Ive probably spoken with more than 10,000 small business owners over the past 40 years and one of the most often asked questions is, How can I increase profits when it seems that the cost of everything keeps going up and competition keeps driving the pricesdown?
The point many small businesses miss is that in every business action there is an equal and opposite business reaction.
When you make a business decision it may affect many different aspects of your business.
Let me give you the perfect exampleCoca Cola.
In 1985 Coke announced that they were changing their X-7 formula to be a little sweeter to compete more strongly against Pepsi sales in supermarkets.
The new product would be known as NewCoke.
Now Coke had changed its formula at least seven other times over the years but this was the first time that they did it publicly.
Their (800) GET-COKE hotline received more than 12,000 complaint calls per day protesting themove.
Dont Waste Time and Money Trying To Change Your Customers Mind
Coke didnt give up. They were determined to prove to the public that they were right, and the public waswrong.
They promoted taste tests. Over 250,000 of them across the country. Almost 1% of the population at that time. Theresult?
The public overwhelmingly preferred New Coke over Old Coke and Pepsi. So why dont we have New Coketoday?
In spite of superior taste, the public refused to admit that they might be wrong and they refused to buy NewCoke.
They were not going to let any company dictate to them what product tobuy.
New Coke died a slow painful expensive death and now you have Classic Coke which may be New Coke. Whoknows?
The point here is that a decision that you think may turn out to be favorable may in fact cause a very negative reaction.
Every action has an equal and opposite reaction.
What Does All This Have To Do With Doubling MyProfits?
A lot. Every time you make a business decision it generally affects two aspects of your business. Either profits or expenses.
Would it be easier to reduce expenses by 5% or double your profits? Most people feel that the latter is theeasier.
You at least have some control over your expensesyou may not have control oversales.
So, if you reduce expenses by 5% and your current profit margin is 5%guess what? You just doubled yourprofits.
The next question seems to be where can I cut costs in the day-to-day operation of my business? Here are some of theways.
How And Where to Start SavingMoney
There is a small manufacturing company here in Bozeman, MT that is laying off workers for the first time in its history. Whynow?
Easy, new out of town owners. The previous owners worked and lived here. When times were tough, they found work for their employees rather than lay themoff.
The point here is that in a small town, you the employer have a responsibility to your employees to run the best ship youcan.
Dont start cutting expenses in payroll unless it is absolutely the lastresort.
Use excess people to clean, paint, repair or for any other tasks that arent normally done during goodtimes.
Youll need your employees when times are good again and youll be glad you havethem.
The biggest place you will save is in employee training. If you must hire new people you will need to trainthem.
Trained employees generally make fewer mistakes and overall are less costly than new employees.
I Can Get It For You Wholesale!
This used to be a great comedy line in the early days of radio. What it means is that there is always a deal available if you are willing to work forit.
Many business owners accept price list pricing without a second thought. This is a bigmistake.
No one is going to shoot you if you question the price or terms. Save money on quantity discounts. Payment terms. Pickup rather than delivery. Shipping methods. Discount forcash.
Always ask or propose an alternative deal. If someone wants to buy a lot of my books, Im going to deal on the price if thats what ittakes.
Try to negotiate anything you buy. If you arent comfortable doing it, there are several books on the subject. CheckAmazon.
Buy Product by Mail Order Or On The Net With CreditCard
Each year online Christmas sales set newrecords.
Why purchase by credit card? Why not a company check? Because the credit card company will help you resolve disputes and can even withdraw the charge in case of aproblem.
You can also negotiate with mail order companies and you get at least 28 days to make the payment. Make it in full and there are usually no interest charges. You cant do any of that with acheck.
Dont Put All Your Eggs in OneBasket
Most of us, at one time or another, in our business lives, do a little price shopping. We compare vendor pricing just to keep everyonehonest.
Also, it never hurts to have a backup vendor in case your primary vendor has aproblem.
Every once in a while, put a job out for bid to a variety of suppliers and check the pricing and other criteria and decide if the savings warrant giving someone else the business.
Im not telling you not to be loyal to those suppliers who have gone the extra mile over the years. They deserve your support and may offer to match any lower prices you mightget.
How To Save Money on ThePhone
Most wholesalers that sell large amounts of product will have an 800 number but may not always publicize it as theyshould.
With most cell phones today long-distance charges no longer exist but some companies think the 800 number adds credibility.
How To Save On Electrical Costs
My wife is constantly on my case because I dont turn lights off in rooms when I leave. Or I leave the heat turned up all day when no one is home. It may seem like only pennies, but they mount up when grouped in with othersavings.
If you use a lot of heat and/or air conditioning, consider the small expense of a programmable thermostat that will turn the heat down overnight if you forget to do it. Timers on plug in lamps that will turn them off at specific times if employees dont remember.
How To Save On MailingCosts
In this new modern electronic age, you should be using faxes or email. If you have a computer but dont have a fax, visit, www.efax.com.
This is a company that will assign you a fax number you can use in your advertising, and they convert faxes sent to you to email you can receive on your computer and the best part is its a freeservice.
The other good news is you dont need to leave your computer on 24 hours a day. Your faxes are held just like your email isnow.
If youre doing mailing to your customers in quantity, check with the post office and get the rules on direct mail.Y
ou can save a ton of postage costs by preparing your mail the way the post office wants to receiveit.
Keep a close eye on shipping costs. Fed Ex and UPS can be killers if your delivery department dropped the ball, and something wasnt shipped ontime.
Make sure you allow enough time to fill orders and ship for the lowest rates, not thehighest.
Trade Services for Advertising OrProduct
Bartering is as old as business itself. Trading something you can do for something you cantdo.
This becomes very important if you can trade for some form of advertising. It can actually cut your advertising costs. Hereshow:
Lets say that I sell lawn mowers and the local radio station needs a lawn mower. I make a deal to trade one of my lawn mowers for some radiotime.
Lets also say the lawn mower retails for $200.00, my cost might be $125.00. Im going to trade for $200.00 worth of advertising, not$125.00.
So I actually save $75.00 on my advertising.
Yes, my inventory is reduced by one lawn mower, but if the advertising can bring in four or five sales then that point is unimportant.
And I will also realize any future repair and maintenance costs on themower.
New Is Nice But Used Is A MoneySaver
I have only bought one brand new car in my life. I think everyone should have that experience at leastonce.
The reason I never buy new is, the car depreciates several thousand dollars the moment I drive it off the lot. Its like throwing moneyaway.
Buying closeouts, discontinued items or used equipment in good condition can improve production and reduce the bottom line at the same time. Keep your eye out for bargains.
The Last Word On Doubling YourProfits
As you can see by the above information, there are many ways to help your business become more profitable. Will you double your profits using these methods? Some companies can??otherswont.
What this article will do for you is give you some direction on where and what to look for to cut expenses and increase profits. It also works in your personal lifetoo.
Cutting costs at home is the same as getting araise.
Take a look at Tom Egelhoffs Amazon Best Selling Small Business book, How to Market, Advertise and Promote Your Business or Service in Your Own Backyard.
Subscribe to Toms New YouTube Channel??The Art of Learning Small TownBusiness
Listen in on Toms weekly Saturday radio show 8 am to 11am Mountain Time Open For Business on AM 1450 KMMS Radio,Bozeman.
How To Double Your Profits The Easy Way was originally published in Startup Stash on Medium, where people are continuing the conversation by highlighting and responding to this story.
