Pathway To Success Newsletter - Guest Articles

“David, I’ve been reading your emails for a few months and love them, thank you for them. I do have a question that maybe you can answer for me. What are the best ways to reduce our taxes, increase our revenue and decrease our expenses?”

Entrepreneurs are looking for strategies to increase their profit margins and put more money in their pockets, today more than ever. As we see consumer spending drop month after month, business revenues continue to decrease. So what can we do about it?
Here are three steps to improve your profit margins and put more money back in your pockets.

Step 1 – Review your expenses. If you have not kept track of each dollar you spend in your business or personally each month, stop what you are doing and do it now. You can’t manage what you don’t measure and what is measured gets managed and what is managed gets done. Read that again…. This is a very important point. If you don’t measure your expenses you can’t manage them. If you don’t manage them you won’t find ways to reduce them.

This past weekend my wife and I were paying our personal bills. While doing so we decided to review a few of the bills to make sure we weren’t being overcharged and to see if we could reduce our expenses in anyway. We tend to do this once a quarter. The first bill we looked at was our cable bill. I have high-speed internet access, digital cable and a premier movie channel listed. The bill was about $140 per month. I told my wife I would call the cable company and see if there were any other plans we could choose to reduce the bill.

The first person I spoke with was a sales representative, after a five minute conversation my bill was now $155 per month. She got me to upgrade some things. Boy, was I moving in the wrong direction. I started thinking – my wife isn’t going to like this. So I asked the cable representative if there was anything I could do to reduce my bill because I was looking at other options and just felt the bill was too high. She said she couldn’t do anything but she could transfer me to the department that could.

When the DEPARTMENT representative came on the line she asked how she could help. I explained my situation and that I needed to lower my bill. She said it looks like you just upgraded a service, is that correct? This is when I thought there was no chance of me getting a discount now. Why would they, when I just upgraded my service. I obviously like what I’m getting. Instead, she told me she couldn’t do anything for the service I just ordered, but she could drop the charges on three items for 12 months, giving me a $45 per month savings. After dropping the phone, I picked up and asked if I heard her right. “Did you say I can get $45 off my bill?” It was incredible. In just thirty minutes on the phone I reduced my cable bill by $540 per year. If I was getting paid that would be an hourly rate of $1,080 for my time, that’s like getting paid an annual salary of $2,246,400. Not a bad return.

If I can get $540 in savings on one bill in thirty minutes on the phone, you can easily find ways to reduce your bills just by taking some time and calling each vendor and seeing what they are willing to do for you. Some may give better credit terms and some may reduce the amount you are paying in order to keep your business. It’s worth the time – for me it was worth $1,080 an hour.

Step 2 – Review your revenue strategy. Have you recently taken the time to review your strategy for generating revenue? Do you know what your profit margins are for everything you sell? Have you looked at ways to increase sales without spending more money on marketing?

A revenue strategy is designed to ensure you are maximizing all revenue generating activities. There are three strategies for increasing revenue – if you want to learn what those are, attend our free webinar this Thursday at 12PM pacific / 3 PM eastern, just go to www.earn.com to register. If you aren’t taking advantage of these three strategies you won’t grow your business to new levels.

Understanding your profit margin is extremely important and when I ask several of the clients I work with to describe their way of figuring out their profit margin they fall short. I believe profit margin per product needs to look at more than just the cost of the widget minus the sales price. After all, what was the marketing cost to bring that client in the door? What was the cost of sales commissions, if any? What was the cost to fulfill on the product? Did you ship it? Do you have any labor involved in getting the widget out the door? All of these expenses should be considered when determining your price.

A few years ago I was working with some pricing models for a product in one of my companies. I discovered that a lower price didn’t always mean more widgets sold. In fact, in this particular case I raised the price and ending up selling more of the item. I was shocked, but realized that perceived valued is a huge factor in what people are willing to pay.

Step 3 – Work with you CPA to lower your tax liability. There is no quicker way to put money in your pocket than lowering your taxes. Lowering the amount you pay in taxes is 100% direct drop to your pocket book.
There are a few things in the 2008 stimulus plan that small business owners can take advantage of. Make sure you work with a CPA to take every opportunity you can with the plan.

For those of you who do your own taxes still – STOP. Seriously, why would you continue to try and do this? I use to do my own taxes and realized very quickly after hiring a CPA that I had no clue as to what I was doing prior and the tax deductions and opportunities I was missing. In the first year the CPA saved me $12,000 in taxes from the two previous year’s returns I did on my own, the cost - $800. Now that’s a great return on my money.

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If you want to learn more about running a successful business make sure you come out to our next live seminar in Las Vegas, March 12-15. Learn more at www.earn.com from David Gass - Founder, Business Credit Services, Inc. www.bcscredit.com

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