How Much Additional Sales Do You Need to Offset One Dollar Of Revenue Lost from Theft?
Business owners on Long Island and New York: Have you looked at security from how much new net profit or additional sales you are going to need to make to offset each dollar stolen? When one dollar is stolen from your business, how will you replace it?
When we think about where the money will come to replace that dollar, we need to start thinking about how security impacts our profits. A dollar you lose will need to be reacquired through net profit. For almost all industries, acquiring one new customer, or earning one more incremental dollar of revenue is much more costly than retaining customers, and retaining their sales. So, if you cannot regain the dollar from existing customers, you will have the additional cost of customer acquisition. As you can see, there are many hidden costs of losing even one dollar to a security issue.
So, what happens when you lose from both ends of your Profit and Loss Statement?
1) Money is lost on your bottom line from shrink and theft.
2) Money lost needs to be replaced with other revenue/sales, which may require new customers, with a higher average cost to acquire than maintain your base.
3) You need to also factor in the value of your time and the opportunity cost of not working on other profit drivers.
For example, let’s say you lose $100 to Theft, whether that is from external thieves or even an employee. To replace that $100, you will need approximately $714 of new Income, if you are working on a net profit percentage of 14%. The lesson here is that you need net profits to replaces revenue losses, and that requires many more sales dollars than many business owners may think.
To help you see what the true cost in forgone revenue is to your business every time money is stolen, we put together this helpful chart for you: http://www.totalsecurityny.com/pdfs/SalesRequiredToOffsetLoss.pdf
So, what can you do to stop profit loss? If you are losing money because of theft, you can put significant stop gaps in place when you work with a professional security company. The three tiers you need are:
- A security evaluation and strategy that is comprehensive for your particular site.
- An execution plan that correctly covers all critical areas of your business with the right system, whether it is cameras, access control, alarms or in other cases, GPS tracking etc.
- The ability to record, monitor and capture all activity, combined with onsite personnel who can institute security measures.
These are high level processes you can use. However, nothing replaces the insight and the tailored plan a security systems installation company can do for you when they come on site, get to know you, and design and integrated security program that will thwart thieves and keep your profits higher. This is one of the reasons we at Total Security are much more than a security company: We protect your bottom line. Please get in touch if we can help you in any way.