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"Bob Fifer's Double Your Profits is a highly readable, eminently commonsensical guidepost to success in business." — Norman Augustine, Chairman and CEO, Martin Marietta

Book Summary

This is my book summary of Double Your Profits In Six Months or Less: 78 Ways to Cut Costs, Increase Sales, and Dramatically Improve Your Bottom Line by Bob Fifer. This summary includes my favorite quotes, excerpts, stories, and ideas from the book.

One of the nation's foremost management consultants shares seventy-eight proven ways to cut costs dramatically, send sales through the roof, and double profits in just six months. This timeless profit-boosting guide, considered a top management resource by business powerhouse Jack Welch, presents insights that are notable for their aggressive approach and contrarian perspective. Bob Fifer, former chairman and CEO of Kaiser Associates, shows us how to turn the tables on hardball-playing suppliers and competitors. This book summary includes my favorite quotes, excerpts, stories, and ideas from the book.

He also challenges outmoded assumptions and explains why: arbitrary budgets are sometimes the best budgets, bosses are frequently underpaid, customers can often be persuaded to pay more, suppliers can often be persuaded to charge less. Whether you're a mid-level manager, senior executive, or Fortune 500 CEO, you'll find this book is required reading for growing your company and improving your bottom line.

On this page:

• Getting Ready
• Creating the Culture
• Cutting Costs
• Increasing Sales
• Some Personal Advice
• More Books Like This
• Buy the Book

Getting Ready

Who should read this book?

Anyone who cares about the profits of his or her business should read this book.

That, by the way, excludes a surprisingly large percentage of the managers in this country. Most mid-level managers, and many senior executives and even CEOs of Fortune 500 companies, are motivated by something other than profits: They want their businesses to grow, or harmonious employee relations and morale, or the ability to travel to interesting places and meet interesting people, or whatever else. Some owners of small businesses are more excited about the details of running an operation than they are about ensuring the financial health (i.e., the profitability) of their enterprise. To these audiences I say: Read the book if you'd like, and perhaps you'll better understand the importance of profitability and how to achieve it.

To those managers of large and small enterprises who truly do care about profits but are not fully pleased with their business's bottom-line results, I say: You must read this book.

Your Commitment to Profits

This book is focused on profits because that's where it all starts and ends. Profitable companies have the money to reward employees, build exciting career paths, and invest in new products, businesses and technologies. Less profitable companies inevitably sink into mediocrity in all ways—morale, product distinctiveness, and so on— because they wind up funding each part of the business half-heartedly and inadequately.

Learn how to be very profitable and all else will follow. Try to do it all with mediocre or worse levels of profit, and you'll always be frustrated.

Why do so few businesses practice them and achieve impressive levels of profitability?

Because many managers don't truly care about profits. However, even managers who do care about profits often fail a second test: They lack the absolute commitment to profits, and the tough, determined resolve to lead their organizations in a way consistent with that commitment. Doubling your profits (or more) requires a leader who is focused, consistent, tough, and fair, and who is willing to stretch himself or herself and others in the organization to be different and better than the status quo or the average manager of this world.

Creating the Culture

Setting the Standard

The driving goal of any organization, should be one simple thing: to be the best. Nothing motivates employees, excites them about coming to work, and produces better bottomline results, than to tell everyone in the organization that we as an organization and each of us as individuals will be the best, and will settle for nothing less.

What does “the best” mean?

The best means three things:

1. We will never settle for the status quo. We will always drive as hard as humanly possible, in as many simultaneous directions as necessary, and as far as necessary, as long as we can identify things to achieve that we have not yet achieved.

2. Our organization will be a meritocracy. That means rewards — financial, career advancement, and psychic — will be allocated based on performance, not seniority, likability, or anything else. Furthermore, rewards will be allocated very differentially: There will be a very wide spread in rewards among different people — as wide as the differences in performance that inevitably exist in any organization.

This is the first place where I'll lose some of my readers. Many managers are very uncomfortable with meritocracies. Most Fortune 500 companies won't and don't do it. Meritocracies require managers to make tough decisions that affect people and then tell those people to their faces.

