Kent Sayre's Blog, page 3

Why Raising Revenue Is More Valuable Than Cutting Costs

Raising revenue is always better than simply cutting costs. Any bean counter can look at an expense and lop it off—even if it's a necessary appendage. It doesn't take much to look at expenses and cut them. It's something else entirely to be able to generate revenue. Generating revenue is the secret to success; so as marketers, we need to focus on always generating more revenue. Periodically, we can 'trim the fat' to eliminate expenses.

Here's something else to consider: Nobody can coupon-clip their way to getting rich. It simply won't happen. If somebody has expenses of $3,000 a month and they somehow manage to cut out all their expenses, then they'll put $3,000 extra dollars into their pocket. They have a maximum gain of $3,000 if they could drive their expenses to zero—which they can't. There's a cap to lessening your expenses, because you can only drive them to zero (theoretically). Now, increasing revenue has a much greater return on investment (ROI). It isn't capped. By increasing revenue, you can make $6,000 more per month by changing strategy or tactics. You could add $60,000 more per month by changing strategy or tactics in a major way.

Now, make no mistake—this isn't a free ticket to spend like a drunken sailor and raise expenses. You must stay lean 'n mean regarding expenses. No bloat allowed.

 

Bring the Passion

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Negotiating Discounts from Vendors

If you can't barter for something, at least try to negotiate for the best possible deal. Sometimes all it takes is to ask. Someone once charged me $85 to pull a piece of label from a printer with a pair of pliers. This works out to a slightly obscene $340 hourly rate. Even paying $30 for 15 minutes turns out to be a $120 hourly rate.

By asking for and negotiating discounts, you're saving money and further developing your negotiating skills. Incidentally, this is also an opportunity to outsource. Let's do a little simple math. Suppose someone is making $15 an hour. At $85 to stick the pliers in to pull out the label, that's equivalent to 5 2/3 hours of the person's $15/hour work. Here's the reasoning: if I'm making $15 an hour and can solve this problem in under five hours and 40 minutes, then it behooves ME to do it. If I think there's no shot at all that I can solve this problem in 5 hours and 40 minutes (which is a very long time), then I should outsource it. For everything you do, there should be a cost-benefit analysis done. It's important to think about these things in order to stay fiscally disciplined.

This is why I bought ugly cubicles for my office, for example: I wanted something cheap and quick, and to be done with it. My goal is to stay fixated on what makes the company money. I'd rather make a lot of money in a functional office than make very little money but look good doing it. Remember the old dot-bomb era? A bunch of idiots with untested, unproven business ideas colluded with greedy investors looking to make a fast buck to set up some of the most worthless companies ever. These idiots got all the venture capital money they could muster, and poured it into lavish offices, oak desks, marble reception areas, beautiful architecture, million-dollar Super Bowl commercials that made people laugh but didn't sell a thing, and everything else they could think of. They bought beanbag chairs and ping-pong tables for employees. Meanwhile, nobody focused on bringing in the cash. Nobody went out to get clients.

My schadenfreude was wickedly high when I saw all these garbage companies disappear. "Hey Bob, you know something? I've got a great idea. Let's sell pet food online!" "Yeah Marv, that's super…then we'll take the company public and get rich, rich, rich! Sweet!" Nobody bothered to consider whether there was a market for this. Do people even want to buy pet food online? No, not really.

Opportunity Consciousness

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