You pay everyone – your team and landlord, the software companies and vendors, and even the tax bill that shows up, whether you’re ready for it or not.
Every month, you find the money, mostly, to keep all of it running. Some months, you move things around to cover it all. And others, you’re just not sure how it’s going to work. But you find a way because that’s what you do.
The problem is there’s not always enough profit left for you. And sometimes it’s nothing or less than nothing because you’re having to put your own money into the pot to keep things running.
What’s worse is you left a steady paycheck for this. You took on the risk, worry, and sleepless nights to build this business that helps so many, but doesn’t have enough left for you.
Yes, at this stage, profit is often a red number on a statement, but more importantly, it’s driving a nagging question. When will all this hard work start paying off?
So you start searching for answers. And any search on how to increase profit in your business will serve up the 3 usual answers. Sell more, get more leads, and raise your prices. The problem with these answers is that they’re slow.
You need faster results.
The quickest way to increase your profit is to start cutting, but not like the big corporations do. You’ve got to be more strategic in your approach.
When I started working for myself, I didn’t know what I didn’t know, and wound up in this very uncomfortable place of needing to generate some profit now, too.
When I Spent My Way Toward Going Out of Business
As a new business owner, I had no idea about what would actually work. So I did what a lot of new owners do. I spent a lot of money and time trying to figure it out.
I poured tens of thousands of dollars into learning how to market. I joined networking groups, paid for conferences showcasing big-name speakers teaching the latest marketing ideas, and spent on coaching with someone trained on a big-name speaker’s methods.
Every single one of those purchases felt like the correct and responsible thing to do. I was investing in my business, which meant I was taking it seriously.
It wasn’t working because the clients were still only trickling in.
But I took the blame on myself. I told myself that I wasn’t doing it correctly. That I wasn’t working hard enough. That I must be missing a key ingredient, so I needed to learn and invest more.
So, I kept on spending. I could see that I wasn’t getting the results I needed, but I kept spending until there was nothing left to spend.
I had to stop floating the business with my savings. I had to let the business do what it was going to do because I ran out of runway.
The $350 I Almost Didn’t Spend
So now I felt burned and taken advantage of. I’d become so gun-shy about spending that I almost said no to the opportunity that actually turned my business around.
I was offered the opportunity to work for a new online magazine for a year. The cost? Only $350.
It was cheaper than anything else I had previously invested in. It was also the only one that wasn’t education about marketing. It required that I actually do something, and it put me in front of an audience.
The $350 got me syndicated on well-known platforms, providing lots of visibility, which translated into clients. None of the other money I spent did this, despite the promise of these results.
What Should You Cut to Increase Profit?
Put everything through this filter:
Does this get a client, keep a client, or increase the lifetime value of a client?
If a dollar doesn’t do one of these 3 things, stop spending it as quickly as you can.
I couldn’t have known the magazine would outperform the conferences. I was guessing, the same way I was guessing with everything else. Most of what I was spending money on didn’t have a way for me to calculate ROI before purchasing. I was spending based on hope within my comfort zone and calling it strategy.
But the magazine required me to consistently do something. The conferences were comfortable because I just had to learn things. I never had to implement them.
There was also accountability with the magazine that was missing from everything else I had tried.
And, if I had run all of my purchases through the filter of does this get a client, keep a client, or increase the lifetime value of a client, the conferences and networking groups would have failed. At the time, though, I felt that if I hadn’t spent the money and the time that I was quitting, and that was actually my fear of failing.
What’s the Fastest Way to Increase Profit Without More Sales?
Go through your expenses, line by line, and put each one of them through the filter. Does this get a client, keep a client, or increase the lifetime value of a client? If the answer is no, stop spending on it as quickly as possible. And the moment you do, that money drops directly to your bottom line without making a single sale.
As straightforward as this is, most business owners skip it. Maybe it’s because cutting spending feels like a loss while getting another sale feels like a win. But you can keep more of what you earn much more quickly and predictably than you can earn more.
Profit and revenue don’t move together the way many owners assume. The gap between them is usually full of spending that is no longer a value-add.
Why You Keep Overspending
This is where things can get a bit confusing. Overspending isn’t generally obvious. Most owners don’t regularly scrutinize their spending. Plus, most overspending feels reasonable while you’re doing it.
It can show up as making purchases for the business you want instead of the one you have. Ever buy software or systems meant for a business 10x your size? I have. When you pay today for a stage you’re not at yet and spend ahead of where you actually are, you’re unnecessarily draining the runway you need to grow to 10x.
It can show up as the thing that everyone in your industry has: the office, tech stack, professional photos. Who’s asking if it gets, keeps, or grows a client? No one, because they’re justifying it as opening stakes for the business.
It can show up as a charge that’s too small to worry about. Maybe a subscription you forgot you had or the tool you only used twice. On their own, they might be trivial, but when you add them up, they become significant.
And it can also show up as money you’ve already spent. You keep paying because stopping would mean admitting the first chunk was wasted. So, you throw good money after bad to protect a previous decision.
Can You Cut Your Way to Profit?
Yes, in the short term only. You cannot shrink your business into greatness, and if you try, you’ll start removing the things that actually bring clients in, but there’s a big difference between true in the long run and true today.
Big companies prove this constantly. When a profitable corporation wants to please shareholders, it cuts, sometimes through layoffs, and the stock frequently jumps because Wall Street reads cost cuts as bigger profits. Despite the bump in the price, Wharton’s research on corporate layoffs has found ZERO evidence that cutting to improve profitability helps beyond the immediate, short-term accounting bump. That’s because they’ve cut the wrong things. They cut the people and capacity that get, keep, and grow customers only to hit a quarterly number.
This is the difference between reckless and disciplined cutting. The corporation cuts staff to make a quarter look good. The filter protects the ability to earn revenue and only removes what isn’t needed to do that.
Cutting costs is the fastest way to increase profit. However, it’s not the only lever you can use to do so, and it’s not the last one you’ll ever pull.
Simple to Understand, Really Hard to Do
The filter is very simple, but it’s brutal to apply it in your own business. It forces you to see whether you’re spending toward a client or spending to feel like you’re doing something. Seeing that clearly about your own money is really difficult.
I couldn’t do it alone. I knew there was something wrong, but I still couldn’t stop the spending until I ran out of money. Every expense I had felt justified to me, just like they do to every business owner I’ve worked with.
The subscription is essential.
The conference is an investment.
The tool is only a few dollars a month.
From inside your own business, every line item has a story that explains why it gets to stay.
That’s why an outside eye can see what you’ve been oblivious to, and an outside ear can help you hear how weak your justifications are.
It also works in the other direction. The spending that does get, keep, and grow clients is no longer a guess. The return on the right strategic moves can be calculated before you commit a dollar, which is exactly the work I do with the owners who are a fit for my process.
Cost-cutting is one lever for growing your business. My book shows you the rest of them.
About the Author
Karen Finn, PhD is an author and business growth strategist. Download a copy of her book, The Business Growth Plan, to get insight into the no-cost and low-cost strategies she uses with her clients to 2x-3x their revenues.