If you are a relatively unsentimental, bottom-line-oriented manager, ask yourself, "Whom would I rather have resentful: the better-performing employees or the under-performers?" In a meritocracy, the bottom half complains. In a seniority or other system, the top-performing half complains.

3. We're here to make a profit. In fact, we're here to make as much profit as we possibly can. Profit is the most accurate, most all-encompassing measure of whether we truly are the best. Profits measure how much our customers value the products and services we deliver and how efficiently we can organize and operate to deliver that value to our customers. Profits benefit all of us — profits provide cash for shareholders, for managers' and employees' compensation, and for investment that creates growth, that in turn creates rewarding career path opportunities. When the profits slow down, we all suffer.

Results, Not Processes

A mind-boggling the amount of time, energy, and money that companies, particularly large ones, spend on processes. Some of these processes go under trendy, buzzwordy names: Total Quality, Team Building, Strategic Planning, and so on. Each of these concepts has a value, a time, and a place.

However, what has been lost at so many companies is any sense of proportion, any rigorous questioning of whether the effort expended is more than paying for itself in terms of bottom-line results. Any excellent manager, anyone who wants to double profits, must have a built-in cynicism about processes.

Any investment in processes (and people's time is every bit as much of an investment as out-of-pocket expenditures) must be rigorously questioned: Assuming we buy the concept, do we really need a formal, extensive process to implement the concept, or can it be done in a quicker, more direct, more common sense way?

The reason the majority of companies over-invest in processes is:

1. The leader of the organization doesn't credibly communicate that results are the only thing we are here for.
2. It is easier for managers up and down the line to demonstrate that they have nice, shiny processes (i.e., that they are good at spending money), than to prove that they are truly making money for the business, so they stick to the easier objective.

A healthy, aggressive suspicion of all time-consuming, buzz-wordy processes is one critical way to establish and communicate your focus on results.

Strategic vs Non-Strategic Costs

In all superbly-run, very profitable companies I've seen (large and small), all costs are divided into two categories:

1. Strategic costs are defined as all those things that clearly bring in business and improve the bottom line. Typical items in this category are the cost of salespeople (but not sales managers), advertising (if it's working), and commercializable R&D.
2. Non-strategic costs are all other costs, i.e., the costs necessary to run the business. but that don’t clearly bring in more business. Administrative costs of all kinds fall in this category: managers, clerical support, rent or real estate cost, consultants, lawyers, accountants, computers, office supplies, and so forth. Often, this category also includes the costs of your manufacturing or service operations.

Whenever managers at my company have a meeting to discuss a new direction, a new investment, or how to enhance the bottom line, we automatically categorize each expenditure as strategic or non-strategic.

The reason is simple, and very powerful. My (or your) role as leader is to ensure that:

1. We will outspend our competition for strategic costs, and spend this money in good times as well as bad.
2. We will ruthlessly cut non-strategic costs to the bone.

This simple concept, applied with commitment and unwavering resolve, is more powerfully profit-maximizing than the most complex and detailed business treatise or process ever conceived.

Outspending your competitors on strategic costs requires intelligence and judgment. You must distinguish those selling, marketing, and R&R expenditures that truly enhance the top and bottom lines from those that are wasteful and unlikely to pay off.

You must be able to identify enough worthwhile strategic expenditures to ensure that you are outspending your competition for strategic costs by a considerable margin, as a percentage of revenues if not in absolute dollars: By spending more on truly strategic costs you build your business.

"Ruthlessly cutting non-strategic costs to the bone" requires an unwavering suspicion of every single non-strategic cost; assume it can be eliminated unless proven otherwise.

In order to profit-maximize, in order to cut non-strategic costs as much as possible, You must start with these beliefs and cynicism, and place the burden of proof on justifying costs, not on eliminating them.

Maximizing Customer Satisfaction Leads to Bankruptcy

There are many ways to differentiate your company's products and to achieve superior customer satisfaction: By offering higher quality (Mercedes Benz), better service (Disney), a broader selection (Toys "Я" Us), a superior brand image (Federal Express), or some combination of the above. All of these are nice things to have, but all cost money to provide.

