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 seems that too many companies are not willing to invest where there are direct and, in some cases, instant savings.
We encounter this frequently with Hreflang Builder. Companies come to us complaining that traffic cannibalization and shopping cart abandonment cost them between $100k to as high as $20 million per month in lost revenue. In these cases, they have tied it back to visits from search engines landing on the wrong website where they cannot transact.
They are looking for a solution. If they can present the correct webpage and get the searcher through, they can reduce that loss significantly. The problem is often that despite a critical problem, their company or department did not budget to fix the solution. While in most cases, our software is not prohibitively expensive if is often the implementation that requires time of their internal or agency resources to fix defects in their systems.
Sometimes, the delay is a few months to a year to make the business case and get alignment on the spending. Often companies need to budget to fix the problem completely and are unwilling to do any mitigation until that is possible. We had a client who was complaining that they were losing $3 million per month, and it took 6 months to get approval, meaning in the time it took to get approval for $3k in software licenses and $10k for their agency to map URLs they had lost nearly $18 million dollars.
I first encountered the idea of revenue and cost centers and budget allocation during my first job after leaving the Marine Corps. During my first month on the job, I reviewed the department’s budget with the finance manager. There was a line item for $50k for Records Management/Storage, and was growing by $1,500 per month. He told me that his understanding of it was for a service that picked up the completed medical records and their audit materials and stored them for us. He did not know any details and suggested I speak with the Operations Manager. The Ops Manager told me that we needed to store old records and furniture from when they were a government agency, and that was all she knew. I was fascinated that there was a $600k annual expense, and no one knew what it was for or why we had it. My curiosity got the best of me, so I dug deeper.
Turns out we had 3 large storage rooms that were floor-to-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. Note that there was no reimbursement for storing it, and it seems no one in the government cared about what happened to it. I finally tracked down someone in DC who told me we can dispose of it with any government reutilization facility. I found one 45 minutes away at the local Marine Corps base. When I called them, they told me I only needed to complete a return form for each item and deliver it to the base. They sent me a few boxes of the forms set up to print on a dot matrix printer. I created a database and an output that mirrored the required fields on the form. Rooting around in one of the storage rooms, I found a handwritten list of all of the items by type and its government tag ID. I had a temp enter all of this into a database. I got quotes from trucking companies and some temp labor and developed a budget. The full cost to load the trucks and return the furniture would cost around $8,000.
Our current government contract required us to maintain the completed audit and medical records for 90 days after we submitted the audit in case there were any issues. It specifically stated records could be shredded on the 91st day. Talking to the records management company, we did not have a provision to retrieve and shred the records. This is why the monthly rate was growing by $1,500 each month. The storage company reluctantly gave me a printout of all of the storage boxes and the date added into storage And yes, we had many years of them stored. I decided anything that had been in storage for more than 6 months would be shredded. Due to the quantity of shredding, over 6,000 boxes, the records management company told me they would have to contract out to have them destroyed for about $25k, which seemed a bit expensive to dump them into an industrial shredder.
Again, reaching out to my fellow Marines, I found a weapons incinerator at the nearby Naval Weapons station. After multiple calls, I found a sympathetic Navy Senior Chief who agreed to let me incinerate them and give me a signature indicating they had been securely destroyed. The only cost would be a few cases of beer for his sailors to monitor the process, the labor to load /unload the trucks and the trucking company fee to transport them to the base.
Overall, the total cost to get this under control and reduce our recurring expenses was just over $13k. By eliminating the furniture storage, the backlog of records, and moving to a new full-service vendor, our monthly cost would drop from $50,000 to less than $2,000 per month.
I developed the business case and detailed all of the activities and took 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 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.
One might assume saving $48k a month or $576k annually (that would only grow) would be an easy decision. The Dirctors initial reaction was to say no since we did not have funds to allocate to this line item. I honestly could not process this decision. In the very next month, this activity would pay for itself and actually save money. There was no downside to this, which left me stunned when she disapproved of the project. She stood firm that we would, in effect, be over budget for that month and would not approve the funds. She told us we could make a budget request for the next fiscal year for the funds.
A few months later, this director was replaced by someone less rigid, and it was approved, and we disposed of the materials. This process also lead to several improvements and databasing of records management and an overall process improvement.
Even today I am surprised by companies that have a known problem but due to strict line item budgets or managers that would rather hide a problem than solve it, never realize the savings or benefits that are possible by making the right decision.