Small business entrepreneurs are continually looking for ways to save money. However, if your idea of trying to "save money" is by refusing to make smart investments in tools, technology and marketplace necessities that appeal to your clients, then you're likely going to be losing more money as a result than you could ever possibly manage to save...

For example, let's pretend that there's two new companies - Company A and Company B. Both are in the plumbing industry, and both are equally skilled in their profession. (I'll simply refer to them as "A" or "B" from this point onward.)

While the first company, "A", is under the command of a dynamic CEO with the willingness to test the effectiveness of calculated investments in the infrastructure of the business, "B" is owned and managed by a very conservative person that purposely goes out of his way to avoid spending any money, ever. Even if it means forfeiting the potential profits and productivity that they can provide.

Both have an excellent plumbing service, which meet and exceed the requirements of their customers. Both of them do very well with their initial advertising campaign, and their schedules initially fill up at the same rate.

However, after the first quarter, A shows about 25 per cent more sales/jobs than B. As a result, company B brings in a consultant to find out why their competitor, A, seems to be steadily gaining more and more market share, while B seems to be falling behind. While looking into the matter in order to create a detailed report, the consultant was surprised by a simple discovery that seemed to be the root of the problem. You'll be surprised as well...

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A has only one thing that differentiates it from B - they accept credit cards while the other, B, does not.

A decided to pay $20 per month for mobile credit card processing abilities and a discount rate of 4% per transaction. A's CEO based this decision on his previous experience with customers - he knew that people always preferred to have flexibility and convenience when it comes to making payments on just about anything - even plumbing work. Not only that, processing credit card payments means that they get paid on the spot, instead of having to deposit checks and waiting for them to clear. This also cuts down on their paperwork and accounting hassles.

The CEO of company B only wanted to go through the hassle of opening up a merchant account once his sales volume had reached a certain level. Up to this point, he simply thought he was making a smart business move by saving money he'd otherwise be spending to accept credit card payments. He now understands that he's losing approximately 5 plumbing appointments per month because of the company's inability to process credit card payments - and at an average ticket-size of $500 per transaction, he's losing $2500 each and every month as a result!

Sadly, B's misguided owner fails to see that he would have a continuous flow of business to justify the cost of $20 + $120 (the 4% per transaction) per month for accepting credit cards. He's unwittingly losing $2500.00/mth in order to "save" a measly $140/mth.

While all of this is going on, the customers that B loses are banging on the doors of A's establishment, because they're known to have the same quality of service. A, like B, takes extra trouble to ensure that its customers are taken care of in a highly personalized manner. This has created an extremely valuable reputation for the company; happy customers are busy promoting the A by word of mouth to all those they know and hence, helping the volume of business grow exponentially.

Several of these customers helping with the viral growth of A's marketing campaign would've happily used B's service, but didn't, because they found it more convenient to pay for their services with their credit cards - most of which did so for the simple reason that their card companies had rewards programs (like AirMiles)...

The people who actually hire B are just as happy with their plumbing work, and that is not the issue. The issue is that numerous potential clients ask up-front if they can process credit card payments when they call the number in the ad - and then move on to someone who does. Particularly, A.

So while B is continually worried about saving every last nickel, A is watching it's investment in credit card processing abilities pay for itself and then some...

It's obvious that the above example is very simple, and yet the principle of the situation will apply to almost any existing small business, with consistency.

It all boils down to being able to cater to what your customers really want, and making them happy. Cutting expenses is a great way to uncover hidden profits if you're removing pointless liabilities and costs - but if you're suppressing something that will either:

a) Bring in more customers,

b) Make it easier for people to do business with you,

c) Reduce non-payments and monies owed to your business

Then, whether you like it or not, you're not saving a red cent.

All you're doing is making it easier for your competitors to succeed - while you produce mediocre results at best...