The goal of the profit-maximizing organization is not to maximize differentiation, but to: Provide those elements of differentiation that the customer is willing to pay for and not those that the customer is not willing to pay for.

This is not insensitive or selfish, this is survival and common sense. You are not doing customers favor by building unwanted differentiation and costs Into your products or services that raise the prices your customers have to pay. Sooner or later, they'll switch to a supplier smart enough to include the right but exclude the wrong types of differentiation.

Honda, as an example, eliminated the costs of this unneeded variety, put some of the savings in its pocket as superior profits and gave the rest of the savings back to the customer in the form of superior, standard-package quality.

Striking the right balance as to what to sell your customer is where the profits are, where the greatest judgment is required, and where the true fun of running a business lies. You must conceive a way to offer superior differentiation, or you have nothing to sell.

However, the vast majority of people in your organization—the salespeople, the engineers, the marketers, the entrepreneurs—are trained to add differentiation. Who is trained to eliminate those costly elements of differentiation that the customer is not (or is no longer) willing to pay for? The answer is precious few. That’s why it's so critical for you to train the organization to create a culture of "What is the customer willing to pay for?"

“Maximizing Customer Satisfaction" is a platitude and a cop-out. (If you truly want to maximize the customer's satisfaction, cut your price to zero or give him or her a free trip to Hawaii and a free car once a month. You'll also maximize your own bankruptcy.) Forcing yourself to separate out the differentiation the customer is willing to pay for from "it's-nice-to-have-but-I-won't-pay-for-it" is what is best for your customer, you, and your bottom line.

Strategic vs Non-Strategic Time

Just as there are strategic and non-strategic costs, there are strategic and non-strategic time:

• Strategic time is defined as anything you do that produces profits.
• Non-strategic time is defined as that which is busy and succumbs to the requirements of processes, but which does not contribute to profits.

Your role as a superlative leader is to communicate by your every action and every utterance that the former is appreciated and the latter is frowned upon.

People respond to a host of your non-verbal signals. How do you act, how focused are you on results, how much of a hurry are you in, how intolerant are you of wasteful, time-consuming parts of the day?

The message a superb leader communicates to his or her organization is:

• We are a great company, an incredibly exciting place to be;
• We are here to make a profit;
• We have so much more yet to accomplish, so much uncaptured opportunity;
• Every ounce, every fiber, every dollar, every minute of our organization will focus on realizing our potential and making a profit. We will ruthlessly pursue anything that contributes to that end:
• Every other (i.e., non-strategic) dollar, every other minute will be ruthlessly stamped out. What is it you (employees) want anyway? To work for a great company or merely to punch a time clock?

When you bring in a new customer or eliminate an unnecessary cost you are helping make a great company. When you sit in a meeting or fill out a form or crunch numbers or fiddle with technology no one will buy you are helping sink the company and yourself into mediocrity.

It all ties together. However, the overall message will be credible only if reflected in your actions as you manage the business day-to-day and hour-to-hour.

A Sense of Urgency

How many heads of small businesses know the things that need to be done that are truly important to the future of their businesses but take many months or years to get to them because they're "just too busy?"

The first thing I do in the morning of every workday is divide everything I have to do that day into three lists:

• The first list includes anything that brings in new business (i.e., raises revenue) or eliminates costs. (These are the only two ways you can create profit, since profit equals revenue minus cost.)
• The second list includes things I have to do to maintain existing business or keep an existing internal operating system running.
• The third list includes all the things that someone expects or wants me to do, but that really add no value to the bottom line.

I never start on my second list until I've done everything on my first list, and never start on my third list until I've done everything on my second list.

This sequence, by the way, is the opposite of the normal human tendency. The most important tasks (i.e., list one) are usually the hardest to conceptualize and implement, so the tendency is to procrastinate and do the less threatening, less critical tasks (list three) first.

Hence the businessperson who is always"too busy" to do the most important things.You have to make sure that the most important things are completed with the most urgency.

Always set deadlines in the very near term. If you stick to this, people always will meet the deadlines, not by working all night but by eliminating non-value-producing tasks from their schedules. That is the real benefit of tight deadlines.

