This begins a three-part series on how to build your profits. Parts 2 and 3 will deal with ways to increase revenues, but part 1 starts from the other end: reducing expenses.
Every dollar you cut from your expenses goes straight to your bottom line. We’ve all heard the old saying that “You have to spend money to make money.” Yes, it’s true that you can’t reduce your expenses to zero, but there is probably waste in your spending which you could trim, and there are ways to spend your money more effectively.
Don’t confuse buying stuff with making progress in your business. Getting a new computer or buying fancy letterhead may be more for your ego than your business.
Each time you prepare to pay for something, ask yourself what contribution the expense will make to profits. Will it attract more business? Will it help you to reduce expenses in another area? For example, automating a function costs money up front, but could save (and make) money for a long time to come.
And this one may throw you: Don’t be afraid to trade money for time–always spend your time and money wisely. There are times when it makes more sense to spend money than to do it yourself. Now, I am a hardcore do-it-yourselfer. But when it makes sense, I pay someone else to do it.
This makes sense in at least three situations: One, when you can use your time more profitably. Does it make sense to turn down work paying $100 an hour so you can do something you could hire $10 an hour help for? I don’t think so!
Two, your cost in actual dollars may be less when you outsource. I could buy a copier or printing equipment and print my own manuals, or I can have it done by a print shop that already has the equipment. My cost is less to have them do it than to do it myself, even before you add in the value of my time.
Three, when hiring someone will get better results than if you do it yourself. If you are really uncomfortable making cold calls to set up appointments, you may not do it very well. Hiring someone else to take that first step could result in lots more appointments–and more sales!
Use your time and money wisely to increase profits. In the next installment, we’ll talk about innovative ways to increase your revenues (and profits) from each sale you make. In Part 3, we’ll talk about ways you may not have considered to make more sales.