How to Find Expensive Problems in an Industry You Already Know

How to Find Expensive Problems in an  Industry You Already Know

Short answer: Trace the last ten instances of delay, rework, idle capacity, avoidable risk or missed sales in a workflow you understand. Calculate what each instance consumed, identify the person accountable for the loss and look for a pattern that recurs at least monthly. 

Prioritise a problem when the buyer can verify the cost from existing records and a small paid intervention could return at least three times its fee as a working target.

Industry knowledge creates an advantage only when you use it to see mechanisms outsiders miss. General observations such as “construction communication is poor” or “restaurants waste food” are too broad to price, test or own.

Expensive problems usually look boring from a distance. They live in repeated handovers, missed cut-off dates, corrections, empty slots and quotes that nobody follows. Records reveal them more reliably than brainstorming.

Use the Cost-Leakage Walk

The Cost-Leakage Walk follows one real workflow from trigger to financial consequence. Look in five loss channels rather than asking people to name business ideas.

Choose one workflow and walk through the last ten occurrences. Record where work stopped, who intervened, what resource was consumed and what happened next. Ten is an investigative starting point, not proof of a market.

My view is that founders should hunt for frequent, documented leakage before dramatic strategic problems. A £200 loss repeated every week with one accountable owner is usually easier to prove and sell than a theoretical £100,000 risk that nobody has experienced or budgeted for.

Start with exceptions, not the normal process

People describe how work is supposed to happen. Expensive opportunities hide in the exceptions. Ask for the last order that arrived late, invoice that needed correction, booking left empty or item that missed a return date.

For each instance, write:

1. The trigger and date
2. The normal next step
3. Where the process departed from normal
4. Who spent time or money recovering it
5. The final cash, capacity or customer consequence

Avoid “How often does this generally happen?” until you have reconstructed actual events. Memory favours dramatic incidents and round numbers. Once you understand the mechanism, use records over a defined period to estimate frequency.

Convert activity into defensible cost

Use the narrowest figure the buyer can support. Paid employee time can be estimated from the relevant employment cost and hours consumed. Wasted material uses replacement cost. A missed sale should use expected contribution after sale-specific costs, adjusted for the normal probability of winning it.

Do not count the same loss twice. If a delayed job causes overtime that is already included in its recovery cost, do not also value every delayed hour as lost revenue unless the business truly sacrificed other paid work.

Show a low and high case when records are incomplete. A useful estimate can remain uncertain as long as the mechanism and assumptions are visible.

The three-times-fee target is a working screen rather than a universal pricing rule. Buyers may require a larger return when implementation is risky, or accept a smaller direct return for safety and compliance. Test the ratio against the customer's priorities and alternatives.

Find the accountable owner and the budget route

An expensive loss can cross several departments while belonging to none. Ask whose target, customer promise or budget worsens when it occurs. Then find who can approve a small test.

The operator closest to the problem can explain the process. The manager can explain consequences. Finance or the owner may verify cost. Speak to all relevant roles without assuming the loudest complaint identifies the buyer.

Look at the current workaround. If a supervisor spends Friday afternoon fixing the issue, that time is an allocated resource. If the firm accepts the loss because changing a core system appears dangerous, your solution must reduce implementation risk, not merely promise savings.

Use your access without misusing confidential information

You can use general competence and observations from an industry. You should not take employer records, customer lists, trade secrets or internal documents. Do not quote identifiable incidents without permission or imply that an employer endorses your new business.

Read your employment terms and policies before researching with current suppliers, colleagues or customers. Conflicts, intellectual property and restrictive terms vary by jurisdiction. Obtain qualified local legal advice when your proposed activity overlaps with an employer or depends on information learned in confidence.

Create fresh evidence through consented interviews, customer-supplied records and your own paid tests. Industry familiarity should improve your questions, not become an excuse to skip verification.

Worked example: Callum's parts-return control service

Callum has worked in independent vehicle repair garages. He notices that unused parts are sometimes left beyond supplier return deadlines. He reviews eight weeks of records with one garage's permission.

During that period, £4,800 of parts were eligible for return. Items worth £1,350 missed their deadlines and could not be credited. Staff also spent about six hours a month checking boxes, emails and supplier terms. The garage values that administrative time at £19 an hour.

For the eight-week review, approximately two months, the documented cost is:

• Missed credits: £1,350
• Administration: 2 × 6 hours × £19 = £228
• Total observed leakage: £1,350 + £228 = £1,578

Callum offers a one-month paid test of a parts-return control service for £300. During the test, the process returns £760 of parts that the garage documents as otherwise likely to miss the deadline. Administrative time falls from six hours to two, saving four hours.

Value produced is:

£760 recovered credits + (4 × £19 saved time) = £836.

Net value after Callum's fee is:

£836 minus £300 = £536.