My philosophy is always to keep resources very scarce, because that is the only way to force people to soul-search to decide which tasks are truly value-producing and which are not. The opposite is also true: Give people more time, and as the very true cliché goes, time spent on a task will always expand to the time allowed.

Create and maintain a strong sense of urgency in your business, and it will pay you back a thousand times in the increased focus and productivity of everyone in the organization.

Cutting Costs

Every Cost Is Up For Grabs

The first step towards reducing costs is to see every cost as, at best, a necessary evil.

So many people in our society see costs as a plus. More costs mean a bigger organization to run, a larger bureaucracy to be administered, more respect from your friends and neighbors. I'm always struck by what people ask about the size of my business. They ask me how many employees I have, not the number of satisfied clients or the amount of revenue.

I truly see all costs as, at best, necessary evils. In fact, I say to my business associates, "I don't believe in costs," because I don't. Costs are something to be driven mercilessly out of any business to the maximum extent possible.

The day-to-day manifestation of this policy is that I (and you) need to see every cost as up for grabs, as something that you should try to find a way to eliminate.

When I visit a company and see unused office space or a receptionist reading a magazine or an idle computer or a paper-shuffling, non-value-adding manager, I instantly and instinctively see the opportunity to increase profits. No cost should be absolutely sacred: no manager, system, perk, or capital expenditure. Sure, many costs will withstand your or my scrutiny and prove to be justified; but your mindset going in has to be to try to eliminate every cost that you encounter.

What I'm really talking about is a zero-based budgeting of the mind (but not the formal process). Don't assume anything has to be done the way it is.

Instead, always ask the question, "If I eliminated this cost, would I really lose revenue or profits? How and where?" If you can't figure out how and where, then you don't need the cost.

All of this applies particularly well to non-strategic costs, but also to strategic costs. Strategic costs (e.g., sales-people or advertising) are profit-producing in principle, but only if spent well. You must eliminate all non-profit-producing strategic costs so as to leave more money for truly productive expenditures.

Cut Costs First, Ask Questions Later

The comforting thing about cutting costs is that, if you do make a mistake, somebody will always tell you and you can add the cost back.

All the pressures in the typical organization are to add costs. Hire three new people instead of six in Department X, and they'll inevitably come back and tell you how overworked they are. Buy ten PCs instead of fifteen, and the requisition request for five more will inevitably come.

Cut costs too much, and you’ll get lots of chances to correct your mistake. Spend too much, and that money is gone forever.

You must change the mindset of your organization, starting with your own. If in doubt, cut more and spend less. The cost-spending tide is so great that only a very resolute and strong force in the opposite direction will successfully stop it.

No Cost is Too Small to Worry About

This principle is very simple. Show your employees you care about saving money on a $10 item and boy will they look for savings on larger items. There are no exceptions to the necessary evil of costs. Give in a foot, and you'll slip a mile. Scrutinize every cost, and your message will be taken seriously. Furthermore, there is a surprising amount of money to be made in cutting so-called minor costs, since those are precisely the costs that no one has ever bothered to look at before!

Be consistent. Every cost must prove its worthiness.

Sign All The Checks Yourself

The first several times that I cut costs in my own company, I used all the techniques described above. The most recent time, I added one more wrinkle: I started signing all the checks myself.

I don't mean that I literally sign all the checks.My payables person signs the checks. However, she literally brings every bill and every check to be signed to me for my approval before she's allowed to sign it.We meet twice a month for half an hour and get through all of them (very efficiently) in that time.

This added wrinkle has made a big difference. In the past, when I was looking at cost reports but not the bills and checks themselves, a lot of things got lost in the category aggregations of those cost reports. When you look at each bill, you'd be amazed at the number of unnecessary hidden expenditures that you find. It also gives you a much better sense for real money flowing out the door and suddenly things that you had to have begin to seem expendable.

If your business is too big to sign all the checks, then "sign" half, or a quarter, or 10% or 2% of the checks each month. But do it. You'll find a lot of savings, a lot of profit potential, that you didn't know was there.

Accounts Payable

One easy way to lower your costs this year (although it only works once) is to extend your payables. Most suppliers will wait a long time for their money rather than lose you as a customer.

