How To Double Your Profits
The Easy Way
By Tom Egelhoff
 I have probably spoken with
more than 10,000 small business owners over the past 30 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 prices down?"
The point most small businesses miss is that in every business
action there is an equal and opposite business reaction. When
you make a decision in your business it may affect many different
aspects of your business. Let me give you the perfect example...Coca
Cola.
In 1985 Coke announced that they were changing their X-7 formula
to be a little sweeter to compete more strongly against Pepsi.
The new product would be known as New Coke.
Now Coke had changed it's formula at least seven other times
over the years but this was the first time that they did it publicly.
Their (800) GET-COKE hot line received more than 12,000 complaint
calls per day protesting the move.
Don't waste
time and money trying to change your
customers mind.
Coke didn't give up. They were determined to prove to the
public that they were right and the public was wrong. They promoted
taste tests. Over 200,000 of them across the country. Almost
1% of the population. The result? The public overwhelmingly preferred
New Coke over Old Coke and Pepsi. So why don't we have New Coke
today?
In spite of superior taste the public refused to admit that
they might be wrong and they refused to buy New Coke. They were
not going to let any company dictate to them what product to
buy.
New Coke died a slow painful expensive death and now you have
Classic Coke which may be New Coke. Who knows?
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 my profits?
A lot. Every time you make a 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 the easier. You
at least have some control over your expenses...you may not have
control over sales.
So, if you reduce expenses by 5% and your current profit margin
is 5%...guess what? You just doubled your profits.
The next question seems to be where can I cut costs in the
day-to-day operation of my business? Here are some of the ways.
How and
where to start saving money
There is a small manufacturing company here in Bozeman, MT
that is laying off workers for the first time in its history.
Why now? Easy, out of town owners. The previous owners worked
and lived here. When times were tough they found work for their
employees rather than lay them off.
The point here is that in a small town, you the employer have
a responsibility to your employees to run the best ship you can.
Don't start cutting expenses in payroll unless it is absolutely
the last resort.
Use excess people to clean, paint, repair or for any other
tasks that aren't normally done during good times. You will need
your employees when times are good again and you'll be glad you
have them.
The biggest place you will save is in employee training. If
you have to hire new people you will need to train them. Trained
employees generally make fewer mistakes an 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 for it. Most business owners accept "price
list" pricing without a second thought. This is a big mistake.
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 for cash. Always
ask or propose an alternative deal. If someone wants to buy a
lot of my books, I'm going to deal on the price if that's what
it takes.
Try to negotiate anything you buy. If you aren't comfortable
doing it, there are several books on the subject. Check the local
library.
Buy product
by mail order or on the net with credit card
Before you write to me about your card number being stolen
on the net. Check out this article from Scambusters. A web site
devoted to Internet Fraud. For more info visit: Scambusters.org
Reprinted from Internet
ScamBusters Issue #23,
May 31, 1998
"Over the past four years, there has been an enormous
amount of publicity about the dangers of credit card fraud on
the Net. When you add movies like "The Net" to the
news articles about Internet fraud, it's hardly surprising that
consumers are nervous about giving out their credit card numbers
over the Net.
Yet, as many savvy Internet shoppers now know, the reality
is that it's actually much safer to enter your credit card number
on a secure on-line order form than
it is to give your credit card to a waiter at a restaurant. After
all, what's to stop the waiter from writing down your credit
card number and placing orders on the phone with it later?
And research shows that the rate of fraudulent purchases made
by cell phones is much higher than credit card fraud on the Net."
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 a problem. You can also sometimes
negotiate with mail order companies and you get at least 28 days
to make the payment. Make it in full and there is usually no
interest charges. You can't do any of that with a check.
Don't put
all your eggs in one basket
Most of us, at one time or another, in our business lives,
do a little price shopping. We compare vendor pricing just to
keep everyone honest. Also, it never hurts to have a backup vendor
in case your primary vendor has a problem.
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.
I am 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 might get.
How to
save money on the phone
Most wholesalers that sell large amounts of product will have
an 800 number but may not always publicize it as they should.
If you don't see an 800 number call 1-800-555-1212. This is the
information number for all toll free numbers. These will include
the new prefixes such as 817 and 888.
Also if you are calling several vendors at a time and placing
several orders, don't hang up between calls. The phone company
will charge you a connection fee each time you pick up the phone.
Instead, just touch the #(pound sign) at the end of each call
and you will get a fresh dial tone without a reconnection charge.
How to
save on electrical costs
My wife is constantly on my case because I don't 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 other savings.
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
don't remember.
How to
save on mailing costs
In this new modern electronic age you should be using faxes
or email. If you have a computer but don't 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 it's a free service. The other
good news is you don't need to leave your computer on 24 hours
a day. Your faxes are held just like your email is now.
If you are doing mailing to your customers in quantity, check
with the post office and get the rules on direct mail. You can
save a ton of postage costs by preparing your mail the way the
post office wants to receive it.
Keep a close eye on shipping costs. Fed Ex and UPS can be
killers if your delivery department dropped the ball and something
wasn't shipped on time. Make sure you allow enough time to fill
orders and ship for the lowest rates, not the highest.
Trade services
for advertising or product
Bartering is as old as business itself. Trading something
you can do for something you can't do. This becomes very important
if you can trade for some form of advertising. It can actually
cut your advertising costs. Here's how:
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 radio time. Let's also say the lawn mower retails for
$200.00, my cost might be $125.00. I am 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 the mower.
New is
nice but used is a money saver
I have only bought one brand new car in my life. I think everyone
should have that experience at least once. The reason I never
buy new is, the car depreciates several thousand dollars the
moment I drive it off the lot. It's like throwing money away.
Buying close-outs, 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 your profits
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 others won't.
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 life too.
Cutting costs at home is the same as getting a raise.
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This article may be reproduced for your non-profit
group or organization provided it is not altered in any way and
the following is attached:
©1998 - 2004 Eagle Marketing PO Box 271 Bozeman, MT
59771-0271
http://www.smalltownmarketing.com - (406) 585-0219 - Toll FREE
(888) 550-6100
email: tommail@smalltownmarketing.com
Based in Bozeman, MT, Tom Egelhoff is the author of How To Market, Advertise & Promote Your
Business Or Service In A Small Town, and The
Small Town Advertising Handbook: How To Say More And Spend Less.
He is also a seminar and workshop presenter
and trainer. He may be reached at 888-550-6100 or PO Box
271 Bozeman, MT 59771-0271
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