How To Double Your Small Business Profits The Easy Way

by Tom Egelhoff

Author Tom Egelhoff

I have probably spoken with more than 10,000 small business owners over the past 35 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.

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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 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.

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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.

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"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 librar y or online.

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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:

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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.

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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.

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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.

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How To Save On Small Business 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.

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How To Save On Small Business 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,

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.

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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.

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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.

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The Last Word On Doubling Your Small Business 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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