Keep extending your payables: to forty-five days, then sixty, then three or six months for those suppliers who will tolerate it. Never pay a bill until the supplier asks for it at least twice. You'll be surprised: A few suppliers will take as much as two years before they finally get around to asking for their money.

If You Never Fire An Employee, You Can’t Have An Excellent Business

In any organization with more than a few people, there inevitably are employees who are not up to snuff, particularly if your standards are high, as they should be. It is impossible to credibly communicate to your employees that you believe in a meritocracy if those non-performing employees get to keep their jobs and salaries.

My standards are as high or higher than anyone's, and in fifteen years I've had to fire only 3% of all the employees my company has ever had. Zero percent, however, is the wrong number—it will lead to dysfunctional behavior in your organization.

I've fired very few people, but each was justified, and the positive ripple effect of that firing on the rest of the organization was profound. Each time it has happened, one can almost tangibly feel everyone else step up their performance another couple of notches.

If you never fire an employee, you will not achieve excellence for your business (and will certainly not maximize profits).

Keep Human Resources Scarce

There are two types of things employee and managers can do with his or her time. The first thing an employee usually does is fill his or her schedule with useful, productive things which truly help the company's bottom line. If not enough of these can be found to fill the day, the employee finds lots of other things to keep and appear busy, and now the day is filled.

I solve the problem this way. When part of my (or a client's) organization asks for another person, I say no. When they ask again, I say no. When they ask a third time, I say no a third time. When they're virtually screaming that the added resources are needed and they can't function to the right level without them, I investigate and often (but not always) let them hire more people.

What this does is drive inefficiency and unneeded work out of the system. A truly busy employee is forced to prioritize and do only the truly worthwhile things. More importantly a manager with scarce resources reporting to him or her is forced to prioritize and to get things done efficiently. In other words, that manager is forced to manage well.

Excessive, unchecked, or non-tightly-controlled staffing leads inevitably to lazy management and inefficiency. Parkinson, who coined the phrase, "Work expands to fill the time available," also came up with a second law: "Work expands to occupy all the people available."

When is the last time someone ever came to you and volunteered that he or she had more people than they needed in his or her department? The only way to promote efficiency and eliminate unnecessary work and motion is to keep human resources scarce.

Emergency or Remedial Headcount Reduction

For a profitable business to keep its edge, an occasional firing is sufficient. For an unprofitable or weakly profitable business to become very profitable, more may be needed. Many managers, even good ones, shy away from massive lay-offs. Others don't. You have to decide what you're ready and willing to do, but I have just one observation to offer.

Almost all white collar organizations can eliminate one person in four without any reduction in worthwhile output. Many can handle eliminating one in three or one in two. The reason is two-fold: First of all, much of the work done is unnecessary, while necessary work is often done inefficiently. Second, in almost any organization, the poorest-performing 25% of employees simply aren't very good and aren't adding much value.

This is of course at least as true of the public sector. I live near Washington, D.C. and can tell you that a walk through any government agency or department would sicken any taxpayer's stomach when you see what these people do with your money. But that's another book.

In my heart I believe that I could eliminate one-third of the white collar employees at any Fortune 500 company and the result would be huge savings and no diminution of value for the customer or the bottom-line. However, I know many of you will view this as extreme.

Eliminate Most of Your Administrators and Managers

The best and most profitable businesses always have broader management responsibilities and broader spans of control (direct reports per manager). They instinctively understand that optimizing efficiency means minimizing the cost of managers who don't directly contribute to customer satisfaction or the bottom line. The best companies have one or two or three superb, instinctively profit-maximizing managers in each business, with very broad, loosely-defined, entrepreneurial responsibilities, and then very little hierarchy or bureaucracy, I'll take one good profit-maximizing manager over ten paper-shuffling administrators every time.

Here's one rule a client taught me to help you do away with managers: Every manager should be one of his or her own direct reports. If he's Group Vice President of your European Division, then he should also be Country Manager of (for example) France. If she's COO with a number of functional VPs (sales, manu-facturing, engineering, etc.) reporting to her, then she should also be one of the functional heads.

