"Calculator and Money" by 401(K) 2012 via Flickr

How I Saved a Business Over $250,000 Per Year

It didn’t take a lot of effort. Not much time either – about a day or two. All I used was a bit of basic statistics, and by basic, I mean being able to compute percentages. Although I’m doing a Ph.D. in math, I didn’t use any of the fancy artificial intelligence, machine learning or big data stuff that’s all the rage these days. Just some good ol’’ arithmetic.

Which means that what I’m about to share is simple enough for anyone to understand and apply to their own situation. Of course, I can’t guarantee you’ll get the same results I did, but I’m sure that you’ll recognize the power of the methodology to transform your business in such a way that it brings you more profit, success and joy than it ever has before.

I was working for a web startup at the time, and one of our main functions was to collect massive amounts of data from tens of thousands of sources around the globe. Most of the work was automated, but there was a substantial subset of the data that we just had to get manually, so we were spending a fortune on outsourcers, temp workers, part-time and full-time staff, and the development and maintenance of the systems required to support these activities.

I had a hunch that this was all a waste, so I created a metric that compared snapshots of our database before and after the manual collections, which I then applied to various geographic regions and markets. The result? Less than a 1 percent improvement from the manual collections. I presented my findings to the CEO, and just like that, we had over a quarter million in cost savings every year.

We had been pouring tons of money, time and effort into something that made no discernible difference to the bottom line. How idiotic, short-sighted and irresponsible, right? Absolutely. And yet every company I’ve worked with was doing something just as stupid. The problem is that most people don’t have a good system to detect and eliminate waste.

I’m about to give you that system.

Step 1: Get Angry

Identify some part of your operations that you hate with all your being. And I’m not talking about something that just annoys you. What you need to be looking for is a visceral type of loathing that comes from a deep, dark place in the inner recesses of your soul. You know you’ve settled on the right thing when just the mere mention of it makes you want to throw something out the window and punch someone in the face.

But why anger? Because this will light the fire under you to make a change. Just think about how many times you’ve promised yourself to organize your workspace or clear up your email inbox or take evening classes to improve your skills but never followed through. There’s just not enough pain to elicit a sustained emotional and psychological response that would make it impossible for you to not follow through. And that’s in spite of the fact that you know that doing any one of these things would make your life 10 times better! So get out some pen and paper and list out anything and everything that makes you hopping mad.

For me personally, I utterly despise grunt work – tasks you have to do just because someone (a boss, a consultant, an industry “expert”, a best practice guidebook, etc.) says you have to do it. This is what inspired me to seek a solution to the manual process I described above. For you, it could be something totally different. Maybe it’s maintaining your social media presence, or making cold calls to prospects all day long, or sucking up to clients that never buy.

Step 2: Take a Shower

Yes, you read that right. After you make your list, set it aside and hop into the shower, and not just because you’re dirty. I’ve usurped this principle from a friend of mine who was formerly the CEO of a manufacturing company who says that we get our best ideas in the shower, and I can tell you from personal experience that it works beautifully. In fact, I got the basic idea for setting up my metrics while in the shower.

Allow me to explain. Have you ever had a leaky faucet that keeps dripping, dripping, dripping and won’t stop and it drives you nuts? Well, there’s something much worse that you carry around with you 24/7. It’s your smartphone.

All day long it screams out, “HEY LOOK AT ME! LOOK AT ME! LOOK AT MEEEEE!!!!!!” One moment, there’s a text message. And then an email. And then a LinkedIn connection request. A phone call, Facebook update, calendar event reminder, and on and on. And when you finally have a little free time, you end up wasting it binge-watching Justin Bieber music videos on your phone’s Youtube app or scrolling through stuff on Etsy that you don’t even need or want.

Well, guess what? You can’t take your phone into the shower, which means that for about half an hour, you are completely distraction-free. This is your sanctuary, your escape, the place where your best ideas will naturally flow. And when you apply your mind to the problems from step one, you will come up with the most extraordinarily effective and out-of-the-box solutions that will revolutionize the way you do business. Don’t inhibit yourself and watch the magic happen.

Step 3: Define Success and Failure

Once you figure out your solution, you need to sit down and figure out what would be a successful result before you start implementation. This is absolutely essential. If you don’t set your metrics ahead of time, you will always find a way to justify persevering with your “solution” even when it’s clear that it’s not doing you any good and possibly causing a lot of harm.

It’s like when you take those online personality tests. The first time through, you try to answer the questions as honestly as you can. But then you get the result that you’re a little cute bunny rabbit when what you really want to be is a vicious tiger. So what do you do? You take the test again, except this time, you answer the questions in a way you think a tiger would answer them.

In personality testing, this is harmless cheating. In business, on the other hand, this kind of ex-post facto rationalization can lead you down a path that will leave you worse off than before. So make sure you have a clear idea of what triggers will prompt you to cut your losses and abandon a faulty strategy and then put it down in writing. As a rule of thumb, the more quantitative this can be, the better, because this would leave no room for creative qualitative excuse-making.

For my example, I had determined ahead of time that if the data didn’t show at least a 5 percent improvement, that would be a signal that we should stop doing the manual data collections. Your tolerance level may be widely different from mine and that’s OK as long as you make that decision and stick to it.

Step 4: Assign Someone to Keep You Accountable

Let me tell you a story. I was once running a class in which the students were supposed to give all the talks and lectures. On day one, I asked for volunteers and almost nobody raised their hand. Not wanting to give all the lectures myself, the following week I went up to each person individually and asked them to give a talk on such and such date. Everyone signed up.

In the same way, if you don’t make it someone’s job to monitor the impact your solution has on your business, then nothing will ever get done. This is especially important if you don’t have the time or ability to do it yourself.

Pick someone who is detail-oriented, is naturally concerned for the bottom line and has some facility with numbers and metrics. They should have the ability to set up a system in which they can compare a control group to an experimental group, much like I did with my former company. Communicate to them steps one to three as clearly and explicitly as you can so they have a deep understanding of your objectives. Finally, ask them for regular progress updates so that you can tell whether to persevere or pull the plug.

Depending on your situation, this could take as little as a few hours or up to several months, so make sure they understand that this part of their job will most likely be fluid and unpredictable. That being said, as long as they set up good systems, the task shouldn’t take up too much of their time.

So there you have it. To recap, find something that makes your blood boil; then go to a distraction-free zone to think of solutions; make a priori measures of success and failure to determine whether or not you will persevere; and finally, delegate to someone capable of managing this process. And then use this system over and over again in all aspects of your business so that you can experience extraordinary benefit and prosperity.


About the Author:

Daniel Lee

Daniel is a Ph.D. student in probability and statistics. He was awarded a Lassonde Entrepreneur Institute Company Launch Fellowship and is founder of Enlighten Sciences, a data analytics and statistical consulting service. He can be reached via email at dlee@math.utah.edu, or connect via LinkedIn.


2 thoughts on “How I Saved a Business Over $250,000 Per Year

Leave a Reply

Your email address will not be published. Required fields are marked *