Controlling Your Expenses

The three ways to increase your business’s profitability are

Increasing sales (in which case, those increased sales may or may not have a positive impact on profitability)

Increasing prices (in which case, the entire amount of the increase will have a positive impact on profitability, assuming that you don’t lose customers due to the price increase)

Decreasing — or controlling — expenses (in which case, the entire decrease will have a positive impact on profitability, assuming that you don’t lose business due to the impact of the expense reduction on your product or service quality)

When you increase prices or cut expenses, a one-to-one leverage factor goes to work on your bottom-line profits. This is why successful small-business owners always look to the expense and pricing categories first when they’re in a profitability crunch: Results can be instantaneous, and the impact is usually dollar on dollar.