Double Your Profit Day #3 Slash Costs and Maximize Profit with a Lean Business Culture - Owned and Operated - A Plumbing, Electrical, and HVAC Business Growth Podcast

Summary6 min read

Double Your Profit Day #3: Slash Costs and Maximize Profit with a Lean Business Culture

Podcast: Owned and Operated - A Plumbing, Electrical, and HVAC Business Growth Podcast
Hosts: John Wilson and Jack Carr
Episode Release Date: August 3, 2025

Introduction

In the third installment of the "Double Your Profit" series, host John Wilson delves into the crucial strategies for slashing costs swiftly and cultivating a lean business culture. This episode is part of a comprehensive 30-day program designed to equip home service business owners with actionable steps to significantly increase their profitability. Targeting industries such as plumbing, HVAC, and electrical services, John and his co-host Jack Carr provide insights that are both practical and immediately applicable.

Understanding the Challenge of Cost Management

John opens the discussion by addressing a common struggle among entrepreneurs: the apprehension around cutting costs. Many business owners develop an emotional attachment to their expenditures, often refraining from reducing costs due to past investments or the fear of disrupting established processes.

"Whenever I'm talking to other entrepreneurs about this concept of cutting costs fast and zero based budgeting and really how to maximize the profit through their business, you find that people have this relationship with costs."
— John Wilson [00:45]

He highlights the dilemma of recognizing unnecessary expenses but hesitating to take decisive action against them, often due to inconvenience or annoyance. This hesitation can lead to continued financial strain, as exemplified by John's own experience with banking fees.

Adopting a "Slash Now, Analyze Later" Mentality

To overcome the inertia associated with cost-cutting, John introduces the "slash now, analyze later" approach. This strategy emphasizes immediate action in reducing expenses based on intuitive judgment, deferring detailed analysis to a later stage.

"We've started doing is a slash now, analyze later cost cutting mentality. It is the easiest thing in the world to go add more cost to your P and L. But cutting it is hard."
— John Wilson [01:20]

John explains that while increasing costs can feel straightforward, reducing them requires challenging decisions—whether to trim personnel, streamline processes, eliminate software subscriptions, or renegotiate vendor contracts. The key is to trust one's gut instincts about what isn't delivering the expected return on investment (ROI).

Empowering Managers to Drive Cost Efficiency

A pivotal theme in the episode is the empowerment of managers to take ownership of cost-cutting initiatives. By delegating the responsibility and tying financial incentives to their performance, businesses can foster a proactive approach to reducing expenses.

"One of the best ways to do this is empowering your managers to cut costs directly and tying their own financial incentives to that."
— John Wilson [02:10]

John shares a success story of a manager who aggressively pursued cost reductions and introduced automation within her department. As a result, she not only enhanced efficiency but also earned a promotion and additional earning opportunities. This example underscores the benefits of aligning compensation with desired financial outcomes.

Setting Bold Cost-Cutting Targets

To instill a culture of frugality, John advocates for setting ambitious cost-cutting goals. Bold targets can galvanize the team, prompting innovative solutions and collaborative efforts to achieve significant savings.

"Another is bonuses, promotions, whatever it is. But people need to know that you take cost cutting seriously. And it is something that will advance their career."
— John Wilson [03:00]

He provides a practical example from his own business: a goal to reduce overhead by $50,000 within 60 days. Given their monthly overhead of $750,000, this target is attainable and involves eliminating unnecessary software, negotiating better rates, and optimizing utility usage.

Ensuring Cost Cuts Do Not Harm Core Operations

While rapid cost reduction is essential, John cautions that it must not compromise the core functionality of the business. After implementing cuts, it's vital to evaluate their impact to ensure that the business remains efficient and effective.

"If you have an inkling that that cost is unnecessary, kill it. But you do want to be able to analyze later."
— John Wilson [04:15]

This balanced approach allows businesses to adjust their strategies post-cutting, reinstating certain expenses if necessary to maintain operational integrity.

