20. Maximising The Bottom Line

May 01, 2026 03:53 · 9:30 · English · Whisper Turbo · 2 speakers

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Lecture Index

0:15

S… Speaker 1 (20. Maximising The Bottom Line)

One of the most critical dials in your financial cockpit is maximizing profits. When you hear the word maximize, your first instinct might be, get big. But maximizing profits is not the same as hitting the revenue or growth lever of your business. The low-hanging fruit for maximizing profits is not the gas pedal on sales, it's reducing expenses.

0:44

S… Speaker 1 (20. Maximising The Bottom Line)

Suppose I have two identical businesses. So far, these businesses look exactly the same. Let's suppose the management of business A decides their strategy to increase the profits from $10 to $13, which is a 30% increase, is to increase the revenue from $100 to $125, which is a 25% increase.

1:13

S… Speaker 1 (20. Maximising The Bottom Line)

which is aggressive for any business regardless of the environment. Assuming business A enjoys the luxury of some economies of scale, this 25% increase in the growth of the top line revenue could result in the desired 30% growth on the bottom line profits. Management of company B, on the other hand, has an entirely different strategy.

1:42

S… Speaker 1 (20. Maximising The Bottom Line)

Business B has decided to take a hard look at all of the expenses of the business line by line and ask the question, do I want this or do I need this? If I want it but don't need it, it's eligible to be reduced or eliminated. As business B starts looking at each expense, another question arises, need it for what? Great question.

2:11

S… Speaker 1 (20. Maximising The Bottom Line)

Many years ago, I received the monthly financial statements on one of our businesses on the 8th of the following month. Just so you know, I have an ironclad rule. And that rule is that my bookkeepers and accountants provide me with my financial statements by the 10th of each month. You should adopt this rule too.

2:33

S… Speaker 1 (20. Maximising The Bottom Line)

So here I was, I was reviewing the numbers, and I noticed a significant aberration in one of the expense categories. Since my financial information is always presented in a trend format, just like it is in CFO School Board, the problem was very easy to spot. I immediately picked up the phone to talk to my general manager about this issue. When I asked her, how could we have had this expense, she told me, Keith,

3:03

S… Speaker 1 (20. Maximising The Bottom Line)

That's just the cost of doing business. I was stunned. I had no idea that we had cost of doing business. I thought we only had investments. Think about it. Why are you in business? There are only two reasons to spend money in a business, regardless of the business or the industry that you're in. Number one, keep the customers you got.

3:33

S… Speaker 1 (20. Maximising The Bottom Line)

Number two, get new ones. That's it. Every dime I invest is an investment in keeping the customers I have or in getting new ones. Money that is spent that does not support one of these two functions is a waste of money and candidly is probably ego-driven. Here's the great part of this lesson.

4:01

S… Speaker 1 (20. Maximising The Bottom Line)

All investments earn a return, and all returns can be measured. You can literally measure how efficiently your money is being used by measuring how well you're creating repeat business, referrals, and attracting new customers to your business. Cost and expenses, on the other hand, are black holes. Money disappears into them never to be seen again.

4:32

S… Speaker 1 (20. Maximising The Bottom Line)

So let's go back to our two businesses. Business A's strategy was to grow the business probably by ramping up advertising, building the new website, creating new brochures, blogging three times a day, tweeting two times per week, and adding one new salesperson, all of which is a lot of fun and very exciting.

4:55

S… Speaker 1 (20. Maximising The Bottom Line)

And it's a ton of work and it costs money. And maybe business A's efforts and excitement will pay off in the form of additional revenue. Remember, business B had a different strategy. By looking closely at every expense line by line, check by check, vendor by vendor.

5:17

S… Speaker 1 (20. Maximising The Bottom Line)

and thinking in terms of needs and wants and investments versus cost, business B was able to increase its profits by 30% by cutting expenses by 3.5% without growing revenue. Let me say this another way. With a profit margin of 10%,

5:44

S… Speaker 1 (20. Maximising The Bottom Line)

Every dollar reduction in expenses produces the exact same amount of profits as a $10 increase in revenue. And if you whack your expenses, you don't need to find, close, and deliver on that sale. That's what I call business intelligence. I've been using a strategy I call NOG, N-O-G.

6:12

S… Speaker 1 (20. Maximising The Bottom Line)

NOG for 25 years. It stands for no overhead growth. It's a mantra we have in all of our businesses. The question we're always asking ourselves is this. How do we grow the top line revenue and maintain or reduce our expenses? We can't do it perfectly. Of course, it's a constant work in progress.

6:41

S… Speaker 1 (20. Maximising The Bottom Line)

but it's one of our primary profit maximization strategies. In tough economic times, figuring out how to maintain profits with declining or stagnant revenue is paramount. Let me tell you something. Of the thousands of businesses I've looked at over the last 40 years, the thousands of business owners I've helped, I've yet to see a business that wasn't wasting

7:11

S… Speaker 1 (20. Maximising The Bottom Line)

8% to 10% of its revenue on expenses for stuff that made no difference. You put me in charge of your income statement, and I'll whack 10% of the expenses you've got in less than 60 days. Just like that. Increasing your revenue by 25% is a dicey, multi-month initiative at best.

7:38

S… Speaker 1 (20. Maximising The Bottom Line)

Reducing expenses by 5-10% is a 60-day process at most. The investment required to reduce your expenses is insignificant compared with the investment required to ramp sales and revenue. Here's the formula for doubling your profits in the next 60 days. If your expenses are 90% of revenue, like most small businesses,

8:07

S… Speaker 1 (20. Maximising The Bottom Line)

Guess what happens when you whack 11% of your current expenses? Your profits double. If your expenses are 85% of revenue, then eliminating 10% of your expenses will drive your profits by almost 60%. Not too shabby for an afternoon's work.

8:30

S… Speaker 1 (20. Maximising The Bottom Line)

Controlling expenses is typically relegated to the same to-do list as raking the leaves and returning that overdue library book. Big mistake. Vacuuming up the nickels and the dimes in the corners seems like it would be tedious and painful, but man, is it profitable.

8:53

S… Speaker 1 (20. Maximising The Bottom Line)

Reducing expenses is literally the low-hanging fruit for turbocharging your financial results. The secret to maximizing profits is to optimize before you grow. Growing a cancerous business so that you can have a bigger cancer is counterintuitive. First, you must eradicate the tumor, then get bigger.

9:22

S… Speaker 2 (20. Maximising The Bottom Line)

Here it is on a bumper sticker. Grow the efficiency as opposed to growing the problem.

This transcript was generated by AI (automatic speech recognition). May contain errors — verify against the original audio for critical use. AI policy

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