You can generate more profit by either increasing revenues or decreasing expenses—or by doing both. The common thought (both in business and in life) is that you should decrease your expenses to fit your income. However, the opposite might be a formula for a more fulfilling and flexible life: you should work to earn the income you need to cover the cost of what you really want or need to do in life. With that perspective in mind, you can see how decreasing costs is important, but increasing sales should really be the focus of business owners.

Increase Sales

In order to increase your sales, you must either (1) sell to more customers or (2) sell more to the customers you already have. To attract new customers, you can find a better location, differentiate your business more carefully, choose products that are historically more popular with customers than the ones you currently carry, or advertise more effectively. To sell more to the customers you already have, apply the principles of suggestive selling (see information on suggestive selling in Chapter 12).

Decrease Costs

Before you can decrease your costs, you need to fully understand those costs. Review your records, making note of expenses that are either unneeded or larger than you think they should be. Once you have identified the problem expense areas, work to decrease one problem area at a time. Many of the cost problems can be solved by applying principles such as using multiple suppliers, assessing personnel needs and hiring employees only when they are really needed, and negotiating contracted services.