How To Grow Business Profitability Without Firing People | Ep 10

🔍 5 Ways to Boost Business Profit Without Cutting Staff or Ad Spend

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📢 In uncertain markets, most businesses slash payroll or marketing to preserve profit—but that can backfire. In this episode, learn how to boost your profitability strategically without sacrificing your team, brand, or momentum. Whether you’re running a $1M or $10M company, these steps help you think like a CFO and optimize for long-term growth.

✔️ How to increase margin without volume
✔️ What to audit before making drastic cuts
✔️ Why pricing changes can transform your bottom line
✔️ Tactical steps to tighten scope, improve collections, and eliminate waste

⏱️ Chapters

00:30 – Why Cost-Cutting Alone Doesn’t Lead to Healthy Profit
01:42 – Step 1: Evaluate Gross Margin by Product or Service
03:20 – Step 2: Audit Operational Efficiencies (Without Firing People)
04:36 – Step 3: Adjust Pricing Strategy and Value Perception
06:00 – Step 4: Improve Collections & Cash Conversion Cycles
07:27 – Step 5: Control Scope Creep in Services
08:42 – Common Pitfalls: Cutting Growth Levers First
09:34 – Pitfall: No Communication of Financial Goals Across Teams
10:00 – Pitfall: Focusing Only on Revenue, Ignoring Margin Discipline
10:30 – Final Advice: Audit Waste, Revisit Prices, Tighten Scope

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✅ Key Takeaways:

✔️ Gross margin visibility by product/service is the first step toward smart optimization.
✔️ Don’t cut team or marketing—audit tools, processes, and bloat first.
✔️ A 1% price increase can drive up to 11% in profit.
✔️ Faster collections = faster reinvestment in growth.
✔️ Scope creep kills margins—tighten deliverables and train your team.
✔️ Profit is not just about cost—it’s about strategy, systems, and clarity.

⸻

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Transcript

[00:00:00] Over the last 15 years, I've had the opportunity to look at hundreds and hundreds of business financials to take a look and see what inefficiencies exist. Now, over the last three years, I've had the opportunity to run my own business to try to identify how to continue to grow profitability while not sacrificing our team or our service or our brand.

[00:00:19] And so today on full send CFO, we're gonna walk through how you can start to evaluate boosting profits. Without slashing headcount or cutting ad spend. There [00:00:30] are a handful of ways to do this, and we wanna walk through five different areas that we can look at in order to create a more profitable company Now.

[00:00:38] In today's market in April of 2025, there's a lot of uncertainty and so many, many companies are looking at macroeconomic cycles and saying, we need to cut 15% of our workforce to try to increase or maintain profitability through the rest of the year. Now, that is a very shortsighted way to look at profitability.

[00:00:56] However, big companies operate very, very differently than a one [00:01:00] to $10 million business. So this is geared for businesses that are in that. Threshold that are trying to evaluate how do we continue to maintain our profitability? What is the CFO mindset to build leaner and stronger businesses? So many business owners look at payroll and marketing expenses as their go-to for cuts, but, but really I think that's a short term fix that usually backfires because you may be ending up letting go team members that are critical to your operations.

[00:01:27] So first, why is profitability [00:01:30] not just about cutting costs? Most people look at profit as slashing and burning expenses, but really it's not the same thing. Profitability comes from a variety of factors in your business and just cutting your team and marketing can can create. Problems with culture, your brand, and your long-term momentum.

[00:01:47] So instead, how do we look at optimizing our operations, optimizing our pricing, and then our strategy that supports that to grow our profitability? Most companies that optimize their pricing can increase profitability by two to [00:02:00] 7% without even touching the volume, without even having to create a new go to market motion.

[00:02:05] So step by step, how do we start to increase our profit without cutting core investments? We really want to evaluate our gross margins by product or by service. So if your financial statements are not architected and displayed in a way that help you understand your profitability by core function, by core service, by core product, It is gonna make it really difficult to understand where can we start looking at opportunities to improve that. [00:02:30] So are there some products that you have that are carrying more of the profitability weight while others really are just maybe losing money? Maybe you've got cash tied up in inventory of really slow moving products that have.

