The Hidden Costs In Your Business And How To Uncover Them

There's a cost sitting somewhere in your business right now that you know exists but can't locate. You can see it in the overall number. You just can't tell which part of the operation is producing it, which means you can't do anything about it.

That's the problem Dave Oakes has spent 35 years helping manufacturing and engineering businesses solve. He's the CEO of Power Technology, and his one thing is this: start with the problem, not the technology. It sounds straightforward, yet almost nobody does it.

Keep reading for the six top insights from this conversation.

1. The purchase usually comes before the problem

Go and look at the last piece of technology your business bought. Now ask yourself: did you start with a specific problem you needed to solve, or did you start with the product and work backwards from there?

Most of the time, it's the product first. The shiny thing gets bought, rolled out, and then everyone waits for the ROI. Only it never quite arrives because nobody defined what they were trying to fix before they started. Dave spent years on the other side of that equation, proud of the technology he was selling, puzzled by the ceiling on what it could do. It took him a long time to realise the issue wasn't the technology. It was the order of operations.

Practical step: Before the next tool, system, or piece of kit gets signed off, write down in one sentence the specific problem it's supposed to solve. If you can't, you're not ready to buy it.

2. Four questions to help you notice your blind spots

There's a set of questions that Dave uses at the start of every client conversation. On paper, they look simple. In practice, they’re designed to make you uncomfortable.

What decisions are you making based on assumptions rather than facts?
What costs do you just accept because you can’t currently see them?
If you had better information tomorrow morning, what would you do with it?

And the one that seems impossible to answer: what don’t you currently know about your operation?

That last one isn’t really a question, more of a prompt. Obviously, you can’t list your blind spots, but sitting with that question tends to surface something: the area of the business you avoid looking at too closely, the number you’ve stopped querying, the cost that appears on the bill every month and gets signed off without scrutiny.

Practical step: Take those four questions somewhere quiet and write down whatever comes up. Try to get out of your head and away from what you think ‘should’ be the answer and just jot down what comes to mind.

3. Start with the big picture before you zoom in too closely

There’s usually at least one cost sitting on the P&L every month that nobody can really account for. You know it’s too high. You just don’t know which part of the operation is responsible, which means you don’t know where to start.

The temptation is to measure everything at once and let the data tell you. The better approach is to start one level up. Break the problem into sections that reflect how the business works, find the one that looks out of kilter, and then drill down into that.

Take energy consumption, for example. Instead of putting a sensor on every machine, you split your supply by area: this production line, that cold storage section, the compressor room, the offices. Each section gets its own reading. Suddenly the one big number on your bill becomes several smaller numbers, and one of them is almost certainly much higher than the rest. That’s your starting point. Everything else can wait.

The same logic works anywhere you’ve got a cost you can’t explain. A logistics bill that just keeps climbing: split it by route, by driver, by delivery window. A maintenance budget that creeps up every quarter: split it by machine, by site, by age of kit. Staff hours that don’t add up: split by task or by team.

Practical step: Pick one cost in the business that you accept without fully understanding it. Work out the most natural way to split it into three or four categories. Even a rough split on a spreadsheet tells you more than one total figure.

4. More data is not the same as better data

Dave shared a story about a rail company that fitted their engines with 100 sensors to improve efficiency and reliability. Sounds thorough in theory, but in reality they ended up spending more time maintaining the sensors than the engines.

Someone applied a bit of Pareto thinking. It turned out that a single measurement from the exhaust pipe gave them enough information to identify most of the problems they were trying to solve. They went from 100 sensors to one well-chosen measurement and saved millions of pounds.

The lesson is that more data isn’t automatically better. The goal is to find the measurement that tells you the most, not to measure everything and hope something useful surfaces.

Practical step: If you're already collecting data somewhere in the business, look at how much of it informs a decision. If the answer is "not much," go back and ask better questions about what it is you need to know.

5. Telling staff to be careful never works

When it’s not your money, it’s easy not to think about it. Staff don’t set out to be wasteful; they just don’t feel the same pull towards careful spending that a business owner does. Machines get left running. Lights stay on. Supplies get ordered when there’s no process to reuse what’s already there. It adds up, and a reminder email doesn’t change it.

A more reliable fix is to stop relying on people to make the right call and build it into the operation. A sensor that triggers when a machine runs idle. Lights on a timer. A simple process that tracks and reuses supplies across sites rather than buying fresh ones every time.

If the correct behaviour is automatic, you’re not depending on anyone to remember or care. The problem stops being a people problem.

Practical step: Find one recurring waste in the business that depends on staff consistently doing the right thing. Ask whether a simple process or automation could make the right behaviour the default rather than the reminder.

6. Before you go looking for information, work out what it's worth

Phil put a useful frame on this near the end of the conversation. If your energy bill is £1,000 a month and you've no idea where it's going, that's frustrating, but the investment in finding out probably doesn't pay back quickly. If it's £50,000 a month and you've no idea where it's going, that's a different conversation.

The decision to invest in better visibility should follow the same logic as any other business decision: what's the likely return, and what does it cost to find out? Look for situations where the potential savings are significant and ongoing, and the cost of getting started is relatively low.

Practical step: Look at your biggest operational costs. For each one, ask: do I know what's driving this number? If you don't, estimate what a 10% reduction would be worth over a year. That figure is the ceiling for what it's reasonable to spend finding out where the money's going.

The bigger picture

The One Thing from this episode is deceptively simple: start with the problem, not the technology. It keeps needing to be said because the pull toward the product, the new system, the thing that promises to fix everything, is strong. It's not that the technology is wrong; it’s that without a clear problem to solve, it's almost impossible to know whether it's working.

The businesses that get this right are spending in the right order: problem first, question second, measurement third, technology last. By the time they get to technology, they already know what it needs to do.

Dave Oakes is the CEO of Power Technology. You can find him on LinkedIn or visit powtechnology.com to explore case studies from businesses in chemicals, fuels, food and beverage, and manufacturing.