There’s a simple test I run on every recurring expense when I’m reviewing a client’s books. Does this cost directly contribute to generating revenue, or does it buy back time for someone who generates revenue? If the answer is neither, it’s a cost that needs to be justified or cut.
Most business owners don’t think about expenses this way. They think in categories - software, marketing, insurance, payroll. But categories don’t tell you whether something is earning its place. A $200/month tool that saves your ops manager three hours a week is worth every penny. A $200/month tool that nobody has logged into since January is not.
The Two-Bucket Framework
Every expense in your business falls into one of three buckets. Two of them are worth keeping.
The first is revenue-generating. This is anything that directly drives sales or makes it possible to deliver your product or service. Your e-commerce platform fee, your sales team’s CRM, your raw materials, your shipping costs. These are non-negotiable. Without them, revenue stops.
The second is time-buying. This is where it gets more interesting. A bookkeeper who handles your monthly close so you can spend that time on sales calls. An inventory management system that eliminates four hours of manual spreadsheet work every week. A VA who handles customer service emails so your operations lead can focus on fulfillment. These costs don’t show up on the revenue line directly, but they free up the people who do generate revenue to actually do their jobs.
The third bucket is everything else. And this is where most of the waste lives.
Where the Waste Hides
It’s rarely one big expense. It’s fifteen small ones that nobody questions because they’ve always been there.
I reviewed a client’s expenses last quarter and found seven subscriptions totaling $1,400/month that didn’t pass the two-bucket test. A project management tool the team had abandoned for Slack. A design platform with two seats that hadn’t been used in five months. A lead generation service that had produced zero qualified leads in the prior quarter but was still billing on auto-renew.
None of these were large enough individually to trigger a conversation. That’s exactly why they survive. A $150/month charge doesn’t feel worth investigating. But stack enough of them together and you’re looking at $16,800 a year that’s doing nothing for the business.
The pattern I see most often is tools that were useful when they were adopted but stopped being useful when the business changed. The team grew and moved to a different workflow. A process got automated. Someone left and their tools stayed behind. Nobody cancels because nobody owns the decision.
How to Run This Audit
Pull your P&L and sort expenses by vendor, not category. Categories mask the problem because they group unrelated costs together. When you see each vendor as its own line, the questions become obvious.
For each recurring charge, ask two questions. Is this directly tied to how we make money? If not, does this free up time for someone who makes money? If neither, flag it.
You’ll find three types of results. Costs that clearly pass and you move on. Costs that clearly fail and you cancel. And costs that sit in a gray area where someone thinks they might need it but can’t point to a specific outcome. That gray area is where you need to push hardest. “We might need it” is not a justification. “This saved me six hours last month” is.
The Time-Buying Trap
One thing I watch for is expenses that claim to buy back time but don’t actually deliver. The classic example is a tool that was supposed to automate something but still requires manual work because nobody set it up properly. You’re paying for the tool and still doing the work. That’s worse than not having the tool at all, because now you’re paying twice - once for the subscription and once in labor.
When a client tells me a tool saves time, I ask them to quantify it. How many hours per week? Whose hours? What do those hours get redirected to? If they can’t answer, the time savings are theoretical, not real.
Making This a Habit
The best time to run this audit is during your monthly financial review. Not as a separate project, not once a year, but every month as you’re reviewing the P&L. It takes ten minutes once you know what to look for, and it keeps costs from quietly accumulating.
The businesses I work with that stay lean aren’t the ones that never spend money. They’re the ones that make every dollar defend its existence. Revenue or time. That’s the bar. Everything else is negotiable.