How to Improve the Bottom Line
The Bottom Line: Improving Net Income
The bottom line refers to the last line on financial statements—net income after all expenses are deducted from the top line (gross sales or revenues). If you want a five-word summary statement about improving net income, here it is:
Reduce Expenses and Increase Income.
What is missing in this statement is one key question—How? That is the focus of this overview.
In my discussions with business owners and managers during the past 25 years, I have repeatedly heard frustrations about “popular” but oversimplified strategies for improving the bottom line—for example, downsizing. These “one-note programs” typically focus on one key concept such as downsizing (shrinking) a company to a leaner version by eliminating products, services, departments, and jobs. Does this actually work? Tom Peters and several others provide a candid answer: “No company ever downsized its way to greatness.”
Of equal concern to decision-makers within organizations of all sizes is how to achieve better bottom-line financial results within a few weeks or months rather than years. The lack of practical strategies and actionable ideas for producing additional revenues and reducing expenses in a timely fashion is (and should be) a major concern and frustration.
With these real-life operational requirements in mind, I offer this candid review—starting with nine suggested strategies in the following table:
Improving the Bottom Line: 9 Alternative Strategies, With Practical Examples
- Contingency Business and Financial Planning
- Better Use of Business Proposals
- Enhance Negotiating in Multiple Areas
- Exercising the Power of No
- Be Prepared to Fire Your Bank and Banker If Necessary
- Improve, Enhance or Add Inbound Marketing Sales Processes
- Use Less New Debt and Reduce Existing Debt
- Avoid Recurring Business Problems
- Improve Business Writing in All Areas
Reduce Expenses and Increase Income—But How?
1. Contingency Planning: Always Have a Plan B
This strategy involves preparing your response in advance of something going wrong. For example, what will you do if your banker says no? What will you do if your working capital line of credit or other business loan is suddenly revoked with little or no advance notice?
While many businesses have a definitive business plan, only a small percentage devote much effort to "What if something goes wrong?" planning. Because so few actually do this, business owners and managers that have a series of contingency plans can gain a step or two on the competition by remembering the value of Plan B thinking—Always Have a Plan B.
The best way to predict the future is to plan it.— Peter Drucker
2. Business Proposals
A successful business proposal is one of the most cost-effective ways for any organization to produce short-term income. However, far too many business owners and managers overlook this strategy altogether.
I especially recommend the regular use of unsolicited business proposals—a proposal that has not been specifically requested by the prospective customer. An unsolicited proposal is often more successful than traditional requested proposals. The higher success ratio is due in part to less competition. In a surprising number of situations, winning proposals can be as short as one page.
Successful proposals usually lead to immediate business.— Stephen Bush
3. Focus on Business Negotiating
Effective negotiating represents one of the best short-term opportunities to help your bottom line by reducing expenses immediately. If you aren't currently devoting time and energy in this area, you are probably paying "full sticker price" for many products and services. To help avoid paying full sticker price for anything, refer to the following table for eight primary negotiating candidates:
You will never make more money than when you are negotiating.— Roger Dawson
Opportunities to Negotiate: 8 Examples
- Accounting, Legal and Financial Fees
- Credit Card Processing Fees
- Working Capital Financing
- Marketing and Sales Expenses
- Commercial Mortgage Loans
- Utility Costs
- Business Loan Refinancing
- Manufacturing Costs and Supplier Agreements
4. Remember the Power of No
Even with our expanding vocabularies, it is remarkable how often we get derailed by little words like "yes" and "no." But both "yes" and "no" are indispensible in negotiating.
The oldest, shortest words — ‘yes’ and ‘no’ — are those which require the most thought.— Pythagoras
What can you do? I recommend taking some extra time to learn about the "Positive Value of No." One invaluable source of insights is a series of books by William Ury—the series is often referred to as the "No Trilogy" because improving the use of No is a common theme in all three books:
5. Consider Firing Your Banker
Even though many banks have recovered from the recent financial crisis, problems are still lurking in the banking world. For example, there are still about 150 Problem Banks as defined by the Federal Deposit Insurance Corporation (FDIC). The list of troubled banks is confidential and the FDIC has always gone to great lengths to preserve the anonymous nature of this list. The good news is that the list had over 800 banks on it less than 10 years ago. However, the list contained about 50 banks before the banking crisis.
Banking fees are a stellar example of customers often paying "full sticker price" (and even higher in many cases) for multiple bank products. This is a key reason why companies of all sizes might choose to fire their bank—even if the bank is healthy in financial terms.
6. Appreciate the Potential of Inbound Marketing
Inbound marketing reflects the changing emphasis from sales processes where the marketer is in control to ones where customers are calling the shots. One immediate bottom-line impact of inbound marketing is the reduction (or elimination) of expenses for traditional cold calling and advertising.
Because of new strategies involved with inbound marketing, there is the potential for errors and mistakes. For example, there are typically 10 (or more) common inbound marketing mistakes to anticipate and avoid—here are three illustrations:
- Settling for low quality in content writing (usually in order to save money)
- Too much promotion instead of educational content
- Oversimplifying content for mass audiences instead of targeting niche audiences
Marketing strategies have shifted from traditional marketer-centric strategies like advertising and cold calling to educational and customer-centric strategies like white papers and case studies. Spending less time and money on activities like cold calling and advertising will enable most organizations to improve their bottom line almost immediately.— Stephen Bush
7. Better Debt Management Choices
I strongly recommend using less debt instead of more debt. I envision this strategy as different from negotiating. Better debt management primarily involves a decision or choice to not use debt in the first place—or at least to reduce the dependence on business debt.
It is our choices ... that show what we truly are, far more than our abilities.— J.K. Rowling
8. Tackle Recurring Problems
Does your organization have problems that continue to haunt you? These are recurring problems, and they deserve your full attention before a bad situation becomes even worse.
There are some advanced strategies that might help—including lean process improvement and Six Sigma. Whatever you do, the goal is to avoid and prevent these problems. The following table includes 10 examples of recurring problems that often exist in small businesses as well as large organizations:
All problems become smaller if you don't dodge them but confront them. Touch a thistle timidly, and it pricks you; grasp it boldly, and its spines crumble.— Admiral William F. Halsey
Recurring Problems – 10 Prime Candidates
- Evaluating Lenders
- Ineffective Business Communications
- Level of Operating Expenses
- Insufficient New Business Development
- Lack of Negotiating Skills
- Communication with Other Businesses
- Commercial Lending Negotiations
- Too Much Debt
- Finding New Sources of Capital or Financing
- Lack of a Plan B
9. Learn Business Writing
Like negotiating, business writing is an example of a strategy that can help organizations in multiple areas—business development, communication, and inbound marketing to name just three. However, business writing continues to be diminished and overlooked by many organizations in the interest of saving money. Business writing also involves potential pitfalls and mistakes that should be anticipated along the path to improving your bottom line.
More Success Tips: Improving the Bottom Line
Revise Business Training Methods
Use Cost-Effectivess Criteria with Writing, Training, Negotiating and More
Increase Collaborative Efforts
Focus on Preventing Problems Instead of Solving Them
Avoid Low-Bidder Mentality When Adding Outside Help
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2017 Stephen Bush