When companies set their sights on profitability, the usual suspects often get hauled in for questioning: sales processes, sales teams, sales managers, and CRM systems. Makes sense, right? But here’s the kicker: your company’s bottom line might not be as tied to sales as you think. (Shocking, we know!)
For the average company, every $20 spent requires a $100 sale to offset it. Yes, really. So, let’s flip the script and look at expenses instead. Because keeping what you earn? That’s the real MVP of profitability.
The Three Amigos of Expense Reduction
Our clients have spilled the beans (we’re sworn to secrecy—kind of). Here’s what they’ve learned:
- Cost of Goods Sold (COGS): One client realized their biggest expense was in what they were buying. Cue the dramatic vendor negotiations! By locking in annual purchase agreements with three suppliers, they saved a cool $27k in year one. Boom.
- Manpower Costs: Another client reevaluated their hiring policies. They limited temp help to three weeks per position (because temps are like ice cream—great in moderation) and expanded their full-time team. The result? A hefty $38k saved in just one year. Talk about staffing done right.
Small Tweaks, Big Wins
Tiny tweaks often lead to jaw-dropping results. And the best part? Those savings can fund something else your company “couldn’t afford” (hello, dream software or shiny new espresso machine).
And let’s be real: while it’s crucial to boost sales, if your profit margin doesn’t make sense, you’re basically running on a hamster wheel. And unless you are a hamster, that’s not a great business model.
Balancing Act: Sales vs. Margins
Here’s the golden rule: every sale’s gross profit must generally cover your overhead and leave a little something extra for that bottom line. Exceptions? Sure, but only with the boss’s blessing.
Some savvy companies even tie salesperson commissions to gross margins instead of raw sales. Why? Because sales without profit are like donuts without the filling: hollow and unsatisfying.
Culture: The Heart of Spending
Your company culture shapes spending priorities, like:
- People-first cultures might splurge on salaries and perks to foster loyalty (and save on turnover costs).
- Product-driven companies may settle for slimmer gross profits while keeping overhead lean.
- Service-obsessed businesses often see happy customers translating into a healthy bottom line.
So, What’s a New CFO to Do?
If you’re stepping into the CFO shoes (congrats, by the way!), here’s your cheat sheet:
- Identify Sacred Cows: Figure out which expenses are untouchable. If it’s employees, sharpen your HR toolkit. If it’s products, brush up on negotiating skills. And if it’s service? Time to wow your customers.
- Investigate the Rest: Tackle the top three expense categories next. Research purchasing methods, negotiate volume discounts, and always have a Plan B vendor. Remember: even your favorite vendor might wiggle on price if the competition is close.
At the end of the day, it’s not what you earn—it’s what you keep that matters. So, let’s talk about how your company can save money and make the most of what it already has. Head over to our Contact Us page to start the conversation. And remember: even hamsters need breaks from the wheel.