[00:02:43] A decent profitability, but because they're not moving, you're not able to convert it to cash. Now, both of those have very different impact on the financial statements, but effectively what we're trying to do here is look at those low margin products or services and then start to drop or reprice those.

[00:02:58] By nature of having a [00:03:00] quality accounting function that's enabling you to have the data to be able to take a look at that, you can then start to take action on making changes in that area. So gross margin by product, gross margin by service. That's gonna be the very first thing that you wanna look at to determine what your high profit offer is and what your low profit offering is.

[00:03:20] Step number two, we want to, walk through an audit of our operational efficiencies. So we wanna take a look at our subscription costs. We wanna take a look at the tools that we use, vendor [00:03:30] bloat, or maybe some degree of manual processes that are eating up time. So on one, one side, we're looking at.

[00:03:36] What are, what are the dollars going out of the door of things that we don't really need or use? On the other side, we're looking at our time. How's our time being spent and is it in an efficient manner? And so what we're trying to do here is we're trying to streamline the delivery process without reducing the value that we deliver to our customers.

[00:03:52] So by streamlining delivery, we're focusing on the process. When you look at your profitability, I think you can distill it down into [00:04:00] people. Process or pricing, one of those three things are impacting your profitability. And so in this core operational area, we're looking at process. if you could take a look at your top five non-payroll expenses with year over year growth.

[00:04:15] What changed? What's driving the growth of those expenses year over year? And they're non-payroll. So again, we're not looking at slashing overhead in terms of number of employees we're looking at. Operational expenses that changed drastically. Well, [00:04:30] was that investment worth it? Did you need those expenses in order to continue to maintain the level of service and or product that you were currently offering?

[00:04:36] I. Now step number three, we wanna talk about the pricing strategy and your value positioning. If you were to raise prices five to 10% on specific tiers or products or offerings or bundles, how would that, how would that impact your overall financials? Now again, there's a lot of sensitivity in an inflationary environment around raising prices.

[00:04:58] So you could either [00:05:00] raise prices and naturally grow profitability that way. Or you can try to grow volume, and there are different ways to do that. If you focus on the volume play, you need a really creative marketing strategy to be able to continue to move volume of the products and services that drive the margin.

[00:05:17] Now, what you can do is you can start to bundle or reposition your products and services to add a perceived value. Is there something that you can tack onto an. Existing service and increase the price in [00:05:30] order to deliver increased value or increase perceived value. There's an HBR study that said, you know, a 1% increase in price can drive up to 11% increase in operating profit.

[00:05:42] So you can take a look at the Harvard Business Review Magazine and take a look at how and why that 1% increase in price can drive up to an 11% increase in your operating profit. Step number four, we wanna look at improving our collection and accounts receivable processes. So are you, are you losing cash from [00:06:00] slow payments or unpaid invoices?

[00:06:02] We really need to take a look at this because it, it. Handcuffs, your ability to take that cash and to reinvest it into higher margin areas in your business. So we need to have tighter AR terms. We need to automate our follow ups and or offer some early payment incentives by nature of improving your cash conversion cycle.

[00:06:20] So the time it takes you to deploy cash for inventory, raw material for development. Two, the time in which you collect cash from a [00:06:30] customer we want, we wanna tighten that window from 60 days to 30 days, from 30 days to 15 days. The more that you're able to do that, it allows you to take the cash and existing profitability of those sales and turn it back into more profitability.

[00:06:43] So we wanna take a look at the collection and AR processes. One cue here is by looking at an aged accounts receivable report with greater than 30 day outstanding balance. So if you're on QuickBooks, you can go to your accounts receivable aging report and [00:07:00] it'll show you all of the outstanding accounts receivable that you have in your business to focus on for collectability.

