We recently had an inquiry on our position that most times reducing expenses is a much quicker improvement to the bottom line compared to growing sales. In reflecting upon this, let me share with you this example:
Currently | w/ Expense Reduction | w/ Additional Rev | |
Revenue | $100,000 | $100,000 | $140,000 |
Expense Reduction % | 0% | 20% | 0% |
Operating Margin % | 10% | 10% | 10% |
Net Income | $10,000 | $14,000 | $14,000 |
To get the same net profit, you can reduce your expenses by one dollar, or grow your revenue by $40.