The value-to-fee ratio is £836 divided by £300 = 2.79. It falls slightly below the three-times working target, but the test is close and based on observed cash. Callum can examine whether a £275 fee, a higher-volume garage or more efficient delivery improves both sides. He should not annualise one month as guaranteed savings.

The example does not establish a market. Callum must repeat the research with other garages, check supplier variation and make sure data handling and responsibility are clear.

Distinguish one broken business from an industry pattern

A firm can have an expensive problem because its manager, location or system is unusual. Before building an offer, repeat the Cost-Leakage Walk with at least three comparable businesses. Look for the same trigger, consequence and owner, not identical software or wording.

If only one firm has the issue, bespoke work may still be profitable. Price it as a single engagement and avoid investing in repeatable capacity. If several firms share the mechanism but handle it differently, you may have a stronger segment insight.

Competitors are useful evidence. A firm already buying help has demonstrated budget, though you still need a reason to be chosen. An empty market can mean overlooked demand, but it can also mean the loss is cheaper than the cure.

Complete one Cost-Leakage Walk in ten days

Choose an industry where you can obtain legitimate access to operators and records. During the first three days, conduct one event-based interview and trace ten recent exceptions in a single workflow.

Then act in this order:

1. Classify each exception as delay, rework, idle capacity, risk or missed sale.
2. Calculate a low and high cost without double counting.
3. Identify the accountable owner, budget route and current workaround.
4. Repeat the mechanism with two more comparable businesses.
5. Offer one paid, bounded intervention whose result can be measured within 30 days.

Do not build around the biggest number you can produce. Build around the cost a buyer can verify and the improvement you can responsibly deliver.

Frequently asked questions

What if businesses will not share their financial numbers?

Work from operational records and let the buyer insert sensitive values. You can count delayed jobs, staff hours, returned items, empty appointments or repeated corrections without asking for complete accounts. Ask for ranges where exact figures are restricted, then show the low and high result. Do not pressure employees to disclose confidential information. 

A buyer's unwillingness to share enough data may also limit your ability to prove value, so propose a small paid measurement stage with clear confidentiality terms. The exception is regulated or highly sensitive information, where you may need specialist agreements, security and qualified advice before accessing any records.

Can supplier delays reveal an expensive problem worth solving?

Yes, when the buyer repeatedly pays for the consequence and can influence the response. Trace a delayed delivery into idle staff, emergency freight, missed customer work, rebooking or excess safety stock. Separate the supplier's failure from the customer's internal planning, because you may be able to improve only the latter. 

Ask who owns the loss and what records show it. A founder cannot promise to control an external supplier they do not manage. The exception is a rare disruption with no repeatable response, where the documented cost may be high but no practical service can reduce it economically.

Should I ask owners for their biggest business problem?

Not as your main method. The question invites broad priorities, fashionable concerns and whatever happened that morning. Ask for the last time a defined workflow failed, what happened next and what records exist. Owners can then rank the documented consequences. 

Their stated biggest problem may still be valuable, but it often lacks a testable boundary. The exception is an exploratory first conversation where a broad answer helps you choose which workflow to inspect. Move quickly from opinion to recent events, frequency, cost, ownership and current behaviour before treating the answer as an opportunity.

Is a rare but very expensive problem worth solving?

It can be, especially when prevention is mandatory or the consequence threatens safety, continuity or substantial assets. The buying mechanism will differ from a frequent operational service. Customers may purchase insurance, inspection, contingency planning or guaranteed response rather than routine correction. 

Verify the risk, decision owner and required standard without exaggerating probability. A dramatic hypothetical loss is weak evidence if nobody budgets or acts to reduce it. In regulated or safety-critical work, use qualified expertise and current local requirements. The exception is a newly emerging risk, where strong technical evidence may precede established buyer behaviour.

How many businesses should share the problem before I act?

Start by reconstructing the mechanism in three comparable businesses, then seek a paid test rather than chasing a large interview count. Three instances do not prove a market, but they can show whether one firm's problem is unusual. Continue until the trigger, consequence and buyer role repeat within a reachable segment.

High-value offers with few buyers require deeper verification than low-risk services. The strongest next evidence is customer sacrifice: records, staff time, an existing budget or payment for your intervention. Do not combine different industries merely because they use similar words for the problem.

What if I understand the problem but cannot deliver the solution alone?

Do not sell beyond your competence or responsibility. You can narrow the intervention to diagnosis, coordination or one part you can deliver, provided the scope is clear and valuable. Alternatively, work with a qualified provider under written responsibilities and price their contribution honestly.

First confirm that the customer will pay enough to support the complete delivery chain. A problem's size does not grant you permission to practise in a regulated field. Where safety, finance, law, health or specialist engineering is involved, check local requirements and obtain appropriately qualified professional involvement before making claims or accepting work.