Last Updated on August 20, 2026 by
When someone asks how to improve business profitability, the default answer from a typical accountant is to ‘restructure your costs’. In plain English, that usually means cutting overheads and letting staff go.
That advice often comes with a familiar playbook: swap the good coffee machine for instant, cancel the staff Christmas party, and quietly squeeze morale out of the business to save a few dollars here and there.
Sound familiar?
The problem with this advice is that it is often wrong. Cutting small expenses is not a reliable way to improve profitability, and it can easily backfire.
When accountants and CFOs run a cost-cutting exercise, they tend to focus purely on the numbers in the profit and loss statement. What often gets missed is the non-financial cost of becoming the business everyone quietly resents.
That espresso machine and the caffeine hit it provides might be one of the small things keeping your team showing up in a good mood. Lose the goodwill, and you risk losing the very people generating your profit in the first place.
Fortunately, there are three genuinely effective ways to improve profitability, without gutting the culture of your business. Call them the three profit levers.
Your profit and loss has three levers built in
Look at your profit and loss statement again. Notice it splits naturally into three categories: revenue, direct costs and operating expenses. Each of these is a lever you can pull to influence profitability.
- Sales lever
- Direct costs lever
- Operating expenses lever
Here is how to use each lever to genuinely make a meaningful impact on profitability, without destroying morale in the process.
Lever 1: The sales lever
The sales lever is your top line: revenue. There are two ways to pull it.
- Increase prices: raise the per unit price of your product or service.
- Increase volume: sell more units.
What matters here is not sales technique. It is how pulling the sales lever actually affects your profitability.
In one modelled example, increasing prices by 10% delivered a 53% improvement in profit, while increasing volume by the same 10% only delivered a 16% improvement.
Increasing prices is almost always the stronger lever, because a price increase does not change the unit cost of anything you sell. It flows straight to the bottom line.
That said, it is rarely that simple. A 10% price increase can alienate price-sensitive customers, and in a competitive market, some of them may switch to a competitor, which can actually reduce total sales. It is a balancing act.
Getting more specific with your data helps here. Upselling is often one of the most overlooked ways to pull this lever.
Done well, upselling does more than lift a single sale. It also increases customer lifetime value and strengthens loyalty, both of which flow back into profitability.
It is worth asking: does your tech stack actually support effective upselling? Can you identify which customers in your data are a natural fit for cross-selling? This is often one of the easier parts of the sales lever to pull.
Lever 2: The direct costs lever
If raising prices is not realistic right now, and it will not always be the right lever, there is another option: direct costs.
Direct costs are the expenses directly attributed to producing your product or delivering your service. They are typically variable, meaning they rise and fall with sales volume. This is sometimes called the Cost of Goods Sold (COGS).
There are a few practical ways to pull this lever:
- Renegotiate supplier terms and consolidate contracts where it makes sense.
- Review vendor performance and reconsider suppliers who are underperforming.
- Explore long-term supplier agreements where the cost benefit is genuine.
- Review your inventory management to balance demand against stock holding costs.
- Reassess product features that add cost without adding meaningful value for the customer.
If your direct costs are already tightly managed, and they are worth reviewing regardless, there is a third lever available.
Lever 3: The operating expenses lever
During the disruption of COVID lockdowns, one business SBO worked with pulled the operating expenses lever and uncovered $250,000 in unused annual tech subscriptions sitting quietly in the business.
Operating expenses are the fixed costs you incur regardless of revenue: rent, wages, utilities, insurance and tech subscriptions. All of these are reviewable, negotiable and often renewable, and it is worth analysing each one for waste.
With the national minimum wage increased on 1 July 2026, wage costs are one of the operating expenses worth reviewing early, since a plan built on last year’s numbers may already be out of date.
Energy prices have moved, so it is worth checking whether you are still on a competitive plan. Commercial space is easier to find in many markets right now, so it is worth asking whether your current location and lease still make sense. Insurance premiums can also creep up year on year without much scrutiny, so it pays to review them regularly.
You could also look at more cost effective staffing structures, though this is where the cultural cost of cutting too aggressively becomes a real risk.
In summary
These three levers, sales, direct costs and operating expenses, are the controls on your profitability. Each one has several moving parts to coordinate: pricing, product and service costs, wages, and marketing spend.
Together, they add up to the numbers on your profit and loss statement. Know which lever you are actually pulling before you take the easy route and damage morale for a result you could have achieved another way.
Frequently Asked Questions
👉 Not sure which lever will actually move your profit? We'll model the impact of each lever against your numbers, so you know exactly which one is worth pulling first.
