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Don’t Cut Costs to Save Money in Your Business

Businesses never make money by saving money. Instead of trying to save money in your business, you must invest your money in such a way that it earns a return for your business.

Instead of cutting costs, watch this short video and inspire yourself to start thinking about where you should be investing your resources.

Action Steps:

  1. Calculate your Cost Per New Customer, or CPNC. Your CPNC is your customer’s projected value divided by 3. This calculation satisfies the “Rule of 3″ from the video.
  2. Find ways to invest in increasing your customers’ loyalty to your business. Is there a way to make your customers thrilled, happy or excited about doing business with you? Brainstorm some ideas, pick one and execute it.
  3. Share some of your suggestions on how to make wise business investments on this page.

Principles:

  1. The Rule of 3 says that every dollar spent should add at the very least $3 to your bottom line.
  2. By using the Cost Per New Customer (CPNC), you’ll increase the odds that your make money in your business when advertising.
  3. Investments in customer loyalty tend to yield the highest returns for small businesses.

Outwit the Forces of Chaos. Get Your Free Action Plan.



  • Deric

    Thank you Dave! Sound advice for Life too! Deric G

    • http://DaveCrenshaw.com/ Dave Crenshaw

      You’re welcome, Deric.

  • http://www.facebook.com/rick.squires.75 Rick Squires

    Dave,
    Great info as always. The topic of ‘cutting costs’ does need some clarification though. Most small businesses have areas where they are bleeding and finding and fixing those ‘leaks in the ship’ to a certain extent needs to be done. After taking over the running of STS Turbo I found that the previous president thought that the only thing left to cut was to turn off the phones (he actually said that in a board meeting), when once he was replaced, thousands of dollars a month were easily saved and those cuts helped make the company much healthier. Just like our government, once the cuts are made, you find that you get creative and learn to operate leaner. But there comes a point where you have to quit cutting and work on growing and investing. Your 3:1 formula is great and I think that much of the cuts of wasted money solve themselves if that formula is strictly adhered to. Accountability and quantification on that formula will make a huge difference (easier said than done though). As with most things, keeping a good balance in cuts and investments as well as all areas of the company must be maintained to ensure success. Keep up the good work. I sold STS Turbo last year and still really enjoy your videos. Oh, and congrats on the new addition!

    • http://DaveCrenshaw.com/ Dave Crenshaw

      Well put, Rick. You make some great points. Certainly there are areas where any company can operate leaner. My experience has been that it’s mostly feast or famine with business owners. Either they just spend like crazy, with no thought of ROI, or they slash costs everywhere, with little though as to if they’ll end up losing ROI.

      This video is just encouraging entrepreneurs to consider ALL expenses as potential investments. The question is: are you making a wise investment, or a bad one?

      And thanks for the congrats. We’re all loving Darci here!

  • Angy Ford

    This is great information. Made me think about a few things for sure.

    • http://DaveCrenshaw.com/ Dave Crenshaw

      Glad it helped, Angy.