How to increase your profit margin or the story of my new hiking trousers

There are lessons to be learned in every purchase, including lessons on time management!

A little bit of background

You may or may not know that I did a no-buy year challenge that ended up pretty much lasting over 2 years. The pandemic helped greatly extend the duration of such challenge, as the feeling that I may need new clothes vanished with every moment spent working from my couch.

You also may or may not know that I had also decided to sew my own clothes instead of buying them, although that didn’t go so well. Again, thanks to the pandemic, no one noticed I wore the same outfit again and again, since I was alone, when I had to go to the office!

And finally, you may or may not know that recently, I experienced physical changes which is what lead to the purchase of a new pair of smaller hiking trousers because I just couldn’t continue wearing the ones I had purchased over 10 years ago.

So here we are! You are all catch up on the circumstances which have taken me, slightly anxious, to a well know sport retailer where I hoped to find a new pair of hiking trousers. I use the word trousers because of my British friends always make fun of me for using the word pants!

Finding the “same” hiking trousers

To my utmost surprise, going shopping didn’t feel completely horrible & I didn’t go into over stress mode! Even more surprisingly, I found the same pair of hiking trousers I had bought over a decade ago!

Well, “same” should be in quote because I noticed a few differences right away, but it didn’t stop me from buying them.

However, when I came home, I decided to play a spot the differences game between the 2 pairs and found quite a few, to say the least.

difference between models

The back pocket size stroke me! So I checked the front pocket size as well. I could have easily made this piece about the ridiculous size of women’s pocket but this is a well documented issue by now.

So I kept going with the ‘spot the differences game’… Only one button here instead of 2, no more coin pocket, no more zippers at the bottom, no more thrill here, different construction there which means less fabric and thread… narrower cuffs which is not ideal with hiking shoes I must say!

One could thereafter consider that these pair of trousers are not the same (I would strongly argue they are meant to be) or it’s just that the design has evolved.

Sure! Designs evolve to make things better… or do they?

On designs that are meant to cut costs

In an ideal world, indeed, the evolution of design should make things better. For the consumer, better may mean easier to use, stronger, more durable, more efficient, with new functionalities, or something like that.

But for the producers and sellers, a better product often means a cheaper one to produce! Yes, they may throw in a new functionality, but this is mostly to increase the perceived value of the product. A different approach.

Here, with this pair of trousers, we are faced with an obvious case of costs reduction.

One button instead of 2 is probably a cost reduction of 50% (simplifying because it probably isn’t 50%)

Smaller pockets means less fabric and thread and a small reduction of the labour required to sew such pockets.

The removal of the bottom zippers or the coin pocket also represent big cost saving. If you’ve ever sewn a zipper or a pocket, you know why!

And, yes! The reason behind such changes is that cutting costs is one way to increase your profit margin!

Easy costs cutting!

Revenue, costs and profits equation

In a slightly simplistic but efficient way, let’s remember that:

Revenue – costs = profit

This is a bit obvious and you already know that.

To increase your profit, you can increase your revenue by selling more and/or increasing your prices.

You can also reduce your costs and we had a great example on how to do this above.

It’s a perfect world if you can do it all! With the trousers above, I can’t really say if the price increased, since I had bought the previous pair over a decade ago. It would have been a marvelous experience to buy one of these every other year or so and see the evolution!

Anyway, here we are with my 2 pair of hiking trousers example!

This got me thinking on how such concepts apply to my own work and thought I should talk about the most important of all: time management.

Cutting costs in a service business & time management

In general, cutting costs isn’t as easy as it seems from the example above. In a service business, it is probably even harder. In a one woman show, like the business I have, it might be ninja level!

I’m afraid I’m not going to go through all the usual cutting costs tips like reducing your electricity bills, going paper less, negotiating your bills, or reducing the size of your office… These are all things you can find elsewhere. These are great but I’ve already somehow applied what I could to my whole life, not just to my business!

