The Business Cafe

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It’s a well known fact that there are only two ways to increase profit in a business; either you cut expenses or increase sales.

Cutting expenses is the fastest way, but there's a limet before it negatively affects your business in one way or another.  

Increasing sales is the best way, but only if the sales are profitable.  The reason I mention ‘profitable’ will be obvious in a minute.

I’ve witnessed both implemented incorrectly harm a business beyond recovery.

The first inclination of cutting expenses is usually thinning out the workforce.  Problem is, management usually looks for the most expensive employee(s) to cut first, not taking time to evaluate the value that employee contributes to the overall business.

I have watched aggressive business owners discount their products over and over just to make a sale.  I’ve watched extensions of credit to buyers who were already way past due.  Greedy owners who do things like that shouldn’t be in business. They have no concept of how either of those actions affect the business overall.  They will eventually be forced out of business, never understanding why they failed.

Sales without profit are a waste of time.  Sales that don’t get paid for are even worse.  When the customer doesn’t pay on time, they are using your money to finance their business and pay their other bills.  (It amounts to you giving them a free loan!)

Increasing sales is easy if you don’t consider that a sale without profit is a waste of time and resources. Lowering the price to gain marketshare only works if you were overpriced to begin with.  Even if you eliminate your competitor by cutting your price there’ll be another popping up before you know it. That means you’ll have to keep lowering your prices to stay competitive.  Soon, you’ll be working for peanuts just to move product, and in order stay competitive, you’ll have to cheapen the product to get your cost down.  That is business suicide!  

You have to stay profitable, keep the customers you have and continually add to that customer base in order to have a ‘good’ business.  How is that done you might ask?  Answer: Quality in everything you do.  Quality people dealing with the customers and quality products produced in the most efficient way. Never sacrifice the quality of your products!

My rules:  Never change anything to reduce cost unless at the same time it increases quality or in the least doesn’t diminish quality.  That goes for everything from the employees, the raw materials, the production and the packaging.  I have never seen a business fail by selling top quality products. This is especially true in the area of NON-esensial products.

Never complicate any part of the process for the customer.  Remember, a lot of times you’re dealing with a buyer who has to deal with many suppliers.  That buyer will shy away from suppliers who make their job difficult. They would rather place orders with the supplier who is easy to deal with.

You would be surprised at how business people don’t use common sense when they implement policies.  (Especially in the area of handling warranty requests.) They don’t stop and think about how the policy affects the customer's time and effort.

So, use common sense at every step and never compromise on quality in everything you do.  It doesn’t matter if you’re selling burgers or houses; make the best quality products for wherever in the marketplace you want to be positioned.  It’s much easier that way and more profitable!

Joe Bottieri

Increase Profit the Right Way

Adopting one animal won't change the world, but it will change the world for that one animal.

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