How to increase profits

One of the things most (hopefully all) business owners are looking to do is increase their profits.

They spend long hours (and lots of money) on marketing and sales in order to generate more revenue. The thing to keep in mind is profit is determined by revenues minus expenses. So, while increasing revenues is one way to try to increase profits, decreasing expenses will do the same.

Most companies, organizations and even individuals would be shocked if they actually looked at how much money they were wasting. Too often, we look at the big number but instead, we need to look at all the little numbers.

The challenge is to cut expenses while still maintaining a high level of service.

In large organizations one mistake frequently made is a “task force” (which I believe is another word for committee) is formed to look into cutting expenses. While this is one approach you can take, another approach is to be a lot more transparent than most organizations want to be and share the books with the entire organization. Give everyone the task of finding ways to cut costs. The people doing the “dirty work” are frequently the ones who see all the waste while the ones “in the clouds” are dealing more from theory.

Consider giving an incentive for the person/people who find the ways to save money. Make it worth their time and effort to do so. While some might consider giving a gift certificate to a local restaurant for a person who can save the organization money, why not give them a real incentive? While someone might make a suggestion or two for the good of the organization, if you give them 25% of the savings for the first year then you will see the suggestions fly in. You have to make sure they understand this only applies to those suggestions that are applied and create savings

As an example of the type of cost savings that are possible, two years ago I was in a meeting with a client who was complaining about all of their expenses (it’s a $30,000,000 a year non profit organization so you can imagine they pay out a lot of money). In looking at the breakdown of their expenses, they were spending a ridiculous amount on long distance calls. A good portion of their calls were between their own offices (all within the same state but many were far enough away they were billed at intrastate long distance). By switching over to a VOIP phone system, they were able to quickly cut their phone costs in half. The only reason no one suggested it before was their employees didn’t know how much the calls were costing and had no incentive to do anything about it.

There are many ways for an organization to save money without affecting what they are producing. Give your people an incentive to save money and everyone benefits.

This same concept applies for families as well.

Have a great day!

Lawrence

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