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Dale Hammernik’s First 2 Keys to Chopping Costs Correctly

I wanted to write you this week on a subject near and dear to my financial heart: profit.

Now, I’ve been spending a lot of time with you over the past few months on increasing the revenue side of the profit equation, but I thought I might take a few weeks to touch on the expense side of the coin.

Because in this environment, it’s a key factor for success (i.e., that you pay close attention to it).

Having worked with entrepreneurs and business owners for a while, I know that most of them don’t like having to pay attention to that side of the ledger. The “sales” side is much sexier.

But at the end of the day, it really is about profit … right?

So, this week’s blog post will directly help you keep those costs down.

Dale Hammernik’s First 2 Keys to Chopping Costs Correctly
“Either do it or don’t do it. No more wishy-washy, half-hearted attempts. Either say ‘no’ to achievement or dig in and get to the bottom of the persistent incongruence between what you say and what you do.” – Dan Kennedy

It’s a common (and normal) temptation for the biz owner: Make some additional sales and revenue, and let expenses (that were perhaps too high in leaner times) creep back in. Some folks even do this as a way of signaling to themselves that they’re doing better … a sign of prosperity, if you will.

Well, I hate to be the bearer of bad news — but you’ve gotta stay moored to reality. Cutting that overhead NOW, when things are better, is much healthier … and one of the easiest paths to profit.

And what’s often the highest piece of overhead? Payroll.

So, I’ll take some time this week (and next) to suggest some easy, painless ways to keep that major cost under control.

1) Re-work compensation to link to specific goals.
We’re used to seeing salespeople compensated on a performance basis, but the important thing to realize is that ALL of your employees could go on such a compensation system. What are the production goals for your non-revenue employees?

A simple idea would be to SET these production-related goals, and somehow have them reported back to your employees on a daily or weekly basis. By seeing and tracking their own results, they become invested in increasing their performance (if they’re at all competitive and have a drive).

Plus, just the simple fact that they know somebody’s watching will increase efficiency.

Yes, it may cost some money (and time) on the front-end to implement this kind of system (which is best when mostly automated) … but it will be WELL worth it in the long run.

2) Never stop training.
Usually poor employee performance is NOT deliberate sabotage — it’s simply not enough time spent in training.

Often employers assume new employees know how to perform their job functions and, therefore, don’t do enough to continually orient them to their job.

Have you conducted a review of your employee performance … and asked THEM for feedback on how they could do better?

That’s a great training opportunity — and again, a nice way to keep them from seeing their job as a paycheck, but rather as directly contributing to the profitability of your enterprise.

A side-benefit: When you cross-train employees across each other’s responsibilities, it can also signal to them (positively) that they’re not as “essential” as they might think they are. They’ll work a little more productively to continually earn that regular paycheck, when they know that being replaced wouldn’t kill the business.

Next week, I’ll share with you a few more ideas for how you can reduce these and other costs — and increase your profits.

Feel very free forward this article to a Waukesha County business associate or client you know who could benefit from our assistance — or simply send them our way? While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for Waukesha County families and business owners. And we always make room for referrals from trusted sources like you.

Warmly (and until next week),

Dale Hammernik
(414) 545-1890

Hammernik & Associates