Free consult & free copy of book

E-Myth – “Why most small businesses don’t work & what to do about it”

Contact Us


Most 5 star CPA Google reviews in Canada

Read Reviews

Chartered Professional Accountants E Myth

1 Fixed Monthly Fee - Planning | Accounting | Taxes | Consulting

Helping Canadian businesses beat the odds!

Edmonton Business Coach | Minimizing Expenses Is Not The Answer

If you don’t have the ability to generate new revenue, any work that you do on your Edmonton Business Coach expenses will ultimately not matter. You will go out of business. You need the ability to generate new revenue first. Uh, your tire business depends on it. Uh, expenses are secondary because if you don’t generate revenue, it doesn’t matter what your expenses are, you’re going out of business eventually.

Yeah, I can see why [inaudible] because it’s not.

Hi, thanks for joining us for another episode of ask [inaudible] CPA. Today I at the business coach, we’re talking about minimizing expenses enough. The answer again on em to business coach, you’re talking how minimizing expenses is not the answer. I have may here with me from the, from me. Are you seeing that the customer and you know, there are clients who spend the least of their expenses at least was the ones that are making the most money.

Yes and no. Yes, some that do. And then there’s some that they spend, but then they don’t make money. So

yeah. How do those business big businesses look compared to the small business though? Spending a lot more on everything that altogether.

No, the major difference. Yeah. It’s based on, like you said, it’s based on what, how the spending and the benefits of what they’re spending on versus what they need versus what they want kind of thing.

Yeah. Yeah. So the, the quote that we have here today, it’s a zig Ziglar quote and he says, it is unwise to pay too little. When you pay too much, you lose a little money. That is all, when you paid too little, you sometimes lose everything because the thing you bought was incapable of doing what it was bought to do. The common law of visits balanced prohibits paying too little and getting a lot and the statistic that we have here at 50% of all Canadian small businesses will go into business in the first five years. In 29% of these fail business owners will list running out of cash is one of the primary reasons for their failure making running out of cash. The second most common reason for business failure and the story that we have here are business owners. They’re unaware of the risks of running out of cash. And you know, I, they’re aware of running, uh, uh, the risk of running out of cash in the end of running their business with an employee mindset that is ineffective in business than me. What are the questions you think these business owners should be asking?

They should ask if you can’t generate new revenue, expenses even matter.

So that’s the crux is if you have the, if you don’t have the ability to generate new revenue, um, you don’t want to replace clients and grow clients as they, you know, um, or generate new clients. If you don’t have the ability to generate new revenue, any work that you do on your Edmonton Business Coach expenses will ultimately not matter. You will go out of business. You need the ability to generate new revenue first. Uh, your car tire business depends on it. Uh, expenses are secondary because you don’t generate revenue. It doesn’t matter what your expenses are. You’re going out of business eventually.

Well, revenue generating activities suffer if he’d spent too much time. Unexpensive yeah,

there you go. So we establish the fact that if you can’t grow revenue, if you can’t make sales, ultimately your Edmonton Business Coach business will fail regardless of your expense levels. So if you spend too much time on your expenses, you won’t have enough time to spend on revenue generating activities. And you know, if you don’t have enough time to spend on them, they’re not going to function well.

Why does the employee mindset we grow up with make this difficult to grasp?

It’s difficult to grasp because the employee mindset we grew up with is we trade time for money and you know, we go to work and we make relatively set amount. You know, some, you know, some people are completely fixed and the terms of hours an hour, the rate or the salary they’re drawn and some people have a bit of a commission maybe that they’re getting. For the most part, what you’re going to make in your Edmonton Business Coach job is relatively fixed within a certain, within a certain level, but in business it’s the complete opposite. How much you’re going to generate in revenues, completely dependent on you and what you do. So it’s a completely different game altogether where our goal is we have to generate more revenue because the one, we’re an employee, there is a certain amount of revenue. It’s guaranteed, but it’s also fixed. And in business the revenue is never guaranteed and it’s not fixed at all. It can be, you know, infinite or, or nothing. So, uh, we can’t have that same employee mindset where their revenue is guaranteed. And, and our job as an employee is simply to minimize expenses, increase the level of savings and pay down debt. Uh, we’re in business, it can be a little bit different.

And why is 168 the most important number in a basis?

So 168 is always the number of hours in a week. And every business owner, whether they have $1 to start their business or $1 million to start their business, they all only have 168 hours in the week. So how much of that time are you going to allocate your Edmonton Business Coach revenue generating activities versus how much of that time are you going to allocate to optimizing your Edmonton Business Coach expenses? Ultimately 168 hours is going to be the main limiter on both.

Are Your direct costs generally worthy of significant time?

Yeah, so generally like your direct costs, those are worthy, you know, that we put the direct costs rate at the top of the financial statements. So we have a revenue first and then we dove duck the direct cost to get to the gross margin. Those are, you know, the types of expenses where if you’re investing some time to optimize those expenses, um, it’s probably going to have a pretty significant payback for you because if you can change your direct costs even by, uh, you know, uh, a few percentage points here or there, it’s going to make a rather large impact on the bottom line. If you can, you know, keep 40% of every project instead of 30% of every project. That’s a really significant number and one that he is worthy of time.

Are The costs with administrate staff likely significant?

