For years I've been saying that intelligent companies focus on developing sales, not on cutting expenses. "You can't cut your way to profitability" is one of my preferred sayings.
In business, a dollar earned is nearly equivalent to a dollar saved since taxes are dependent on your profits, not income. In effect, you are taxed on your income (sales) minus expenditures. Sales and cost control are generally worth the same. The quandary is that it is a lot easier for most people to focus on expenditure control that on top end (sales) growth. And after you hit the apparent costs, you squander more and more time on things that save you less and less money. It is the 80/20 rule reversed, where you find 80% of your cost savings from the first 20% of cost cuts. Also, you are restricted on how much you can cut expenses, while your capability to grow sales is basically limitless, so it makes more sense to concentrate on development than on frugality.
So my rudimentary advice is for entrepreneurs to focus on sales.
I even now believe this, but that doesn't imply that I'm saying that you should ignore your expenses. That would be a big faux pas. First of all, spending problems grow quicker than revenue. What is a minor issue at $30k per year income is a immense crisis when you grow to $300k per year. The next reason is that expense control is originally simpler to do than sales growth. Your initial swing at cost control will earn you the biggest gains. Ensuing attempts at cost control will be more tricky, less effective, and often affect critical business areas like productivity or quality.
The Key Is To Be Clever With Your Cost Cutting.
What's my pet area to cut costs? It's saving energy by way of an business energy audit or energy management. At this point a small confession is needed: I am an energy consultant and get compensated to help organizations slash their energy spending. I do energy audits for my customers and generally cut their energy bills by more than 20%.
Now that we have cleared the air, let me describe why I like to focus on energy spending:
-The majority of my clients are manufacturers, and they spend a lot every month on their energy expenses. This is a huge area of concern to them.
-Even if you are not a manufacturer, utilities are still one of your biggest expenses.
-Most organizations can cut their energy expenses by 20% or more. I've seen savings as high as 59%! I can't imagine of many areas where you can conserve this much.
-Energy Management is an area where you will slash expenses while increasing output. Any other expense cutting will ultimately hurt production or quality.
In business, a dollar earned is nearly equivalent to a dollar saved since taxes are dependent on your profits, not income. In effect, you are taxed on your income (sales) minus expenditures. Sales and cost control are generally worth the same. The quandary is that it is a lot easier for most people to focus on expenditure control that on top end (sales) growth. And after you hit the apparent costs, you squander more and more time on things that save you less and less money. It is the 80/20 rule reversed, where you find 80% of your cost savings from the first 20% of cost cuts. Also, you are restricted on how much you can cut expenses, while your capability to grow sales is basically limitless, so it makes more sense to concentrate on development than on frugality.
So my rudimentary advice is for entrepreneurs to focus on sales.
I even now believe this, but that doesn't imply that I'm saying that you should ignore your expenses. That would be a big faux pas. First of all, spending problems grow quicker than revenue. What is a minor issue at $30k per year income is a immense crisis when you grow to $300k per year. The next reason is that expense control is originally simpler to do than sales growth. Your initial swing at cost control will earn you the biggest gains. Ensuing attempts at cost control will be more tricky, less effective, and often affect critical business areas like productivity or quality.
The Key Is To Be Clever With Your Cost Cutting.
What's my pet area to cut costs? It's saving energy by way of an business energy audit or energy management. At this point a small confession is needed: I am an energy consultant and get compensated to help organizations slash their energy spending. I do energy audits for my customers and generally cut their energy bills by more than 20%.
Now that we have cleared the air, let me describe why I like to focus on energy spending:
-The majority of my clients are manufacturers, and they spend a lot every month on their energy expenses. This is a huge area of concern to them.
-Even if you are not a manufacturer, utilities are still one of your biggest expenses.
-Most organizations can cut their energy expenses by 20% or more. I've seen savings as high as 59%! I can't imagine of many areas where you can conserve this much.
-Energy Management is an area where you will slash expenses while increasing output. Any other expense cutting will ultimately hurt production or quality.
About the Author:
Industrial Energy Audit Services are industry leaders in energy saving audits. Our decades of experience will make your energy audits fast, effective, and affordable. We are so confident that we will save you money, that we guarantee that we will save you 15% or more on your energy bills.
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