Not just the wages: the real cost of doing things the hard way

If you’ve ever tried to put a number on what an operational inefficiency is costing you, you’ve probably done what most owners do: multiply the hours by the hourly cost of the person doing them. Ten hours a week, £12.71 an hour at National Living Wage, 47 working weeks – somewhere around £6,000 a year. Annoying, but it doesn’t correlate with what you see day to day.

The maths is correct, but the number is misleading. The truth is that the wages are the smallest part of the bill, and the reason the problem evades capture is that the rest of the bill is much harder to calculate.

Here’s what else is on it.

The opportunity cost

The ten hours a week your team spends on workarounds aren’t just ten hours of wages, they’re ten hours that didn’t go into new business. That’s time that wasn’t spent improving the project, or conversations that didn’t happen with your best customers. The lost money isn’t just the £6,000, it’s also whatever those ten hours could have produced if they’d been spent on growth rather than maintenance.

For most businesses, that’s the biggest single number in this whole list – and yet it doesn’t appear in any analysis.

The customer experience tax

Manual processes introduce errors. They could be late responses, incorrect invoices or a missed order that had to be chased. Customers who really love what you are selling may be forgiving of mistakes initially, but over time these incidents shape what they think of your company. Word of mouth is the cheapest and most effective marketing tool you’ll get, but it can also be the hardest thing to come back from if the feedback isn’t good.

Many customers won’t complain to you – but they will to their friends.

The recruitment treadmill

A good employee can often take their pick when it comes to a job. So if working for you is unnecessarily difficult – their time frequently wasted on workarounds or tasks that aren’t part of the job description – they’ll leave for pastures new. Taking care of your staff isn’t just a good wage and generous holiday package – you need to allow them to do the job they were employed to do.

When a talented employee leaves, you don’t only lose their wealth of institutional knowledge and client rapport – you also have to factor in recruitment fees and a loss of productivity during handover periods.

The decision tax

When data is spread across three separate locations and reports take half a day to compile, it’s harder to assess what is working for your business and what is causing friction. Questions such as ‘Is our new marketing campaign impactful?’ that should be answerable at a quick glance take far longer to answer, meaning decisions surrounding them can’t be made in an effective time frame.

Not only does this mean your business can’t adapt quickly to feedback, but it also means that due to the time it takes, over time people become reluctant to ask questions that could provide valuable insights.

The growth ceiling

For a lot of businesses, just as business seems to be booming, it suddenly plateaus and never quite picks back up. Usually, that’s not due to an inability to find more customers – it’s because they can’t take more on without something else breaking. Operations can only absorb so much before cracks start to show, and the ceiling is set by how much the systems can handle, not by how much demand is out there.

If you’ve ever turned work away, or held back from chasing it, because you weren’t sure if you could deliver without everything falling over – you’ve seen an operational cost showing up as a sales problem.

The owner premium

If you’re the owner yourself, the hidden costs are even greater, and they aren’t just financial. It’s the mental load you carry home, the weekend emails or ‘I’ll just do it myself’ mentality that creeps in because the broken processes mean that delegating the task is often harder than just doing it. The reason you started your business probably wasn’t so you could spend Sunday evenings catching up on admin – but it’s the reality you’re facing.

Burnout is expensive, in both human cost and business cost. And it usually gets ignored until you reach breaking point – because as an owner, you’ll do whatever it takes to ensure things stay normal day to day.

Adding it all up

So when someone asks us what an operational audit could be worth, we don’t like to answer in numbers. Yes, the wages-times-hours calculation is a factor, but it’s the floor of the problem. The real cost is a combination of all the above, and it impacts growth, finances and people.

If you’d like to know what the full bill actually looks like in your business specifically, that’s what the audit is for.