Why Cutting Costs Isn't the Same as Saving Money

The pressure is on – revenue is flat, costs keep climbing.

You feel the urge to take an axe to your business’ costs.

But… hold up.

Cutting costs is not always the same as saving money.

Meaning, scanning down through your expenses and cutting the largest expenses is not the approach you want to take.

Rather, as we look down through things we could cut, we want to think through “return on investment” (ROI).

Forms of ROI are boost in revenue, production, or time savings.

Some of your biggest expenses are also the very things that help you produce what you produce, win the revenue you win, or save you time and free you up to focus on higher leverage things.

Cut them and you lose the wind right of your sails.

Large marketing expense? (that also produces 50% of your leads)

Cutting that will only make the problem worse.

Yes you get to cut the cost, but you lose 50% of th

e leads, meaning your revenue takes a hit.

And you now have to work overtime to fill the void with new leads.

Meaning your time takes a hit.

Which robs you from focusing on production efficiency.

Meaning your production takes a hit.

See the ripple effect?

The question is “does your revenue/production/time taking a larger hit than the cost that got cut?”

The opposite scenario could also be true.

You could have a large marketing expense that is now over a year in the running, and is still not producing.

In that case, you cut a ball and chain off of your ankle by cutting that expense.

Cut it, little to no impact on revenue or time savings, and but you do benefit from the cutting of the expense.

Speaking to contractors, I barely need to use equipment as an example, but oh well, I’ll do it anyway. 😂 (To make a point)

Cut your nice (and expensive) machine or tool?

Sure you could.

But then your production and time really takes a hit.

It’s a no brainer. As long as that machine or tool is getting used and aiding production, and the benefit exceeds the cost, it makes no sense to cut it.

You wouldn’t even consider it.

Now, that same equipment/tool example on a piece that is not getting used, meaning not aiding in production?

Yes, that’s a ball and chain you can cut from your ankle.

It’s all about leverage.

How can you spend a dollar, to make a positive ROI in revenue, production, or time savings?

So, going straight to cutting the largest expenses is short sighted, and ineffective.

In fact it can be crippling.

At times this same crippling approach can prevent us from making the investment we need to be making, but the sticker shock at the price is preventing us from doing so.

I’ll repeat – it’s all about leverage.

You can’t save your way to profitability.

Rather it’s about creating the largest expansion gap between your cost, and your gain from that cost, as possible.

Leverage, profitability, margin in your life, time, production, all gets unlocked in chasing and expanding that gap.

A huge, and often overlooked opportunity to expand that gap between cost and your ROI is to do things that buy back your time.

Suddenly “I can’t afford an office admin” turns into “I can’t afford to not have an office admin.”

Why?

Because you can’t afford to be burdened by the $10 tasks, which rob you of your time to focus on the $1,000 tasks.

I’ll say it again for those in the back: LEVERAGE.

If you want to see how we help contractors find, create, and expand leverage in their estimating and job tracking functions in their business, get on a call.

We’ll show you how SynkedUP helps contractors cut their estimating time by 90%.

And increase profitability into the double digits.

Leverage….

Weston Zimmerman

SynkedUP founder & CEO