The Bottom Line

Sometimes we make things more complicated than they need to be.  After all, business is really just a series of simple things.  Profitable business is a series of simple things done well, every single day.  I was reminded the other day of one of those simple things that we may forget.

One dollar of expenses saved equals one dollar of bottom-line profit.  One dollar of sales equals a much smaller amount of profit.

Let’s do the math.  Take your net profit for the year.  Divide it by your gross sales.  Most likely you’ll get a single-digit figure.  If you’re really good, you might hit ten or eleven percent.  If we take the high figure that means that for every dollar you sell, you end up with ten or eleven cents profit.

On the other hand, if you find a way to save a dollar on expenses, that dollar is all yours.  That is, as long as you don’t cut something that causes you to lose sales.  For instance, advertising should always be considered an investment rather than an expense.  But, if you can cut energy costs, or cleaning costs, or if you can negotiate a better lease for your store, those dollars saved go right to the bottom line.

"A penny saved is a penny earned" isn’t just something that our mothers told us when we were kids, it should be a mantra for every successful business.

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