If you are a fan of home renovation shows, you will know that DIY stands for ‘Do-It-Yourself’. Those shows often feature horror stories of people who have tried to do their own projects because they thought they could easily figure it out on their own and save some money by going the DIY route. Instead, many do-it-yourselfers never complete the job and often make costly mistakes.
I wish I could collect a dollar every time a business owner tells me that getting the help they need is “too expensive” or “I can’t afford it”. In almost every case they don’t know the true cost of DIY because they’ve never taken the time to examine the numbers. Their answer has no factual data to back it up. It’s an emotional decision, not a business decision. They are, quite literally, chasing pennies with dollars.
We’re beginning to see a marked increase in home builders attempting DIY projects, following a challenging couple of years. One thing hasn’t changed, though – budgets are tighter than ever. As a result, home builders are drawn to the notion of internally managing their risk strategies and developing maintenance and marketing programs in order to “save money.” When it comes to risk management and satisfied customers that may have a significant impact on the future or your organization, those savings may, at best, be illusory.
It’s important to know what jobs you can do yourself and what projects are best left to the professionals. Some jobs can be simple enough to tackle successfully. Others clearly require expert skills. It’s the jobs between those two extremes that can be tricky. DIY’s cost savings may seem enticing, but if your skills aren’t up to snuff, the result won’t impress.
You need to bring some financial intelligence to the game. You need to understand some simple ROI. Do you know how much a customer is worth, on average, to your business? If not, here’s how to find this important number:
Write down the number of clients/customers you served last month (Or whatever time period makes sense to you. If your business is seasonal, you may want to look at 12 months to get a true average). Now write down your gross sales for the same time period. Divide that by the number of customers. This gives you the average revenue from a single customer. How does this number help? Great question! Glad you asked. Let me give you an example. XYZ Sales serves 20 customers a month with sales of $4,000. That means each new customer is potentially worth $200 a month to XYZ.
But Jane, who owns XYZ is spending more than 25% of her time (10 hours per week) stuck in the office doing admin work, invoicing and other non-revenue generating activities. Almost 40 hours a month. Jane estimates it takes an average of 10 hours to find and convert a prospect into a new client so those 40 hours are costing her 4 new clients per month or $800 in sales. At the end of 12 months Jane is missing almost $10,000 in her revenue stream for that one month alone.
Even scarier, she knows as long as this situation continues, the number continues to grow. (And, yes I know I’m not allowing for attrition but I want to keep this simple and straightforward).
Along comes Sue, a virtual assistant, who offers to help Jane with the workload. Because this is Sue’s area of expertise and excellence, she can complete the same 40 hours of work in 20. Her rate is $25 an hour or $500 a month. Jane’s time is freed up to find new customers and keep her existing ones happy so they stay.
Knowing the numbers, what advice would you give Jane? Now ask yourself how much time you are putting into non-revenue producing tasks in your own business. What is that actually costing you?
There are many parallels between DIY and risk management DIY. For instance, there are some things the organization must do itself, while other tasks require specialized knowledge or experience that you may not have in-house. The risk of starring in your own DIY nightmare can be high if you do the minimum to get by.
All successful risk management leaders know what they can and must do internally versus where they need to get expert advice. What actions can you take to enhance your risk management program? “DIY projects are rarely as easy as they seem, and all too often it ends up costing you.”
Doing the work yourself may result in an acceptable outcome and allow your staff and committee to cross the project off the to-do list and return to their “real jobs.” But, engaging a professional experienced firm will result in an exceptional product that will drive the future success of your organization and enhance both your reputation and risk management program for years to come.