Take a Hard Look at Your Expenses to Increase Cash Flow

[Max Emory]

For some, the easiest way to do this is to go through the past 3 months of bank and credit card statements and mark each expense with a letter or highlight them. I got this method from the Profit First system. (They may do it slightly differently but it's the same concept.)

Distinguish between..
---Profitable: the expense generates more revenue for your business than what it cost
---Necessary: the expense is necessary for your business to run but doesn't directly generate more revenue than what it cost
---Unnecessary: the expense does not generate more revenue for your business than what it cost and isn't necessary to run your business

Whatever turns up unnecessary, get rid of that expense as quickly as possible!

Finally, take a look at the necessary and profitable expenses and brainstorm how to lower those expenses while still getting the same or a better result from them.

Has anyone done this? I can say I have done this and it is POWERFUL.

Hope this helps!

__________________________

Real Estate Investor | USMC Veteran

[Greg Scott]

This is a good prioritization scheme.  Hopefully people use it properly.

Where I tend to see investors fail is when they cut costs in the "Necessary" and "Profitable" category.  Here are just three examples:

  - The roof is old and leaky but they continue to patch instead of replace.  Soon the property is moldy and the ceilings look bad.

  - Don't replace an AC unit that is on its last legs. They typically fail in August at the worst time and you will pay a fortune for an emergency replacement.

  - My property looks "good enough" and makes it hard for them to attract the best tenants.

Cutting into the "Necessary" and "Profitable" areas is what creates slum lords.