintain the completed audit and medical records for 90 days after submitting the audit, in case any issues arise. It specifically stated records could be shredded on the 91st day. After consulting with the records management company, we found that we did not have a provision to retrieve and shred the 6,000 boxes records. The fact that they were generating $32,000 in storage revenue a month they were not incentivised to want to destroy them. They quoted $50,000 to retrieve and shred them.
Again, reaching out to my fellow Marines, I found a large incinerator at the nearby Naval Weapons station. I arranged for a truck and temporary labor to load the boxes, along with a few cases of beer, for the sympathetic Navy Senior Chief team who would certify the destruction.
The total cost to bring this under control and reduce our recurring expenses was just over $ 13,000. By eliminating furniture storage, reducing the backlog of records, and transitioning to a new full-service vendor, our monthly cost would decrease from $50,000 to less than $2,000 per month.
I developed the business case, detailing all the activities, and presented it to my boss. While she understood the cost savings and the need to clean things up, she was nervous about presenting this higher-up. The obvious question would be whether there would be any impact on her job for not seeing this earlier. Realizing it could only get worse if not fixed, she accepted the risk and took it to the office director.
My boss agreed, saving $48,000 a month, or $576,000 annually, which would only grow, would be an easy decision. The Regional Director disapproved the request, as we did not have funds to allocate to this new, unexpected cost line item. She stood firm that we would, in effect, be over budget for that month and quarter and would not approve the funds. She instructed us to include it in the budget request for the next fiscal year to allocate the necessary funds.
There was no downside to this, which left me stunned when she disapproved of the project. Although I understood that we would go over budget this month, this activity would ultimately pay for itself and save significant money. in the long run. My boss later confided that the Director has her same concern that that small budget overage would be questioned shining a light on the bigger problem.
A few months later, the director moved on being replaced by someone who wanted to make their mark early. Seeing this as a quick win, the approval was granted, allowing us to dispose of the materials. This process also led to several improvements and the implementation of a database for records management, resulting in an overall process enhancement.
Even today, I am surprised by companies that have a known problem but, due to strict line-item budgets or managers who would rather hide a problem than solve it, never realize the savings or benefits that are possible by making the right decision.
