Making Less to Make More $$
Episode 443: Show Notes
We have this theory that you can make less revenue and walk away with more money in your pocket if you do a few very strategic things. Like many of you, we came to a point in our business where we were ready to see big growth—and we don’t mean make a little bit more money, but exponentially more! Who doesn’t want that, right? And we managed to do that. In the first six months, we made $100,000, doubled it four months later, and we went on to have a multiple six-figure business in our second year, and over $500,000 the year after that. We just kept going after bigger dreams and pursuing more.
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But we believe there are some things you can do to help you along, and it doesn’t include focusing on that top-line number—which you can shoot yourself in the foot with. We know people who look like they are super successful online, but when you dig a little deeper, you would discover that they set themselves up in such a way they get to keep very little of the money they make. We were headed in this same direction. In this episode, we talk about this learning curve we experienced in 2018 and 2019 during which we thought we needed to do XYZ when we didn’t! Besides, what’s the point of reaching your big goals when you are not personally making any more money? Stay tuned to find out.
Consider Profit and Rethink Revenue
If you have gotten to your first six-figures, we want to say hooray because there is so much that is unlocked when you reach this goal! You have so much more confidence and can see your potential down the line. But what we didn’t get was that many of the conventional ways of growing a business involve growing your revenue while not necessarily making more as the business owner. Our response? What is the freaking point? Doubling your revenue, therefore, does not automatically mean doubling your income. Some of the conventional strategies have merit but we need to reframe them slightly. The first thing to consider is your aim, and instead of focusing on revenue, we suggest you concern yourself more with higher profit margins. There are three ways to do this: decrease your expenses, increase your revenue, or both. The reason why we can talk about this so freely now is we made this mistake and we chased after the bigger business without fully understanding the implications.
Know What You Want and Be Careful of Putting Too Much Fuel on the Fire
Firstly, we do want to make an impact. Most people do. We want to see women make more money—and that’s the reason for this podcast. But you also have to consider what you want to provide for yourself and your family. For us, it’s our full-time income and we’re the primary breadwinners in our households, so that comes with a huge responsibility. The big revenue figure was alluring but we realized it wasn’t going to necessarily make a difference to our pockets. Some of you might think you need a lot of cash to explode your business, push it into advertising, sell more, buy PR, or even establish key relationships. And if you want to do these things, cash is going to be your fuel, but the risk is that you might be losing a lot of money if the strategies or people you placed your bets on fail. We think putting too much fuel on the fire too quickly can be dangerous. We made the mistake of trying to optimize advertising that seemed to be working great and put more money toward it only to realize we miscalculated the time it would take to make back the initial loss of the money, thereby getting strapped for cash. If you’re a small business, you probably don’t have heaps of cash to back you up, so be careful of not spending too much on something that will only produce a return later on.
Pay Attention to Cost Per Acquisition
Normally what you see people do is work out the cost per acquisition, in other words, how much they would have to spend on marketing on average to turn someone on the street into someone purchasing their product. This is what it costs them to get a new client or customer. This is not to be confused with cost per lead: cost per acquisition is a far more useful statistic. We ran into a problem with our $2000 product. We had a very generous payment plan and people were signing up for the program, but our cost per acquisition was higher than the initial payment. The problem is, when you do this at scale, you lose a lot of money upfront that you can only hope to get back at the backend. You get to a tipping point where you have pre-spent the money for people to come in and they have not paid back the money yet, and your cash starts going the wrong direction. It took us a year to finally get all the money back. Understanding your cash flow is one of the most important aspects of being a business owner.
You Don’t Need to be Famous On Social to Get Wealthy
We have friends who aren’t famous on the internet and yet they are rolling in the dough. They are so focused on profit and serving their people well, and that’s the recipe for their success. They don’t rely on social media or any of that stuff. This begs the question of whether you can be rich and famous simultaneously (if you are not a celebrity). Let’s face it, there is an appeal to having your name attached to something that makes an impact, but for us, the important thing is that you earn the kind of money that reflects the effort you put in, otherwise, you will soon be demotivated. That is not to say that you have to work yourself to death. On the contrary, if you work smart, you can be financially successful without breaking your back.
Can You Set A Goal to Make Less Money and End Up Making More?
First of all, yes, this is possible—and it’s what we did. At the end of last year, we decided that we needed to change the way we do business because it wasn’t fun anymore. So, we let go of the sexy revenue number and decided to be cool with whatever we made the year before and keep the money in the business as far as possible to be a safety net. People also play a big role. Early on, we hired people to do the tasks we were tired of doing and it did help us to focus on what we wanted to, but instead, we should have paid more attention to those things that had a direct connection to the money we were bringing in. We should have employed people in the areas where the money and growth were because we ended up doing that kind of work and couldn’t really say how much money our employees were bringing into the business. The bottom line? Don’t hire people that don’t bring in money in tangible ways.
Get Serious About the Money You Want
What all of this comes down to is getting serious about what you want to put in your pocket at the end of each month and not letting big revenue numbers fool you. Revenue can be a real vanity metric. You can build a budget around the money you want to get out and still have a healthy business. As long as you keep tabs on the expenses and plan, plan, plan! Because when we didn’t have a budget and a plan, we ran into some problems. That’s why you have to be careful about taking advice from everybody else and following the conventional growth script. Nowadays our philosophy involves staying lean and focusing on profit rather than doing things like hiring employees because you are told it’s the way forward. Go with what feels right for you.
Quote This
You could make less revenue and walk away with more dollars in your pocket if you do some very strategic things.
Highlights
Consider Profit and Rethink Revenue. [0:06:37.1]
Know What You Want and Be Careful of Putting Too Much Fuel on the Fire. [0:12:30.1]
Pay Attention to Cost Per Acquisition. [0:24:17.1]
You Don’t Need to be Famous On Social to Get Wealthy. [0:30:15.1]
Can You Set A Goal to Make Less Money and End Up Making More? [0:34:07.1]
Get Serious About the Money You Want. [0:39:41.1]
ON TODAY’S SHOW
Abagail & Emylee
The Strategy Hour Podcast
We help overwhelmed and creative entrepreneurs break down their Oprah-sized dreams to create a functioning command center to tame the chaos of their business. Basically, we think you’re totally bomb diggity, we’re about to uplevel the shiz out of your business.
KEY TOPICS
Revenue, Profit, Expenses, Hiring, Advertising, Cash flow, Breadwinners
