The simplicity of dramatically increasing your business bottom line

Has there ever been a more difficult time to even try to maintain profit levels and never mind increasing them?

Declining margins, increased labor and material costs, increased competition, increased marketing, operating and administrative expenses, higher product costs and higher taxes are just some of the many problems you face in defeating profits.

All of which apparently makes even sustaining profits extremely difficult for many companies and nearly impossible for most.

Yes, being in business today can be a very complex and daunting process, but I assure you that making a lot more money is actually quite simple.

Being in business today can be a very complex process, but making more money in business is not that complex. The basic trading formula is that your profit equals your revenue minus your cost.

Any way you look at it, there are really only two basic ways to increase your earnings.

You can increase sales or decrease expenses. The vast majority of business owners and managers in this country think that the most effective way to increase profits is to increase sales.

Countless books have been written on this subject and every day, in every city in the country, seminars are held that teach companies how to increase sales.

The priority of most business owners and managers is to find ways to increase sales. They plan, set goals, develop new products, hire new salespeople, make sales, and actively seek a larger sales base and customers in thousands of other ways.

Yes, increasing sales is the top priority for most companies; in many, it is the only priority.

But trying to increase sales costs money. In most cases a large amount of money. Marketing costs money. Advertising costs money. Hiring more salespeople costs money.

Each of these efforts can severely hamper your cash flow and no one can guarantee that your earnings will increase.

But there is another way to increase profits. A much easier and more effective way to generate significantly higher profits while dramatically improving cash flow.

Think about this; If you increase sales by $10,000, you can make a pretax net income (after selling expenses, operating costs, cost of goods sold, etc.) of $200 to $500 if you’re like most companies that show a net profit before taxes of 2%. -5% per year or less.

That’s right, for every dollar you increase sales, you’re only adding a couple of cents to the bottom line!

Now think about this; if you cut costs by that same $10,000, you just increased your bottom line by $10,000. The cost was zero. In fact, you’ve improved your cash flow by eliminating the cost associated with trying to upsell and for the $10,000 you’ve saved.

You see, cutting expenses costs nothing, saves significant amounts of money, dramatically improves your profits and cash flow, often increases productivity, and has countless side benefits for any business.

The money saved by reducing expenses and controlling costs has an immediate, direct, and very dramatic effect, in the short and long term, on your company’s bottom line.

But few companies make a serious ongoing effort to try to reduce or control costs. Those who do can spend only a fraction of the time and effort they spend trying to increase sales to lower and control costs.

Imagine not paying much attention, if any, to your 50% formula for success. But this is exactly what happens in too many companies. I’d be willing to bet that this is exactly what happens in your company.

Rising and uncontrolled costs are hurting your business in hundreds of ways. Rising costs drain profits and devastate your cash flow.

Runaway costs can bankrupt your business.

Cost control and expense reduction are perhaps the two most neglected areas of management in any company. However, they are without a doubt the two areas of improvement that will have the most dramatic effect on your bottom line, and indeed your entire operation, with the least amount of effort.

But, as with each of us, the fastest path to improvement is usually to look within. Unfortunately, most companies, like most people, will only look inward when all other options have been exhausted.

Think about these examples. A $4,000 cost reduction for a business with a 4% pre-tax profit ratio equates to a $100,000 sales gain. A 1% reduction in costs for a business that has $10,000,000 in sales and a 5% pre-tax earnings ratio puts $95,000 before-tax dollars in the bottom line.

This means that this company’s profit went from $500,000 to $595,000 just by cutting costs by 1%. They just increased their pre-tax profit by 19% simply by lowering their costs by 1%. Think of it, a 19% increase in pre-tax earnings without increasing sales by a dime. To realize this same increase in profits by increasing sales, this company (at a 5% profit level) would need to increase sales by $1,900,000.

I assure you that few things in business can be accomplished with less effort that have such a dramatic effect on your bottom line.

Thinking in these terms will reinforce the dramatic effect cost control and cost reduction can have on your bottom line. Clearly, the money saved by cutting expenses and controlling costs can have a very direct and massive effect on your company’s bottom line, with a fraction of the effort and cost of increased sales that would be required to produce the same. increase in earnings. .

But few companies make a serious, ongoing effort to try to reduce or control costs. Those who do can spend only a fraction of the time and effort they spend on upselling. Oh, sure, they can talk about cutting and controlling costs, and they can even take some obvious steps to do something about it, but usually that’s the extent of their short-term efforts in this area.

But this is exactly what happens in too many companies. I’d be willing to bet that this is exactly what happens in your company.

Isn’t it time to change this?