Fostering Open Communication and Transparency

A transparent approach to cost management helps in mitigating resistance and fostering a collective sense of responsibility. John emphasizes the importance of keeping the team informed about financial statuses and potential cost-cutting measures.

"Communicating openly about this because... people don't feel like the rug was pulled out."
— John Wilson [05:00]

By sharing open book P&Ls and discussing missed budgets candidly, leaders can involve the entire team in the solution, making cost-cutting a shared objective rather than a top-down directive.

Celebrating Cost-Saving Achievements

To reinforce a lean culture, John suggests recognizing and celebrating cost-saving efforts during leadership meetings. This not only motivates the team but also highlights practical examples of successful cost management.

"Our biggest win for adding this into our culture has been inside our weekly leadership meetings. We actually give opportunity to say, hey, how did you save money this week?"
— John Wilson [06:30]

Acknowledging these achievements fosters a positive environment where frugality is seen as a constructive and rewarding aspect of the business.

Conclusion and Key Takeaways

John Wilson concludes the episode by reiterating the essential steps for slashing costs and building a lean business culture:

Act Quickly on Cost Reductions: Trust your instincts to eliminate unnecessary expenses without delay.
Empower Management: Delegate cost-cutting responsibilities to managers and align their incentives with financial goals.
Set Ambitious Targets: Establish bold cost-saving goals to drive team motivation and innovation.
Balance Cuts with Core Operations: Ensure that reducing expenses does not undermine the fundamental operations of the business.
Maintain Open Communication: Foster transparency about financial health and cost-management strategies.
Celebrate Successes: Recognize and reward cost-saving initiatives to reinforce a culture of frugality.

By implementing these strategies, business owners can effectively reduce overheads, enhance operational efficiency, and significantly boost their profitability.

Notable Quotes

John Wilson [00:45]:
"Whenever I'm talking to other entrepreneurs about this concept of cutting costs fast and zero based budgeting and really how to maximize the profit through their business, you find that people have this relationship with costs."
John Wilson [01:20]:
"We've started doing is a slash now, analyze later cost cutting mentality. It is the easiest thing in the world to go add more cost to your P and L. But cutting it is hard."
John Wilson [02:10]:
"One of the best ways to do this is empowering your managers to cut costs directly and tying their own financial incentives to that."
John Wilson [03:00]:
"But people need to know that you take cost cutting seriously. And it is something that will advance their career."
John Wilson [04:15]:
"If you have an inkling that that cost is unnecessary, kill it. But you do want to be able to analyze later."
John Wilson [05:00]:
"Communicating openly about this because... people don't feel like the rug was pulled out."
John Wilson [06:30]:
"Our biggest win for adding this into our culture has been inside our weekly leadership meetings. We actually give opportunity to say, hey, how did you save money this week?"

Call to Action

John encourages listeners to identify a cost in their business they have been hesitant to eliminate and take immediate action to reduce it. He also invites listeners to share their experiences and cost-cutting successes with peers to foster a community of lean and efficient businesses.

For more insights and actionable advice on growing your home service business, visit www.ownedandoperated.com.

