It may sound like over-promising, but it’s true! You can significantly increase your profits in less time than it takes to watch a movie (especially a long movie like Batman v. Superman, which you shouldn’t be watching anyway when you could be making money to spend on better movies). It’s not a “hack” or a trick. It’s a relatively simple exercise in evaluating and readjusting your ledger.
We personally do it about every 6 months, because why wouldn’t we? Businesses of any size can do it. It’s a simple matter of looking at one part of the standard two-part profit formula: revenue minus expenses. While revenue can be generated in any number of ways, the easiest way to widen the profit gap is to focus on expenses.
Some expenses may seem fixed, but they’re often not. While there are certain non-negotiables, a lot of what you’re spending can be decreased, if not eliminated.
Step 1: Make a List
Write down every single expense your business has, right down to whatever you pay yourself. Order them from biggest expense to smallest. To use our software company WebinarNinja as an example, our list-topper is usually our server provider. Your business will have similar “big” expenses. Suppliers, materials, server space, rental space; whatever they are, tweaking them will be key to saving your business money.
While they may appear un-tweakable, a pleasant surprise may be in store. It’s all about the art of the ask. What if all that stood between you and more profit was just the will to ask? By starting with your biggest expenses and working your way down the list, you can make a massive difference— even if you can only lower some of them.
Step 2: Negotiate
This is the “tough” part, though it’s not so tough. While things like rent or materials may seem non-negotiable, you have to remember that whoever’s on the other side of the table wants to keep your business! If you’ve been using a certain service or supplier consistently and you’ve established a long-term relationship, that’s a major point in your favor. Much of the time, they may be willing to give you a break in order to maintain the relationship.
You have nothing to lose by asking. The only thing that stops most people from asking is inexperience overcoming the awkwardness of negotiations. In that case, it’s never too soon to start practicing! Your odds of catching a break are higher than you might think. I negotiate discounts for our businesses all the time. Sometimes, they’re only in the 10% range. Other times, they’re much more. Month to month and year to year, these discounts add up!
Remember that whoever you’re negotiating with has very good reasons to offer you a price cut. It’s in their best interests to keep long-term customers around, even at a slight short-term loss. A discount may even be offered in exchange for a longer commitment or for bigger volume. Either way, you both win.
Take payment processing fees, which I regularly renegotiate. If you’re bringing in more customers in your second year than in your first, your payment processor can see that. They can see that lowering their cut is worth keeping you (and all your customers) around. If your business involves shipping, there’s lots of opportunity to score a better deal. When I ran a clothing company, I was on the phone with FedEx, UPS, and the USPS every few months increasing my revenue.
While you can accept “no,” there’s always plenty of reasons for them to say “yes.” All it takes is a phone call, perhaps a meeting. It’s always worth asking. Consider all the deals and discounts offered to new customers by various services. If it’s worth it for companies to give breaks for the possibility of a long-term customer, why wouldn’t they do the same to keep an already established one?
Sometimes, the “request” can even be indirect. If you’re consistently in contact with your various service and materials providers, that relationship can lead to offers and discounts you haven’t even asked for. We’ve been using Baremetrics for our analytics for years. In that time, I’ve been in constant communications with them, consistently offering feedback. Eventually, when a new feature was added— one I’d been suggesting to them for a while— I was offered a major discount on it without my having asked at all.
Most of your expense-cutting will come in the form of paying less for various things. However, it’s a good idea to regularly check your list for things you can eliminate altogether. What was necessary 3 years ago might be superfluous now. Services that once came from separate providers might now come bundled (the feature in question from Baremetrics was a way to address missed payments from customers, something I’d had to do separately before).
The only thing I’d suggest not cutting, if it’s at all avoidable, is salaries. Your team needs to feel supported in order to give their best, and adjusting your ledger by adjusting their pay is no way to earn their loyalty. If you have to eliminate a position, or one has become redundant, that’s another matter. But if someone is valuable enough to keep on board, they’re valuable enough to treat right!
With a little organization, a little luck, and— most importantly— the willingness to ask for a better deal, you can keep profits on the rise. Make it a habit, and your business will thrive in the longer term.