Allocating Your Time to Improve Profit

Andrew Mattner • January 26, 2026

When improving business profitability, many business owners make the mistake of focusing too much on cutting costs instead of striking a balance between reducing expenses and growing revenue. 


Most business owners and managers simply focus on cutting overheads without balancing their profit-improvement time in other important areas like growing revenue and improving margins.


To get the best outcomes you must take a strategic approach to your profit and loss (P&L) statement.  This requires allocating your time effectively across key areas: overhead costs, direct costs, and revenue improvement.


1. Overhead Costs (10-15% Time Allocation)


Overhead costs—such as rent, utilities, and general administrative expenses—are relatively fixed. While you might be able to cut these expenses by renegotiating contracts, reducing waste, or improving operational efficiency, significant reductions are typically limited to 10-15%.


Since potential savings are limited, no more than 15% of your profit-improvement time should be devoted here. Focus on reviewing these costs quarterly and ensure any ongoing expenses still provide value.


Key Actions:


  • Negotiate supplier contracts for rent, insurance, and utilities.
  • Identify unnecessary or redundant services.
  • Automate administrative processes to improve efficiency.


2. Direct Costs (30-35% Time Allocation)


Direct costs include both fixed and variable costs related to delivering your product or service, such as raw materials, labour, and manufacturing expenses. In my experience, businesses can achieve up to a 30% margin improvement by optimising labour, improving operational efficiencies, and negotiating buying better terms with suppliers.


This is a high-leverage area because improvements here go straight to your gross margin. Allocate around 35% of your time to reviewing and improving your direct costs.


Key Actions:


  • Improve labour utilisation through better scheduling and training.
  • Optimise procurement processes to secure better pricing from suppliers.
  • Reduce waste and inefficiencies in production or service delivery.


3. Revenue Improvement (50% Time Allocation)


The most significant opportunity for profit growth lies in revenue improvement. Efforts to enhance your sales process, increase lead generation, develop new products, or improve pricing strategies often yield much higher returns than simply cutting costs.


By focusing half of your time here, you'll create sustainable, scalable profit growth. Marketing, business development, and refining your sales process are key to driving top-line revenue. Pricing is another critical factor—small price increases can have a significant impact on profitability without increasing costs.


Key Actions:


  • Optimise your sales process to increase conversion rates.
  • Invest in marketing to generate more qualified leads.
  • Explore pricing adjustments to increase margins.
  • Develop strategic partnerships to expand your market reach.


Final Thoughts


Improving profitability requires a balanced and strategic approach. By dedicating 50% of your time to revenue growth, 35% to direct cost management, and 15% to overhead reduction, you'll position your business for sustained profitability. Remember, cutting costs has a limit, but revenue growth is where true scalability and success lie. Make this time allocation a regular part of your business planning, and you'll see steady improvements over time.




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