Ep 740 | 8 Small Levers to Increase Net Income

Thank you for joining me today. It's Brian Gubernick, and welcome to the No Days Off podcast, where we believe that every single day brings a new opportunity to get better. Today, I would like to talk to the No Days Off Nation about small ways to increase your company's net income. Specifically, we're going to talk about 8 levers to increase net income. Now, the No Days Off Nation comprised of a bunch of entrepreneurs, many running traditional businesses, many operating businesses within a bigger business. At the end of the day, I think we're all aiming to increase our net income, so most everything should apply here today to everybody within the nation. I'm not going to spend time talking about doubling revenue. That's a different conversation. Developing a massive growth plan, probably a different conversation. I'm not going to talk about working harder today, hiring more people, any of that. I'm actually just talking about small little tweaks, small levers, levers is what we're going to call them. The kind that go unnoticed, that don't get the accolade or make the headlines, but they absolutely move the bottom line. And to frame this up the right way, I want to start with a story we've actually told here quite some time ago, but I want to tell it again because you may not remember it. I want to tell you about when Henry Ford was building the Model T, the car, and the manufacturing process of the Model T produced a ton of waste. Specifically, it produced wood scraps and sawdust, and that came from the crates and the factory process. Now, at first, when you look at that wood and sawdust and scraps, you did see a lot of waste. You saw a cost. You saw something to get rid of. But then someone inside the operation had a different thought. They actually asked the question, what would happen if we compress this sawdust into, of all things, charcoal? Like little briquettes of, of charcoal. Well, fast forward, that idea became known as Kingsford Charcoal, which is not only an incredibly profitable business that still exists today— I think it's actually the number one charcoal in the country or the world. Like, it's a massive business, and it was born entirely from what had been thrown away. I'm mind-blown every time I read that story or I see it. Ford did not go and sell more cars. Henry Ford didn't have to raise prices. He didn't have to expand production. His team just paid closer attention to what was already happening within, within the business. And, and I think that's the idea for today's episode. Because sometimes you need more top-line revenue, but sometimes the profit you're chasing is already inside the business. You just haven't maybe turned the sawdust into charcoal just yet. Now, the core idea, I think something to anchor to here is that your net income only really moves in two ways. You either increase your revenue per unit or you decrease your cost per unit. Most entrepreneurs have a tendency to obsess over volume. It's, it's more customers, more deals, more growth, more services, whatever it may be. But the smallest improvements in pricing and discipline and efficiency, they can actually lead to hitting your net income goals faster than that type of growth I just described ever will. So let's go through these 8 levers that you can be deploying or at least thinking around. Some are on the revenue side, some are on the expense side, but I do believe that most of us should be auditing all, all 8 of these areas. So let's start with some revenue levers. Number 1, lever number 1, we're gonna talk about revenue per transaction. I want you to ask yourself, what is the average revenue per customer or per deal or per project, depending on your business. What is the average revenue per customer, deal, or project in your world? Now, the follow-up question: how intentional is that number? Now stick with me, right? Like, how intentional? Because the follow-up reflection question would be, okay, well, where are we undercharging, charging simply because that's how it's just always been? Where am I going with this? Again, revenue per transaction. Even the modest increase in price done thoughtfully can fall almost entirely to net income. So if you're charging X percent per deal and that's been your story, what if it looked like X percent times an additional 10%? What's stopping you from doing that? Or is there a smaller number? 10% may be too large a jump. What if it's 1% or 2%? Now, it may sound really small or incremental, but added up over time, it can be substantial. You're already doing the unit. You're already doing the transaction. Can you extract more from it? So lever number 1, revenue trans— uh, per transaction. Lever number 2 is is about pricing discipline. This is where profit sometimes dies. What do I mean? Here's a question I'd ask. Where do we discount by default instead of by strategy? Where do we discount by default instead of by strategy? Follow-up question. Where do we avoid price conversations because they're uncomfortable? Many businesses don't lose customers over price. They lose margin because they just don't defend their value very clearly. So you've got to be disciplined in price, lever number 2. Lever number 3, not applicable everywhere. I shouldn't say that, maybe you can figure out a way to make it applicable in your world, but we're going to call it fees and add-ons. I want you to look closely at what you already do, and then I want you to ask, are there services that we provide for free that actually cost us time, labor, or risk? Another question: are there fees that exist on paper but are not consistently collected? To me, this is the classic sawdust, right? Value is being created, but dollars are not being captured. So what are you maybe doing for free that does cost you and can you be charging for it? Or are there fees that you're supposedly charging for but you're actually not collecting them? Lever number 4, we're going to call this revenue leakage. This is just based on real-world behavior. I mean, you could read any public company's, you know, uh, reports. You'll find this, that this sort of thing exists with most every company. Where does money pass through your business that you don't fully collect? Where are invoices, for example, delayed, or fees being waived, or follow-ups being missed? There's an execution and enforcement problem that exists here. So, there's this revenue leakage. You sold something, you believed that you collected something, but maybe not fully. Maybe it slipped through the cracks. Maybe there's invoice delay, or fees waived, and And in other words, we're not maybe inspecting what we expect. Okay, that was the revenue side of things. Let's talk about some expense levers. This is actually lever number 5, but we're going to get into expenses. Lever number 5, we're going to call subscriptions and tools. I'm talking specifically about what you're subscribing to or tools that you're— that you've purchased or you subscribe to. This is a real simple one. I want you to ask this one question. About all of the expenses, particularly those that are more subscription-based. If this disappeared tomorrow, would anyone fight to keep it? If the answer is no, get it out of here. Lever number 6, let's call this labor alignment. What do I mean? This one could be a little, a little emotional, but it does matter. Are we paying full-time costs for part-time output? Are roles clearly defined or are people just helping out? What am I talking about? I, I'm not saying cut people necessarily, but I do want to align my cost with the contribution. So am I paying a lot more for labor or an output that I'm not actually getting? And have I been willing to accept that? But if I'm being honest and I'm trying to maximize net income, do I need to realign some of that? Lever number 7, fixed costs that, that crept in. This is an interesting one. I'll give you some examples of fixed costs that can easily creep. Office space. You pay a fixed rate, you add a little bit of space, you add a little bit of space, suddenly you look up and your bill's just bigger than you realized. Software, things that you purchased and added and layered on. How about retainers for marketing or anything like that? These are fixed costs that creep in. How about all the nice-to-haves? Not need, but nice-to-haves. A question I'd ask around this particular lever: if I were starting this business today, would I add this expense? If not, it probably— that's a specific expense— probably needs a bit more scrutiny. And then lastly, lever number 8, we're going to call this feels productive spending. I think that so many of us love things that feel like progress. I want you to ask, does this expense directly create revenue or protect, protect margin? Or does it just make us feel busy or optimized or modern or whatever it may be? The real question: if profit dip next month, would you can— what would you cancel first? I think this list matters more than you think. So again, we buy things because they feel like progress, but do we test if it really directly creates revenue or protects margin, or does it just make us feel busy or optimized? So you may want to go back through this and go through those questions on the, on the 8 Levers. Right? Because I ask a lot of questions around value being created that's not being captured, where expenses exist today only because you're just familiar with those expenses. I'm asking around, you know, what can immediately improve your net income if you just made some tweaks this quarter? In summary, I'm asking what sawdust already exists in your business that you're stepping over every single day? Like Henry Ford, I think we could fix a lot of this and discover this sawdust just by paying a bit more attention. That's all I have for you today, the No Days Off Podcast. Thank you so much for listening, and remember, every single day brings a new opportunity to get better. So let's get after it.