To say it another way, instead of hiring or promoting a Group Vice President for Europe, simply make your best Country Manager the Group VP as well. Either way you say it, the point is the same: eliminate professional managers as much as possible. A couple of good ones will suffice. Everyone else should be a "doer" who alse manages a little on the side. In addition to cost savings, the benefit will be a real-world dynamism in your organization, as people report to managers who know what it's like out there and are in touch with the market, and not managers who are familiar only with the ossified management processes of the organization.

The Last Cost-Cutting Step: Do It All Over Again

The hardest part of all of your cost-cutting initiatives will be the resistance to change you will encounter. People will be afraid of everything you suggest and will tell you it just can't be done. People will be afraid of even straightforward and trivial changes-they're just used to doing business the way they've always done it.

Then, you'll see an interesting thing happen. After a few months, people will adjust their expectations. They'll get used to the changes. They'll realize it's perfectly possible to do business under the new set of rules (and a lot easier to make money).

That's when it's time for you to go back to the beginning and go through the whole list of steps again, to institute a new round of cost cuts. Expectations will re-settle a second time, and you can go back through a third and fourth time without reaching diminishing returns.

Even if you institute dramatic cost cuts the first time, as I did at my own company, you must go through a second, third, and fourth time. With each new iteration, you discover that what seemed drastic before now seems routine, the angst level has been reduced, and you discover lo and behold that there are other, even greater cost-cutting profit opportunities to realize. Your self-confidence in your own cost-cutting skill also increases, and you reach out to try bolder and bolder things. Over time, the interval between iterations can get longer and longer, but the work of superb, profit-maximizing managers is never done.

Increasing Sales

Customers Can Smell One Part Blood in a Million Parts Water

I once heard that a hungry shark can smell one part of blood in a million parts of water and therefore can find its dinner from far, far away. Customers are the same way.

If you convey 100% confidence, your customer will be reasonably assured. If you display 99.9% con-fidence, he or she will be very, very worried. Like a shark smelling blood, the customer can detect the slightest doubt you are feeling and mentally will magnify it a hundred times. Your chance of making the sale just went way, way down.

Prospective customers ask a lot of questions.Every answer you give is a potential showing of the "one part of blood." Concentrate, be unwavering, never let the confidence you convey dip at all.

Pricing: You’re Leaving Money on the Table

Most businesses are instinctively revenue-oriented, selling-oriented, and keep-busy-oriented. They are not profit-maximizing (although they may say that they are). A corollary of this is that most businesses, in order to get the sale and keep busy, leave money on the table when it comes to pricing.

The first rule of pricing is the simplest and most commonsensical, yet most ignored of all: Make sure you're charging every customer the most that customer is willing to pay.

Here's a simple procedure to apply which will identify considerable profit opportunity for you. List your largest twenty customers. (If you sell a mass-market consumer product, do this either for the twenty largest retailers or distributors you sell to or, if you wish to do it at the consumer level, the largest customer segments you sell to.)

Now, for each customer ask yourself, "If I raised the price 2%, would I truly lose the customer?" If the answer is no, then try 5%, 8%, 12%, and 15%. If you answer the questions accurately and honestly, you will find that there are some customers that cannot take a price increase but others that can take 2, 5, 8, 12, or 15%.

Unless you're doing this already, this opportunity to increase price is waiting for you, because there is not a sales force in the world that, left to its own devices, will price maximize. They are too intent on booking the sale and may tell you, "What's 2 or 5 or 8 percent, anyway? It's trivial." The answer is that, for a business with a margin of 10 or 15 or even 25%, price increases of that magnitude have a huge impact on profits.

I went through this process with the CEO and VP of Sales of a two-billion-dollar engine manufacturer, and they wound up raising the average price across their whole product line 4.7%. We started with the twenty largest customers, but worked our way down and wound up doing the largest sixty-five customers, which together represented 98% of total revenue. Our motto throughout the process was: "The goal is not a perfectly happy customer, but a profit-maximized one." I worked with that CEO for three years, and years later at lunch he told me that that motto was the single most important thing he learned from me.