To be clear, by all means do all these things. But on my side, my general business costs, apart from taxes and social security are just already super low. My biggest quarterly invoice is my accountant who I could not do without and then it’s mostly my phone bill. I buy maybe 1 ream of paper a year and since last year, I mostly used it to print Covid test certificates!

So for my business and its recent evolution, it all comes down to time management.

My poor time management

When I became independent, I started invoicing my clients on a time basis. It was very instructive to say the least!

I very soon realized that between the commuting to the office, the bathroom breaks and coffee machine little chats, I could only invoice at most 2 hours of work out of 3 hours sometimes 4 hours spent out of my home. This isn’t even taking into account the time spent getting ready to go to the office, because no one used to think like this.

Yes, a whole half a day went by, and all I could invoice were 2 hours!

It was mind blowing to me how much time we loose while ‘working’ and I knew this had to improve, considering my new situation.

I should point out that in addition, very early on, I decided that considering my role, responsibilities and risks, I would not invoice my clients for the informal conversations we had. The ones, where we chatted in general about the business, the plans, the struggles… I did not want my clients to hesitate to call me and did not want them to think that every phone call was something that got the clock ticking. I’m not a lawyer, I’m a business partner and our interests are aligned. It’s very important for me to stay well informed!

Furthermore, I never invoice the time I spend digging into the business, researching or improving my skills and knowledge, even if it is solely for one client’s benefit.

Yes, overall, I used to only invoice about 50% of the time I spend working! That doesn’t sound so good I must say.

And yet… It got me where I am.

Anyway, all my work isn’t invoiced on an hourly base anymore and I got better at this anyway, thanks to the understanding that…

.

Time management is about energy management

Don’t know about you but I have a finite amount of energy everyday. When I’m low, I’m useless!

Time management is therefore mostly about managing my energy level.

I’m sure you have noticed how one tasks can take you 5mn when you’re in good shape and can instantly double if you’re exhausted. It certainly does for me!

Managing my energy level ups and downs is therefore paramount. It could also sound counter productive because why not invoice 10mn instead of 5! Well, that’s not who I am and how my business works.

So how did I get better at time management? Well mostly by respecting my body’s natural cycle.

By working intensively for 50mn max and taking little breaks. By exercising, limiting stress, not relying on coffee, etc… By staying super focused when working and then by moving on!! Doing other things during the day, for myself, like drawing or exercising, is super important to me. Balance is important. These are just examples.

It can mean a different approach to you. Maybe you need to exercise first thing in the morning to wake up. Maybe you hate taking naps (which I love!). It doesn’t matter really, what matters is to understand your cycle and adapt your workflow to it.

And it doesn’t matter if you are employed, self-employed or else. Everyone can benefit from understanding their own energy cycle.

And when you spend less time and less energy on a task, you save costs! because everyone’s time is money.

Side note on cutting costs the wrong way

There is a possible resurgence of a quote (who knows these days with internet) which seems to be from Voltaire and says “Perfect is the enemy of good“, meaning somehow that, one should not seek perfection in what they do, because perfection is unattainable.

Feels to me like a bad advise. Maybe perfection isn’t attainable but people who settle for good enough are not the people who get relied on. In my business, good enough is just not enough, in general.

Not saying everything I deliver is perfect, I make mistakes too. But I always try to do my very best.

Doing less than perfect work could take less time and therefore reduce your time and energy costs, but it feels to me like the wrong way to cut costs. Up to you!

You see things, have greatly evolved for me over the past years and are changing again. If I first freak out about what’s happening, I then realized that I was far better equipped now, than I was in the past to handle. Things are going smoothly so far and there might be some slightly harder days ahead, but I’m no longer afraid.

I do have a couple more ideas of things I could do to improve the way I handle my business and will talk about these ideas if I implement them. Still in research mode!

And yes, all of this came from a pair of hiking trousers! If you’ve read up to here, I thank you. I hope you got something out of it and that it will help you on your own journey!