March Profit Report: How COVID Impacted Our Profit + Did We Reach Our Profit Goal for Q1
Episode 427: Show Notes
We dunno if y’all noticed, but March was weird. March was also hard, hurtful, and 7,000 times longer than January. That’s probably because March asked us to adjust to a new normal and we were still getting used to being home—all the time. And we’re not here to pretend like our situations are better or worse than anybody else’s because, like you, neither of us knew what was going to go down in 2020. What we do know is that this period will be a watershed in small business, the impact of which will likely be felt years from now.
Listen on your favorite podcast player
While we don’t know how this will pan out, we can give you our March profit report and roll it out into a Q1 report in general for you guys to see how the first three months of the year went for us. You can always DM us if there is anything you want to know that we didn’t cover—we’re all here to learn together, right? In this episode, we tell you how each of our products fared, including the surprises and the disappointments we had and how we overcame certain obstacles. One thing is certain: tuning in to this episode will encourage you because we show you how reaching your goals is still possible!
Our First Instincts Versus How We Decided to Respond
Like many of you, the first half of March went great. Some of our friends did really well in March, others were afraid they would have to declare bankruptcy. We also did not come out of March unscathed: we saw a drop in sales because people understandably got fearful and didn’t want to spend money on non-essentials. But we emerged stronger on the other side. When we heard about the drastic changes, we were desperate to react to the situation immediately, wanting to implement a full-fledged plan, but while we made some decisions, we ultimately decided to avoid hasty actions and opted for the pause button instead. And this turned out to be a good decision because it gave us some time to evaluate whether our fears were based in truth or hype. It gave us time to wait and see before responding. The first week was really hard personally and mentally and we allowed ourselves to feel all the feelings without reacting to them. At the same time, we don’t recommend waiting for the so-called “new normal” to set in because you don’t know what that will look like; all you know is how things are right now. So, the best thing you can do is remain flexible while also trying to keep things afloat by responding to what is going on right now. The present is all we have, so it’s okay to put out something now to make a few bucks, something you might not have offered before the pandemic.
Figures for Strategy Academy, Trello, and the Creative Template Shop
Strategy Academy, for the most part, stayed relatively steady at 36% of our total revenue. The part that concerned us was that our risk saw a 30X increase in a matter of 4 days and we just didn’t know how it was going to shake out. What has been interesting to watch is the performance of our two lower-priced entry points: Trello for Business (a one-time $29 purchase) and the Creative Template Shop (membership and one-off purchases). Ads during the last two weeks of March also became unpredictable: our lead generation ads were performing super well as people were opting in for freebies. But our sales numbers also became unstable as no one really knew how to spend their money: some people reverted to spending only on necessities while others chose to do a course during the sheltering in place period. But since these are unchartered waters, we didn’t know what to expect at all! Our Trello course did drop to 17.5% but we didn’t lose any money, we just made less. The Shop, however, has been growing at a rate we have never seen in our business, illustrating its necessity for people. It helps folks look professional and saves them tons of time they can spend on something else. What’s hard about the Shop specifically is because it’s still in its infancy, we can’t tell whether the numbers are the result of what is currently happening or whether it would have been like this regardless of the pandemic. We did see a drop in individual sales and a rise in memberships—which is what we wanted—and we saw a 20% growth in memberships from February to March. In total, the Shop made 43% of our profit! At this rate, our membership might become the primary product in our business.
Why We Need More Data Before We Bring Out the Bubbly
It will be interesting to see what happens with the Creative Template Shop over the long-term. It is only in its fourth month of existence, so we need more time to gather information to get an accurate perspective on the numbers. Getting this kind of data is one of the most exciting things about launching a new product! Oftentimes you can launch and get a ton of information and use that for the next launch, but we might not be able to do it this time around. With our previous membership for Strategy Academy, we didn’t fully realize how memberships should or could work or what it can mean for business. But we do know the first three months after launching is not a good representation of how it will perform long-term, but that is not to say that we don’t think the Shop has a promising future. We are super positive about it, but we understand that we cannot bank on these numbers to continue growing like this. We need at least another year of collecting information to get a better idea of its true success. It is, however, certainly the thing that has worked most naturally the first time. It might look like an overnight success when really it has been two years in the making and it was our third shot at a membership! We’ve had nine different businesses before we landed on this one and have had to get through many failures and mistakes to get to this point—so there really is no such thing as an overnight success.
Let’s Talk About Expenses
Our cost of goods sold on advertising was almost dollar for dollar the same as in February. We spent a little bit less on Trello for Business and the Shop, and that is partly because Facebook was so confused about what buyers were doing that we didn’t want to spend money and take any chances. Our ads team is so knowledgeable that we are protected from some of that volatility. Their conservative approach sheltered us in this instance. The biggest change in March was with our contractors, but we knew it was coming because it was the first month we had to pay everyone working on the Shop in addition to the usual contractors. It shot up to 36% of our overall revenue. In terms of payroll, we have been paying ourselves conservatively for the last six to nine months with the hope of stabilizing things a bit more, so it came up to 15% of the revenue. We didn’t know whether we were going to make any money in March, but we still managed to make a 5% profit—and we are doing cartwheels!
The Overall Performance of Q1
An even better perspective on all of this is to look at our performance of Q1 in general. If we compare Q1 of 2020 to Q1 of 2019, we saw a 5% increase in sales this year, which is not insignificant. But boy, did we learn a lot in the process! Last year we hired a bunch of people in anticipation of growth that didn’t happen as planned, so our cash flow was extremely tight all the time. So, last year in Q1 we made less than 1% profit. Just remember though that we calculate this after we have paid ourselves. In Q1 of 2020, we had a much more controlled environment: we had a clearer idea of what our product lineup was and our customer experience, and we knew how to better manage our team and we had more predictable expenses. Last August we said we were going to focus on profit, cut expenses, and ensure that all team members brought their full value. So, we wanted to be more intentional about moving our business forward, and we did. In Q1 of 2020, we had a 30% profit!
Do What You Have to Do to Make It Work!
We are living in a time of collective fear, anxiety, panic, and just overall uncertainty. People are also grieving their failed plans. The temptation is there to make decisions from an emotional place, but as a business owner who likely helps to support a number of families, you have to make decisions based on facts. We know that the facts change constantly, so your choices now have to work for the present. Don’t worry about the next quarter or next year, try to do things now to keep you going. We are in this together and we want to see you come out strong on the other side of the pandemic. We will do what we can and give you the tools to help you see it through.
Quote This
We know that this will forever have a mark on small business and we will see some pretty massive changes because of it. Don’t worry about the next quarter or next year, try to do things now to keep you going.
Highlights
Our First Instincts Versus How We Decided to Respond. [0:06:18.1]
Figures for Strategy Academy, Trello, and the Creative Template Shop. [0:13:08.1]
Why We Need More Data Before We Bring Out the Bubbly. [0:26:00.1]
Let’s Talk About Expenses. [0:31:21.1]
The Overall Performance of Q1. [0:36:53.1]
Do What You Have to Do to Make It Work! [0:46:04.1]
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
Profit, Expenses, Strategy Academy, Trello for Business, The Creative Template Shop, Q1 performance, Data