To Capture the Consumer Surplus For Mass-Market Products, Price Discriminate

A hotel where I stay regularly charges $129 a night. However, they have executive floors for the business customer, where rooms go for $250 a night. What do you get for the extra $121? A free newspaper and a cold continental breakfast. Total extra cost to the hotel, including labor: less than $5. What a deal, huh?

Yet the executive floors regularly sell out before the rest of the hotel. Many business travelers don't pay their own bills (their companys' shareholders do), so they don't care about price. In their subconscious view, they are getting a newspaper and breakfast for nothing, so it is a good deal.

This example of price discrimination is how all good pricers of mass market products need to think: How do I create relatively small but highly visible differences in the various offerings within my product line so that I can capture the most each group of customers is willing to pay, i.e., capture the consumer surplus?

Examples of this are all around us. Overnight express mail 10:30 a.m. service (costs more) vs. 3:00 p.m. service. Super-premium vs. premium vs. regular unleaded gas (Do you really think there's that much of a difference?). Rush dry cleaning orders vs. the usual three days (try saying you can pay only the regular rate, but really need it rush. It works every time). Macintosh computers, of which there are countless variations and price points: My informal survey of friends and neighbors says many go for the most expensive, but few really understand what the product differences are and think out whether the extra money is worth it. And airlines (the masters of price discrimination), where the same seat has ten different prices depending on how aggressively and cleverly you care to buy it.

Price discrimination is to the mass market what "asking what they want to pay" is to the commercial or industrial market. Either way, the goal is to get each customer to pay the most he or she will pay. The profit leverage is enormous.

Remember: Price Has Nothing To Do With Cost

The evening before my first class in business school, we were handed a case to read and analyze. A manufacturer of bathroom fixtures had three different products and had to decide how to price each one. We were given a dozen pages of costing data and stayed up half the night trying different cost allocation schemes to figure out what the right price was for each of the three products.

The next morning at 8:30, the professor walked in and demanded that a succession of us present our pricing schemes. The various students then got into a ninety-minute debate about which cost allocation methodology was fairest in calculating "true" cost in order to set price. The professor listened silently.As the end of class approached, the professor cleared his throat and spoke up. "Every one of you is wrong. When you set prices, you never look at cost. You price what the market will bear." With that, he left the room.

No single lesson has served me and my clients better than that one.

Marketing is a Strategic Cost: Outspend Your Competition, In Good Times and Bad

One of the great (and unprofitable) paradoxes of business is that business people are focused primarily on revenue yet don't spend enough on marketing. As noted earlier, the superb businessperson distinguishes between non-strategic and strategic costs. He or she ruthlessly minimizes non-strategic costs, so as to maximize profits and so as to free up money to spend on marketing and other strategic costs. Most truly successful and profitable businesses outspend their competition in marketing, either in absolute dollars or as a percentage of sales.

All businesses, sooner or later, have down years. That's usually when they look to cut costs, and often the first place they cut is marketing, because it's the easiest. "Let's cut there," a senior executive once told me, "because it's easier to give less money to our ad agency than it is to lay off our own employees."

Nothing could be more ill-advised. Marketing dollars are strategic, and strategic costs are the long-term lifeblood of the business. Marketing expenditures must be maintained in good times and bad. Cut everywhere else, but never cut marketing dollars when times are bad.

Some Personal Advice

Be Stubborn

Since many of the recommendations in this book are challenging to your mindset as a manager, I would be remiss to end without a few short pieces of personal advice. What does it take, at a personal level, to achieve the mindset necessary to double your profits?

Mx first piece of advice is to be stubborn.

I once asked one of the most successful businesspeople I ever met what the personal key to his success was. He is brilliant, charismatic, sincere, and intuitive, and I expected him to name one or more of those things.

Instead, he said simply, "I'm stubborn." "You're what?" I asked. "Im stubborn. I know what l want to achieve and I know the way to get there, and believe in that way. And nothing or no one is going to stop me from getting there, no matter what they do or say."

I asked the same question of another highly successful person, who had succeeded with half a dozen very diverse types of businesses. "People see me as flighty, because I keep shifting my areas of concern and interest," he replied, "but there's one over-riding constancy to everything I do. I believe I'm more determined than almost everyone else, and I'm going to find a way to make money off of it."