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Transcript1 lines

[00:00]
A
I'm John Wilson and I'm the CEO of the Wilson Companies in Ohio. We are a plumbing, H Vac and electrical contractor that will do about 30 million in 2025. Thanks for joining us for the Double your Profit series where we spend 30 days diving deep into the action steps that you can take to double the profit for your business. Thanks for tagging along. Welcome back to Double your Profit. Today's topic is cut costs fast and build a lean culture. Whenever I'm talking to other entrepreneurs about this concept of cutting costs fast and zero based budgeting and really how to ma maximize the profit through their business, you find that people have this relationship with costs. Oh, I've always used them. I don't want to rock that boat. I don't want to. Whatever. You have to just be able to go with your gut on half of this. Whenever we're having a tough month, in my head I'm rolling through the costs that we could transition out of the P and L or hey, I haven't negotiated that yet. And sometimes I find myself just like those people that I talk to, not taking action against those items. Maybe it's inconvenient, maybe it's annoying. Like right now I need to do that with my bank. I'm annoyed by it and I'm getting charged $3,000 a month of fees. So I should be attacking that. What we've started doing is a slash now, analyze later cost cutting mentality. It is the easiest thing in the world to go add more cost to your P and L. But cutting it is hard. It's either people or it's process or it's software or it's vendors. It's something that you've invested into and you probably don't want to think that you were wrong in the first place. But you do have to cut costs quickly and follow your gut when you think, hey, this might not be working out. I don't think my ROI on this cost is what I expected. One of the best ways to do this is empowering your managers to cut costs directly and tying their own financial incentives to that. We have a manager who has been more aggressive than others with cost cutting and adding automation to their team. And as that's happened, she has been promoted and she has been given additional earning opportunities because she has made her department more efficient. We have essentially delegated cost cutting for her department to her and she's been rewarded because of it. So as you're building a culture that stays lean, a big part of it is, how are you Aligning compensation with the results that you want. Hey, you cut cost, so hey, you get a raise. That's a pretty easy way to do it. Another is bonuses, promotions, whatever it is. But people need to know that you take cost cutting seriously. And it is something that will advance their career. Something that we've used time to time is just bold cost cutting targets. Hey, I need to cut my overhead by $50,000 in 60 days. You're gonna get some Hemming and Han and you're gonna get some disagreements and you're gonna get some pushback. But at the for a business like ours, $50,000 is actually kind of easy to find. Within the P and L, our overhead is $750,000 a month. So for us, 50 grand is okay. Yeah, we can drop two softwares. We'll negotiate that one. We'll do better on gas. Let's go look at our utilities. It actually doesn't take that much work, which is kind of crazy for $50,000. Now, if you're doing a slash now, analyze later, you have to make sure that your results didn't actually damage the core business. That doesn't mean don't do it. You should probably just go do it. If you have an inkling that that cost is unnecessary, kill it. But you do want to be able to analyze later. Hey, did that do what I wanted? Did I save the amount of money that I wanted to save? Did I get what I wanted out of that action? Or do I have to add some version of this back in? I mean, maybe I don't need a full time person. Maybe a software would do. So it doesn't need to be the full investment, but a part of it gets added back in. So figure out what that looks like. How do you measure success in cost cutting? Something that helped us a lot over the years as we were driving this into our culture is communicating openly about this because one, it creates a culture of cost cutting and staying lean. But it also people don't feel like the rug was pulled out. So if that's open book P Ls and saying, hey, we missed our budget, which we did. We missed our budget in May and we had an open conversation with the leadership team. Hey, we missed our budget. And I don't know what that means for our OPEX budget right now, but we're looking at it. If we are going to miss the top line results that we set for this year, that means we're going to miss the bottom line unless we take some action. And profit is the goal. So we can't miss our bottom line. So keeping the team in the loop on hey, here's potential decisions we might be making, here's potential decisions we did make, and most importantly, here's the why is one of the best things you can do as you're adding this to your culture. And it takes it from this dangerous, scary thing where we're cutting costs and it makes it a daily part of their life where they understand why the business is taking this action and hopefully they even help. Our biggest win for adding this into our culture has been inside our weekly leadership meetings. We actually give opportunity to say, hey, how did you save money this week? And then we get a little bit of a chance to celebrate it. So summarizing this video, you want to cut costs fast and if you think that cost is unnecessary or could be lower, rip it. Then you want to figure out a way to analyze the results later. Add a portion of it back in if you need, but make your leadership team and the rest of your team accountable for frugality inside your business and reward them for doing it. If we're going to talk about cutting these costs, make sure that they get rewarded for for cutting those costs. Drop in the comments below a cost that you don't want to cut and share it with a friend who also just can't cut costs.