Increasing daily performance is like compounding interest. While the results of any individual day may not seem significant, over the long term the benefit to your business can be very significant. What if you found a way to increase profits or save just $10 per day starting January 1st? That doesn’t sound like much does it? But by the end of the year, your profits would have increased by $3,650.
What if you could find another $10 per day the next year, and the year after? In five years, you would have increased your annual profit by $18,250 ($3,650 x 5). Now, what if you plan on selling your business!? While multiples vary by industry, economic conditions and a host of other factors, let’s just assume you sold your business for 5x annual profits or cash flow. You would have added $91,250 ($3,650 x 5) to the value of your business! That’s nearly $100,000.
Obviously, my $10 example isn’t necessarily meant as the ultimate goal but simply an illustration. But I think it makes a point. I’ve met many business owners who seem to have an attitude that the small dollars don’t really matter; that it’s only the big items that are important. While I would certainly agree that one should spend more time making a $10,000 decision than a $10 one, it’s also important to remember that small dollar decisions add up over the long term.
Sometimes those little financial matters are monthly recurring expenses that go overlooked. One can grow accustomed to them as a cost of doing business. But are they really necessary? And sometimes, they’re not even small items. They can be hundreds to thousands of dollars per month that have crept into the company’s spending pattern that go overlooked.
While it’s important to ask how expenses compared to the month prior, it’s just as important to ask if every expense is necessary. What are the consequences to the business if the expense were reduced or eliminated completely? If you look closely at your business, I’ll bet you can find a few expenses that were necessary at one point, but no longer make any sense at all!
Perhaps more importantly, small financial decisions can send a message to others in your organization about spending. If no one is being vigilant about expense control, it’s easy for everyone to be complacent.
Just like snow-flakes, those small dollar decisions add up and can be either a thing of beauty (when carefully controlled) or a disaster waiting to happen! Never overlook an opportunity to question and understand expenses.
So, is $10 “Real Money”? I’d argue, it certainly can be!
If you need help with your business, financial plans, or goal setting, please give me a call at (314) 863-6637 or send an email to And, remember . . . Your Cash Is Flowing. Know Where.
Copyright @ 2006 Homza Consulting, Inc.