The stubbornness and determination these two spoke of is characteristic of all the successful businesspeople I know. They don't take no for an answer, but instead stick to it and wear their uncooperative adversaries down. They have a can-do attitude that says there's a way around or over every barrier, no matter how daunting. They are so confident in their beliefs that they don't even entertain the thought of letting someone else stop them from achieving their goals.

Most people in life and business are ambivalent, struggling to find the principles that they truly believe in. If you can find yours and stick to them stubbornly, you'll be at a natural competitive advantage, and you'll win most encounters regardless of relative skill, experience, or intellect. If profits are important to you, this book offers up one set of principles to believe in.

Keep Work in Perspective

Much of what this book recommends requires judgement, subtlety, and the ability to attract other people, none of which usually are optimized by a workaholic. I recommend setting strict limits on when you are willing to work and when you are not, and then sticking to them. More importantly, work must be seen as a distant second (or third, fourth, or fifth) in importance to whatever is truly important to you in life: your family, your friends, or your favorite recreational activities.

In my experience, the person who has other things in life that are more important: (a) Is in the positive frame of mind necessary to do truly well at work, and (b) Has the proper sense of perspective and detachment necessary to see business as game that it is, and to play it well.

Everything it takes to win in business and everything this book talks about requires the trading off of a number of subtle variables: knowing when to apply which rule and which tactic to which situation, and when to offer which carrot or which stick to which employee, customer, or supplier. This isn't math, accounting, or science, where the intellectually-correct, "deterministic" answer is being sought. Rather it's an infinitely variable game of intuition based somewhat loosely on a large set of rules.

The person who lives and dies for work has trouble taking it as a game, because it's his or her life. The balance and trading off that are required are then hard to come by. The player becomes too obvious, too one-dimensional, too crude. The sense of detachment that a more important life outside work gives you allows you the confidence, the calmness, the clarity of thought that makes you a truly winning player.

It may be the world's greatest rationalization (and if so, more power to us!), but I've found that the greater priority you place on things in your life other than business, the more money you make. If you get paid by the hour, this isn't true. If you get paid to be a profit-maximizing entrepreneur or manager, it is.

Stretch Yourself and Have Fun

No one in the world is more depressed than the person who knows he or she has gone as far as he or she is going to go and can find no more challenges to conquer.

The nice thing about business and about the subject of this book—maximizing profit—is that the process is variable and subtle enough that it is impossible ever to get to the finish line: You can always do better.

However, it takes a clever and healthy mind to enjoy a path where you never reach the finish line. It's difficult to conquer the need to feel, "I've completed the job; I got an A in the course."

I derive my enjoyment from always stretching to be better, always trying to re-invent myself to get to the next level. This in turn requires a high degree of introspection and a willingness and a comfort level to be introspective.

What am I doing well? What could! do better? What obstacles am I creating to my own success? How do I overcome them?

In my experience, managers who are unable to talk about themselves and truly be introspective usually are limited in the success that they achieve. If you can't think about yourself introspectively, how can you stretch and re-invent yourself? I you can't re-invent, then how can you go to the next level? The ability to be introspective is one of the keys I look for when I recruit.

The set of personal advice in this and the preceding two steps may appear contradictory: Be stubborn, but be willing to re-invent yourself. Stretch, but don't take work too seriously.

However, the advice is not contradictory. The starting point is to know what you want outside of work (i.e., not take work too seriously) and to know what you want at work (be stubborn). See business as a game, with a healthy sense of detachment.

The way to keep the game challenging, to keep it fresh, is to never completely settle in but to always try to be better: not because it's life and death, but because that's what makes the game fun. Have fun at the game, and you'll be better at it; get better at it, and you'll more than double your profits. It works.

Doubling your profits isn't a matter of rocket science; it is simply a matter of resolve. If you can achieve that resolve and have fun doing it, you've accomplished what relatively few people have. I hope this book has helped start you well on your way to getting there.

For more, I highly encourage you to order Double Your Profits In Six Months or Less: 78 Ways to Cut Costs, Increase Sales, and Dramatically Improve Your Bottom Line and read the entire book yourself.

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