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Reduce expenses, grow profit

 22 October 2018     Donald Cooper 

Reducing expenses by just 5% can improve your bottom line by as much as 20% to 30%. Don’t take my word for it, do the math. By removing the paint from each of their air freight 747s, Cathay Pacific Airlines saved $200,000 in fuel, per plane, per year. By switching from serving bacon all the same length to bacon of uneven lengths, Marriott Hotels saved $2 million a year.

A pizza restaurant spent $40 on plastic bins and zip-lock bags to create a portion control system for cheese and immediately improved their bottom line by 24%. Cheese is the most expensive ingredient in pizza, so they focused on that.

By changing the packaging of their Kirkland brand cashew nuts from round jars to square jars, Costco saved the shipping expense on 600 truckloads of nuts per year because they could fit more jars on each pallet. It’s called ‘cube utilisation’ – using space more efficiently.

Do you have space or facilities you don’t need that could be sold or rented out for revenue? Could you relocate to less expensive space? A lawyer friend of mine, in sole practice with two legal secretaries to back him up, sublets prime downtown office space, usually on a five- to ten-year sub-lease for a fraction of what he’d pay as a lead tenant. So, he may have to move every five or ten years. No big deal when he has just saved $350,000 on rent.

By the way, this same lawyer friend always drives beautiful Jags or Mercedes and has never bought a new car in his life. He buys one or two-year-old cars and saves $20,000 to $30,000 every time. He has a frugal mentality and he does the math.

Are you overstaffed or are you keeping non-performers who are costing you money, time and, perhaps, customers? What is it costing you to not deal with non-performance?

Do you have unprofitable customers that cost you more to serve than they’re worth? Can they be rescued, or should you refer them to another company who may be able to serve them profitably? One trucking company I’ve worked with fired its unprofitable customers and grew their bottom line by $12 million.

When’s the last time you renegotiated service contracts for which you may be over paying?

Your staff will have lots of ideas on how you can operate more efficiently, and they’ve been waiting for you to ask. So, ask them. Add this subject to your regular staff meetings or create a specific one-hour ‘Idea Fest’ where everyone must come up with at least one idea to save money and operate more efficiently. Give them at least a week’s notice so they can do their homework. Then, let them vote on whose idea was best and the winner gets $50.

So, what will you do, starting right now, to grow your bottom line by reducing expenses by just 5%?

Something else to think about:
Goodbye, Sears. Once America’s largest retailer and largest employer, Sears filed for bankruptcy on earlier this month. It was inevitable. They’ll try to shed debt, they’ll close more unprofitable stores and terminate thousands of employees, but it won’t save them.

Once innovators, the Sears Roebuck catalogue – first printed in 1896 – brought affordable mass-produced goods to people who lived on farms and in small towns across the United States. At their peak, they had 3,500 stores and 317,000 employees. Today, they’re down to 700 stores and just 68,000 staff.

Somewhere along the way Sears U.S.A. became irrelevant, just like they did in Canada. They will not survive. Given all that’s going on in retail, in technology and in society the big question is, “What are you doing to stay relevant to your target customers and to the top talent in your industry?” 

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This HGO article was written by:
Donald Cooper
Donald Cooper

Donald Cooper has been both a world-class manufacturer and an award-winning retailer. Now, as a business speaker and coach he helps business owners and managers throughout the world to rethink, refocus and re-energize their business to create compelling customer value, clarity of purpose and long-term profitability.

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