November 2021 Profit Report: Creating Real Sustainable Income and Dissecting Our New Growth Trajectory
Episode 600: Show Notes
Welcome back to another profit report! We’re going back in time to talk about November 2021. We’ve been doing these profit reports for over two years, and we can’t believe how time has flown by! For those who are new to the profit report, in these episodes, we offer a breakdown of our strategies and decisions, as well as insights into how money moves around within a company like ours. It allows you to gain an informed perspective on what it looks like to grow a company of our size, and hear insider conversations about things like healthy profit margins and expenses.
Today, we talk about our launch in October and how it has affected our November profits, including recurring revenue from people who made purchases in October. We unpack some of the exciting changes we’ve made, particularly when it comes to budgeting and reimagining how we’re going to continue to grow and scale. You’ll also hear about why a lot of this comes down to hiring and how we make decisions around that based on projections of client needs and outcomes. Tune in for a detailed breakdown of our profit report, insights into our goals for next year, and why we are so excited to grow!
Listen on your favorite podcast player
Balancing New Hires with Profit Margins
In the past, we’ve been super fastidious about profit margin percentage, sticking to 30 percent. While we have particular goals for 2022, we’ve decided to be less worried about achieving a specific number and accept that this is a new season for us! It may sound strange, but we’re learning that it’s okay to have these kinds of seasons, when we may intentionally use a strategy where we plan for less profit for two or three months, and then see a surge of revenue, putting us in a new category.
This has been important for us to keep in mind when hiring. In the past, we've definitely hired and tried to prepare for growth before we were really ready. While it has been a bit nerve-racking hiring for what we expect we’re going to need in three months, it’s months like these where we see a surge in revenue that helps these decisions make sense. The boost in revenue gives you the padding to grow and keep going. Hiring decisions have also been greatly helped by how our business model has evolved to the point where adding two or three new clients can now justify a new hire, thanks to the high rates clients are willing to pay for our high-end services.
How Our Business Has Evolved to Better Serve Our Clients
The way we're building our business, and the way we're teaching our clients to build their business is specifically a mixture of cash injections and building sustainable revenue. At a certain point, we need to take on new hires in order to handle more clients and keep the same level of service and experience. The fact that we have more contact with our clients is giving us the ability to make a bigger impact on people and we don’t need to work with as many people to see results in our business. As a result, the growth that we’re referring to is much more sustainable since our client contracts are 12 months long. We’re going to need to make different decisions further down the line but, for now, we’re in build mode and growing into what our client capacity CAN look like!
How Team Energy Can Impact the Results of a Launch (and Lessons Learned)
This year, with our October launch and Black Friday following shortly after, our teams had their tasks split across two different projects. We had the support to run both products extremely well and everyone knew what they needed to do and needed to accomplish, but it was an interesting experiment to observe how our teams functioned differently when their focus was split versus when we’re all in sync and working on the same project. We have learned a lot from this experiment, but those lessons will differ from business to business and team to team! One of the biggest lessons we learned about why it was slightly disconnected was that the approach was out of alignment with our team culture. It was counter-intuitive for us to do a promotion in the middle of one of the biggest family events of the entire year. We realized that when everyone else is being loud (which is very much the case with Black Friday!), then we should be quiet.
The Co-op, Our Incubator, and How to Be Decisive About Paid Advertising
The way things have turned out over the last few months is very much in alignment with where we expected them to be. Our heads are still reeling and it’s quite shocking to be here in what theoretically is month two of this new product. We’ve doubled our MRR in five days, which makes sense when you look at our percentages, since the Co-op was technically the only recurring revenue we had. In November the Co-op was 40 percent, the incubator was 43 percent, and our affiliate income was 10 percent. This is exactly the product mix that we were aiming for and, based on our trajectory, the incubator is expected to scale much faster than the Co-op, although it’s important to bear in mind that they comprise two entirely different price points. Mentally, we’re prepared for that and we’re super excited to see how things progress into the next year!
We also learned a valuable lesson when it comes to our spin. We had planned to spend a hefty amount on paid advertising in November but, 48 hours into our cycle, we decided it wasn’t worth it and pulled EVERYTHING! This was partly due to the fact that we had decided to be much better at making quick decisions when it comes to spending, and that helped us make this choice much easier. The problem was not in our adverts or our planning; it was the landscape of advertising itself. The world of paid ads is currently very volatile.
In the past, Facebook was much more focused on helping small businesses, but that has steadily changed over the past four years. It’s also very difficult to plan your costs and outcomes with paid advertising since it fluctuates so much depending on how many people are currently looking to advertise. And during a period like Black Friday, when behemoths like Amazon have an endless budget for advertising, the smart move is often to exit the paid advertising race entirely because it’s so difficult to stand out amongst the noise! In the past, we’ve spent up to 30 percent on advertising, and, this year, we brought it all the way down to 12 percent.
Why We Want Our Clients to Have Freedom of Choice
We want our clients to experience the absolute freedom of being able to choose what they can do for their business; like being able to turn down work because you are fully aware of your capacity. Or deliberately choosing to acquire more work because you know that you’re ready to grow and you have the necessary motivation and support in place. Having that freedom of choice is honestly one of the biggest gifts we’ve ever received. And we LOVE seeing that in our clients!
The first sign that this is starting to happen is when a client feels like they have the agency to say no to a client that doesn’t align with them, whereas in the past, they would have jumped at the opportunity because of the financial appeal or the chance at exposure. This doesn’t necessarily mean that all your clients need to be exactly the same. Instead, it could mean taking on clients who share your values, fit well with your team, and communicate in a way that makes sense to you. We want you to be able to decide how you filter your ideal client and then have the freedom and luxury to make that choice and feel comfortable with it!
Contractors, Employees, Growth, and How We Reached Our Goals!
One major thing we’ve learned this year is that sometimes you need to pay yourself more to increase motivation. That extended to our team and showing our appreciation there. One of the specific goals that we had prioritized was to turn one of our long-time contractors into a full-time employee. We each had very specific metrics for when we would be able to make that transition, and it was tremendously exciting for us when we achieved those metrics on DAY ONE of the launch! We were so ecstatic at having reached this goal, and we were celebrating together even if our team wasn’t aware of it yet! That benefit of being able to make new offers for our team and grow in a certain way has been a highly motivating factor for us.
In terms of our team and expenses, we were super on target this year. Our target for a while has been to have 30 percent be spent on our team, which is exactly what we achieved. It was split up across contractors at 18 percent and employees at 12 percent. One interesting trend we noticed is that, up until this point, contractors have always outweighed employees, and they still did in November, but the gap has slowly been closing. This will probably be the last month where contractors outweigh employees in our business. It's an unusual feeling, but it’s also a very exciting transition for us!
That being said, we have a few niche contractors that we never expect to do without, and they will always be a part of our number every month. In other news, our profit margin this month was a full 34 percent, making it one of our best months ever; and not just from a profit margin percentage, but also the full dollar amount!
Quote This
The way we're building our business and the way we're teaching our clients to build their business is specifically a mixture of cash injections and building sustainable revenue.
Highlights
How to Balance New Hires and Healthy Profit Margins [0:03:46]
How Our Business Has Evolved to Better Serve Our Clients [0:07:50]
How Team Energy Can Impact the Results of a Launch (and Lessons Learned) [0:12:07]
The Co-op, Our Incubator, and How to Be Decisive About Paid Advertising [0:28:03]
Why We Want Our Clients to Have Freedom of Choice [32:58]
Contractors, Employees, Growth, and How We Reached Our Goals! [37:08]
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 Margins, Hiring, Growth, Scaling, Goals, Paid Advertising, Black Friday
