Why Cutting Costs is Bad for Small Business

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Even the savviest small business owners have trouble when it comes to effectively cutting costs. Poor penny-pinching decisions can turn cutting costs into cutting off the hand that feeds you.

So, forget everything you thought you knew about expenses and spend a mere 90 seconds learning about investments. Then get ready to grab those profits by the fistful…

Click to tweet this: Focus on investments & keep “cutting costs” from cutting off the hand that feeds your small business! @DaveCrenshaw

It’s normal for small businesses to find themselves in the middle of a cash crunch. The knee-jerk reaction of most business owners is to cut costs.

However, businesses don’t make money by saving money. They make money by making wise investments.

So I’d like to offer a different approach. Ask yourself this question for each expense—what return are we getting for this investment?

Anything that’s giving you a return of one to one or less, you should probably look at cutting it. But anything that’s giving you a return on investment of three times or more, you should probably spend more money on that.

I call this the rule of three. And if you can follow this by investing money in things that are making lots of money, it’s basically like printing cash for your business.

So I’d like you to take a moment and think about one expense in your business. Then answer this question—what return are you getting for that investment, and share your answer in the comments section below.

Also, if you’ve got a question that you’d like me to answer in a future video, ask that below as well.

Thanks for watching. Now go make a wise investment.

Join the conversation:

Choose one expense. What return are you getting for that investment?

I respond to every question and comment. So, please, join the conversation!