Every business owner worries about profit. Revenues vs. expenses and costs is the all encompassing focus of entrepreneurship. The good news is most expenses and costs are easily identified and can be controlled with good planning.

Unfortunately, a veritable mess of hidden costs lurk beneath the surface of your business, waiting to rear their ugly heads and take chunks out of your bottom line. These costs appear only when it’s too late and you have already suffered a loss.

A loss in risk management-speak occurs when some unplanned event creates an incident that injures an employee or private citizen, damages property, or involves the loss of property (such as stolen receipts, merchandise and trade secrets).

Losses incur two types of costs: Direct costs are dollars paid to doctors for treatment of injuries, or to repair or replace damaged equipment and property. Indirect costs are expenses incurred to keep your business going while you recover from that loss. Indirect dollars are spent on training, temporary employees and equipment rental.

But wait . . . there’s more. How about the time it takes you or another manager to investigate the incident and report the claim to your insurance provider? What about the paperwork, follow-up calls, and file maintenance? Let’s also not forget legal costs and the potential for increases in your commercial insurance premiums.

The reality is that for every one dollar spent on direct costs, you spend on average another seven to eight dollars in indirect costs. A loss of $1000 will mean a bottom line drain of $7000- 8000. At an average profit margin of 10%, you will have to do an additional $75,000 in sales to make up for that loss.

Therefore, it becomes critical that you have a program in place to prevent as many losses as possible. You can start by working with your insurance providers, most of whom offer loss control services. Florida for example, requires insurance companies to provide loss control services. The services are paid for with your premiums, so why not use loss control specialists who can review your business’s risk potential and provide you with solutions?

Learn about the hazards your work creates and make your employees aware of them. If the hazards can be eliminated through redesign, the new design could save you a lot of time and trouble. not, provide your workers with the knowledge to complete their work safely. If they need to be protected with special clothing or equipment, give it to them and train them in the proper use and care of those items. Most vendors of safety equipment also offer training services available at little to no cost; just ask.

Proper loss prevention starts with your decision making. Provide an open environment at work your employees feel comfortable telling you when things aren’t right. Listen and respond to their suggestions and be prepared to take the steps necessary to correct the conditions or practices that can lead to a After all, it makes bottom line sense.

David Schmerer owns Productive Potential, providing profit/productivity solutions, workers compensation cost control, and OSHA compliance/safety program development. He can be reached at 268-6661 or productivepotential@prodigy.net.