Double Your Profit Day #3 Slash Costs and Maximize Profit with a Lean Business Culture

I'm John Wilson, and I'm the CEO of the Wilson Companies in Ohio. We are a plumbing, HVAC, and electrical contractor that will do about $30 million in 2025. Thanks for joining us for the Double Your Profit series, where we spend 30 days diving deep into the action steps that you can take to double the profit for your business. Thanks for tagging along. Welcome back to Double Your Profit. Today's topic is cut costs fast and build a lean culture. Whenever I'm talking to other entrepreneurs about this concept of cutting costs fast and zero-based budgeting and really how to maximize the profit through their business, you find that people have this relationship with costs. Oh, I've always used them. I don't want to rock that boat. I don't want to whatever. You have to just be able to go with your gut on half of this. Whenever we're having a tough month, in my head I'm rolling through the costs that we could transition out of the P&L, or hey, I haven't negotiated that yet. And sometimes I find myself, just like those people that I talk to, not taking action against those items. Maybe it's inconvenient, maybe it's annoying. Like right now I need to do that with I'm annoyed by it and I'm getting charged $3,000 a month of fees. So I should be attacking that. What we've started doing is a slash now, analyze later cost-cutting mentality. It is the easiest thing in the world to go add more costs to your P&L, but cutting it is hard. It's either people or it's process or it's software or it's vendors. It's something that you've invested into and you probably don't wanna think that you were wrong in the first place. But you do have to cut costs quickly and follow your gut when you think, hey, this might not be working out. I don't think my ROI on this is there. This cost is what I expected. One of the best ways to do this is empowering your managers to cut costs directly and tying their own financial incentives to that. We have a manager who has been more aggressive than others with cost cutting and adding automation to their team. And as that's happened, she has been promoted and she has been given additional earning opportunities because she has made her department more efficient. We have essentially delegated cost cutting for her department to her, and she's been rewarded because of it. So as you're building a culture that stays lean, a big part of it is how are you aligning compensation with the results that you want. Hey, you cut cost, so hey, you get a raise. That's a pretty easy way to do it. Another is bonuses, promotions, whatever it is. But people need to know that you take cost cutting seriously and it is something that will advance their career. Something that we've used time to time is just bold cost cutting targets. Hey, I need to cut my overhead by $50,000 in 60 days. You're gonna get some hemming and hawing, and you're gonna get some disagreements, and you're gonna get some pushback. But at the end of the for a business like ours, $50,000 is actually kind of easy to find within the P&L. Our overhead is $750,000 a month, so for us, $50 grand is okay. Yeah, we can drop 2 softwares, we'll negotiate that one, we'll do better on gas, let's go look at our utilities. It actually doesn't take that much work, which is kind of crazy for $50,000. Now, if you're doing a slash now, analyze later, you have to make sure that your results didn't actually damage the core business. That doesn't mean don't do it. You should probably just go do it if you have an inkling that that cost is unnecessary, Kill it. But you do want to be able to analyze later, hey, did that do what I wanted? Did I save the amount of money that I wanted to save? Did I get what I wanted out of that action? Or do I have to add some version of this back in? I mean, maybe I don't need a full-time person. Maybe a software would do. So it doesn't need to be the full investment, but a part of it gets added back in. So figure out what that looks like. How do you measure success in cost cutting? Something that helped us a lot over the years as we were driving this into our culture is communicating openly about this because one, it creates creates a culture of cost cutting and staying lean, but it also— people don't feel like the rug was pulled out. So if that's open book P&Ls and saying, hey, we missed our budget, which we did, we missed our budget in May, and we had an open conversation with the leadership team, hey, we missed our budget and I don't know what that means for our OpEx budget right now, but we're looking at it. If we are going to miss the top line results that we set for this year, that means we're going to miss the bottom line unless we take some action. And profit is the goal. So we can't miss our bottom line. So keeping the team in the loop on, hey, here's potential decisions we might be making, here's potential decisions we did make, and most importantly, here's the why, is one of the best things you can do as you're adding this to your culture. And it takes it from this dangerous, scary thing where we're cutting costs, and it makes it a daily part of their life where they understand why the business is taking this action, and hopefully they even help. Our biggest win for adding this into our culture has been inside our weekly leadership meetings, we actually give an Opportunity to say, "Hey, how did you save money this week?" And then we get a little bit of a chance to celebrate it. So summarizing this video, you want to cut costs fast, and if you think that cost is unnecessary or could be lower, rip it. Then you want to figure out a way to analyze the results later, add a portion of it back in if you need, but make your leadership team and the rest of your team accountable for frugality inside your business and reward them for doing it. If we're going to talk about cutting these costs, make sure that they get rewarded. For cutting those costs. Drop in the comments below a cost that you don't want to cut and share it with a friend who also just can't cut costs.