[00:07:06] step number five. This is probably more for a services based business, but you need to take a look at your scope. What scope of services do you have with your customers and are you over servicing them? Are you overdelivering? Are you allowing scope creep to come into the equation? Are your teams' hours bloated because you don't have clear boundaries?

[00:07:27] One thing that you can do here is audit your client [00:07:30] time and cost in order to then tighten the service scope. If you have this really broad scope of servicing clients, it makes it really difficult for your team to understand where exactly should I be spending my time to drive success for this client?

[00:07:44] And also you, you created a scope for a reason, and your client wanted that scope for a reason. So if it's very broad, it makes it difficult to understand how can I service this client really, really well. Uncontrolled scope creep can cut into profit by 10 20%. [00:08:00] For service-based businesses, it's really difficult to see that uncontrolled scope creep.

[00:08:05] Cut into profit when it's not being monitored. Now, if you're in an hourly billing environment, you have to worry a little bit less about this. However, if your costs are super variable to your own clients, it may drive some dissatisfaction. So you need to be really aware of how that's impacting your clients because so long as that they're.

[00:08:23] Paying highly varied rates for the work that you're doing because of an uncontrolled scope that may drive dissatisfaction [00:08:30] and ultimately churn, which then will damage your profitability. Some common mistakes to avoid here is that we often see companies not only going for payroll first, but also going to cut marketing really quickly.

[00:08:42] So by nature of cutting marketing, you're starting to starve the sales funnel. If marketing and sales are a big part of driving that top line activity, that top of funnel activity, you, you need to continue to drive that momentum so that you have opportunities in the sales funnel to continue to move forward.

[00:08:59] when you [00:09:00] start to reduce your team and looking at headcount, you risk burning out the top performers that you retain. So if you're a large company, a lot of big companies say, Hey, we're gonna slash the bottom 10% without displacing those team members. What that means is that there's additional roles and responsibilities and pressures that roll up to the team members that are still there.

[00:09:17] So if you're gonna put that additional burden on the existing team members, you may risk them burning out and leaving organically, which is not an intended or ideal outcome. another thing that we see [00:09:30] as a common pitfall is that financial targets aren't communicated across departments.

[00:09:34] Maybe there's high level goals and. Desired outcomes from the leadership team, but they're not actually drilling down into the team performance goals to help support those initiatives. So if there's no communication amongst your team, it's gonna be really difficult for everybody to move the same direction to try to increase your profitability.

[00:09:52] The last thing I want to hit on here from a common mistake standpoint is that. So many businesses focus only on revenue, and they [00:10:00] don't have the margin discipline, so they're not looking at the pricing, they're not looking at their collectability, they're not looking at things that impact margin and really are just looking at top line revenue.

[00:10:10] And it could be really challenging to continue to drive cash flow to a business when you're only looking at the cash flow coming in and not the expenses going out, nor the processes that are required to support that.

[00:10:22] Goal of profitability. So if we can, if we can walk away from this with anything, let's start to audit our expenses [00:10:30] beyond payroll and marketing. Let's start looking for waste. Let's start looking for areas that we've overspent in, maybe unintentionally that aren't driving the value. Let's also look at prices.

[00:10:42] We, we want to raise prices strategically. We don't want to rashly raise prices because of some external factor. We wanna be very strategic on how we're doing this to continue driving The value that you are capable of driving your margin should be reflective of that. The last thing. We wanna tighten our scope, we wanna [00:11:00] improve collections, and we want to cut the bloat.

[00:11:02] We don't want to cut the growth levers in the business. We don't want to take a look at something that's working really well, like a great team member and just slash it. That's not a smooth and intentional way to drive profitability. I. If you can take a look at your last three months of service or product profitability, you should be able to start to see are you over delivering or underpricing your goods and services?

[00:11:26] That should help you to get a really quick pulse check on where to focus your [00:11:30] time and efforts to continue to drive profitability to your business. So in a time where we've got macroeconomic uncertainty. Taking a look at some of these things will really help you to drive a more profitable and sustainable business as we move throughout 2025.