Not too long ago, Jill and I were talking with one of our clients.
She gets AMAZING results for her customers, so it’s no surprise that she has a waiting list a mile long.
But the problem was …
No matter how much she would sell, she just couldn’t seem to get ahead.
And so I asked her, “How much does your BUSINESS make every time you make a sale?”
The answer: “What do you mean?”
Why you can’t get ahead
Here’s what’s going on. Imagine you run a construction business.
Your client hires you to as the general contractor for a $5 million dollar project.
At the end of the day, because your projects ALWAYS end on time and on budget, your client gratefully pays you $5m in cold hard cash.
Time to retire to the beach, right?
Because of that $5m, only a small portion ever belonged to your business.
Most of it actually belonged to the subcontractors doing the work. You collected on their behalf, but it wasn’t ever really your money.
What’s more, even after accounting for that pass-through revenue, your business still may not have made any money.
Because you’ve got overhead. Advertising, administration, accounting fees, licenses, taxes, and your own salary, to name just a few.
So the question is, what’s left after all of that?
If you’re like our client, the truth may be next to nothing. Or worse, LESS than nothing.
Here’s how to fix it:
Your business needs the same things that our example construction business does:
First, it needs to make money for itself.
And second, it needs to be able to use that money proactively to fund growth.
1. Track What’s Actually Yours
The first thing you need is to know is this:
Of every dollar you bring in, how much actually belongs to your business?
Because just like with our construction business, the money you bring in ISN’T necessarily your real revenue.
Sales tax, for example, is never actually your money. You collect it on behalf of the government.
Subcontractor fees are another common example.
Say you’re a copywriter. If you’ve got someone who helps you actually do the writing and they’re not an employee (so, they pay their own taxes, may take other clients, etc.) then the money that goes to pay their fee, commission or retainer isn’t really ever yours.
And then finally, we also consider things like affiliate commissions to be part of this equation. You may bring in $1m on your launch, but if $500k of that actually belongs to your affiliates, it wasn’t ever your money in the first place.
Whatever the case is for your business, the first step is to figure out what’s actually yours.
Once you’ve done that, then you know what you’re working with and can move onto the net piece.
2. Plan to Spend for Growth
The second thing you want to figure out is how you can spend to make your goals happen.
In other words, if you want to increase your revenue, how will you need to change your expenses?
Notice that this is different to how most of us naturally think about it.
We usually think of it as “first we increase our revenue, then we’ll be able to spend more” … but this isn’t really the way it works.
If you keep doing exactly the same things, you’ll keep getting the same results. Change how you spend, and that will affect how much you make.
Of course, you need to do this in a way that’s going to actually be ROI positive.
The way we do that is by looking at what your goals are, and what the bottlenecks are to achieving them.
- Do you need more capacity? Spend money on product fulfillment.
- Do you need more margin? Spend money on optimization.
- Do you need more time? Spend money on team.
- And so on.
The important thing, of course, is to figure out what your bottleneck actually is rather than just jumping to conclusions.
These Are Your Action Steps
So if you feel like no matter how much money your business brings in, you just can’t seem to get ahead, these are your two action steps:
First, track what’s actually yours. And second, plan to spend for growth.
In our clients’ case, when we did this we discovered that her biggest obstacle was her margin.
She was paying too much to subcontractors and so no matter how much she tried to “scale up” or sell more, she was just getting further and further behind.
We helped her figure out how much of the revenue coming in actually belonged to her.
Then we could make a plan for how she would spend the rest, so she could grow her business.
Just taking those two simple steps has already been paying off—so hopefully the same will happen for you.
And if you’ve got questions about how this all works, feel free to reach out on Facebook and ask. I’d love to help.