Yeah. Usually after we get through those direct costs. The other one that’s likely significant is the cost of any administrative staff, uh, because all the staffing costs in most businesses are, are one of the most significant expenses. So if you could spend some time on optimizing it, um, you know, and that that’s probably a time well spent. So long as you’re not spending too much time on that, that you don’t mean you don’t want to be the one, you know, you want to fire the, the person at the front desk. So you’re doing all the scanning and you can no longer do your revenue generating activities anymore. Uh, but you know what your costs are. Your administrative staff are likely significant in your Edmonton Business Coach and are worthy of some of your time.

Are The costs associated with your physical location likely significant?

Yeah. So once you get locked in that physical location, you’re lucky stuck with it. Whether you buy it or whether you lease it, you’re, you’re probably there for a considerable amount of time that you’d probably get to spend some money to get out of it. Once you do want to get out of it. Um, so you know, spending some time in getting the right physical location because you’re that rental payment or that a mortgage payment on this space is likely going to be a significant number in your Edmonton Business Coach. So, um, you, you, you probably do want to spend some of your valuable time that you hit in your most real valuable resources time. So you want to spend some of your hundred and 68 hours a week. If you are thinking of getting into a new location or renewing a lease that’s certainly worthy of yours. Some of your time,

he, you likely, you restrict the time you spent on optimizing other overhead costs.

Yeah, it’s not that you, you’re not going to spend time on optimizing your other overhead costs, but you have to realize once you get through revenue, your, your main goal is you have to generate new revenue. If you can’t generate new revenue, your Edmonton Business Coach will. Just a matter of time, regardless of what you can do on the expenses. And you’re going to spend some time to make sure your direct costs to sales are good. So your gross profit margin work so well. You have an admin staff that, uh, those costs are in line and you have a, uh, uh, the cost of your physical occasion with us rent or interests of longterm debt that, that, that works out well. But the rest of your overhead costs, you know, how much the phones costs and what you’re paying on insurance and it, it can pay back whether it’s, it’s minimal. It is very minimal. So I mean, ideally you don’t want to spend no time on it, but it’s not the answer. Minimizing these costs are not going to be the reason why your business succeeds or fails. Minimizing these costs are simply going to be, you know, uh, they’re gonna make a successful business a little bit more successful or a failing business, a little bit more of a failure, but they’re not going to be the difference between success and failure. And most businesses because they’re just not all that significant.

Why is the simplicity of these other overhead costs often grab out attention?

Yeah. So although they’re not that significant, when you start to look at them, they will grab our attention. Because Edmonton Business Coach is complicated. When you come with a problem, I need to acquire more customers and have a constant stream of new customers. That is a big scary task. And someone says, Hey, can you get my phone bill from $85 a month to $80 a month? They know they’re on the phone with telus or Rogers and they’re switching phone lines and, and talking about packages and it’s, you know, two, three, four, five hours later they got their $85 a month phone bill down to $80. But meanwhile they didn’t spend any time on generating new business for that business for that month. And it’s going to fail. I love to tell people it doesn’t matter and you’ll tell us, could pay you to use the phone. Um, if you’re not generating enough revenue, your business is still going to fail.

Um, so, but they grab our attention because they’re simple. You know, we want to solve the problem. The problem is we don’t have enough profit to end of the day and this is a very solvable issue or gravitated to the ones, the easy problems. And you know, we don’t want to eat the frog. You know, you’ve got to eat the frog first thing in the morning and get the hard tasks knocked. Don’t make sure we’re doing the revenue generating activities. Our cost to sales in line, you know, is our admin costs. Staffing costs in lie is the cost of our physical space under control. After that, you know, spend more time on generating revenue and revenue generating activities is probably going to have a bigger payback than spending hours and hours in minimizing those other overhead costs. Even though they’re simple, they’re easy to fix, they’re not going to be the difference between success and failure.

Do successful companies try to minimize advertising costs? So, and then there’s advertising costs, which stands out as an anomaly altogether and people will think, well I want to cut costs, I want to cut costs. We grew up with that employee mindset. The less we spend, the more we make. But it’s been proven time and time again. And you look at successful companies versus unsuccessful companies are the leading brands versus the average. Brad’s you, why does Nike Outsell Puma? Uh, it is because they spend a bigger percentage of their revenue year after year after year, and they do it in perpetuity. So the companies that are generally up performing, you know, and most businesses we see like a 2% average, uh, what people are spending. If you take the, the overall revenue ties up by 2%. You know, a lot of industries that’ll work out to what the average marketing budget is.

Um, but the, uh, leaders, uh, conversely, they’re usually spending 5% of their overall revenue on marketing. So they’re already spending more on marketing. They’re not minimizing expenses. I’m marketing. They’re actually trying to spend double more than double what their competition does. I’m marketing. So, um, you know, if you want to be successful, it, you know, there’s a certain, you know, again, you’re focusing all your time on revenue generating activities. You’re spending, you know, any of your expense optimization time, most of your expenses, optimization time on the, the more significant items and restricting, you know, sucking your time away on the other overhead items and maybe delegating that to someone else. Uh, but in terms of advertising, you’re trying to find a way to outspend your competition on advertising, um, because that’s, uh, one of the keys to success. So I think that’s what we have here today. Thanks so much for tuning in. Um, you know, we enjoy any comments that you put below so we can respond back and use your feedback for future videos and you’ll please hit that like and subscribe button. So we continue to deliver your tips on how to beat the odds of business. Thanks very much.