Creating profit by finding money within your own business feels counterintuitive or even foolish to some people. The author recalls meeting with a group of CEOs and explaining his methods. One rejected his ideas, complaining that you cannot simply “find” profit without making more sales. However, another CEO shared his success story in which he applied this exact mentality to his problem. This business owner ran an oil delivery system which brought oil to small shops as well as car service companies, requiring two trucks to do so. By buying a new truck which could accommodate both kinds of oil, the owner cut his costs in half and finally built a steady profit through his savings. Over time, his company grew to become worth $50,000,000.

Michalowicz compares focusing on sales alone like waiting for rain when you could just dig a well. It is necessary to make sales and pursue profits in this way, but when profit margins become big, competitors find it easy to undercut you, and then you must also cut your prices to stay competitive. This can create situations in which you’re making tons of sales but with less profitability. The author believes that it is essential to improve efficiencies before selling more, since efficiency is what makes sales profitable. This means finding a way to make your efforts go farther. For instance, UPS discovered several small but meaningful changes to make their business more efficient, such as keeping drivers’ keys more accessible, asking drivers to make right turns, and washing their trucks every other day. Through these small improvements the company saved millions.

Cutting back expenses is a key part of this process. He points to the example of Wesley, a website and marketing expert who never made much profit until he cut back expenses by letting go of some employees and discontinued some of his less profitable services. However, firing employees is not the only way to increase profitability: letting go of clients can also help. A study by Strategex in Chicago found that the top quartile of a business’s clients made them the largest profits, while the middle quartiles basically broke even and the bottom quartile of clients actually lost the company money. Michalowicz advises the reader to use this insight to end their relationship with difficult and time-consuming clients. While this feels counterintuitive, getting rid of these clients can actually boost profit as you will not waste time and money trying to serve them.

Another way to become more profitable is to identify your best clients and seek out similar ones. This will make you superefficient, help you have better client relationships, and make marketing more automatic through word of mouth. 

In this chapter, the author continues to coach the reader to “Chip away at expenses,” explaining, “You don’t have to slash and burn the moment you put down this book. You can take it slow. Just get started” (140,141). This gradual approach is consistent with Michalowicz’s other advice and aims to raise the likelihood of people trying his method.

While much of his advice in this chapter is similar to his previous suggestions, Michalowicz offers one fresh insight: Cut out your worst clients. By summarizing a professional study, the author adds credibility to his claim that many businesses have clients who actually hinder their profits: “Strategex found that the top quartile generated 89 percent of the total revenue, while the lowest quartile only accounted for a meager 1 percent of total revenue” (142). While somewhat counterintuitive, Michalowicz uses this claim to encourage the reader to take action to end their relationships with difficult clients. As usual, Michalowicz does not try to specify which industries may experience the most benefits from this approach but simply offers it as a general rule of thumb to all business owners.

Chapter Lessons

• Gradually lower operating expenses
• Find inventive ways to become more efficient at what you do
• End your relationships with your most difficult and time-consuming clients

Reflection Questions

• How could you further specialize the services you offer?
• Identify your five best clients. How might you “clone” them, as the author suggests? Write down three strategies for finding similar clients.
• Do you have clients who may not be profitable at all? Will you cut them? Why or why not?