Archive Monthly Archives: January 2021

What Being Profitable Really Means

Do you know how profitable your business is? To be clear, your profitability isn’t the revenue you’re bringing in or even your net income, after expenses.

One of the biggest mistakes we see business owners make is over-simplifying the profit in their business. It doesn’t have to be a complicated process, but it does take a little bit of thought.

And to actually see real profit month over month and year over year? That takes a plan.

For us, Profit First is the plan.

It allows us to take a profit every month, regardless of our revenue, because we take our profit first. The revenue matters, the net income matters, but the fact that we’re profitable means more.

We’re not going to talk about how to be more profitable here; that’s a blog post for another time. 

But we are going to address why your bottom line revenue isn’t what matters when trying to grow a profitable business.

It’s easy to get excited about having a big revenue month. As bookkeepers, we know better, but we get excited too! To see a five-figure month is exciting. To hit $20k, $50k or more for the first time in a month is cause for celebration.

But once the confetti settles and the champagne goes flat, what does your bank account look like? Have you paid out all that revenue to expenses? Did you pay yourself a livable wage this month? Do you have anything left over?

Usually the answer is yes, all the money is gone. No, you didn’t pay yourself this month (again) and no, there’s really nothing left over.

So while the revenue looked and felt pretty good while it lasted, there was nothing left for profits and nothing left for you, the business owner. And our guess is that you spent much of that big month feeling pretty stressed out as you made sure the work was getting done.

Being profitable means a few things:

  • You’re able to reserve a percentage of your revenue as profit each month, usually because you set it aside first.
  • You’re able to plan out and/or control your expenses so you’re not spending every dollar every month.
  • You have enough cash to pay yourself and your employees a living wage. Consistently.
  • You enjoy a quality of life where you’re able to spend time with loved ones and enjoy some of your own hobbies. In other words, you’re not working all day, every day.
  • You don’t stress out so much about revenue because you have a really good handle on your expenses–and you know where your break even point is because you hit it regularly.

Profit is so much more than your revenue and having a profitable business will help you feel more relaxed and comfortable about where your business is and where it’s going. If this feels out of reach for you, we can assure you that it’s not. It just takes a plan and some accountability.

Let us help you find the way. Book a call with us today so we can show you how.

It’s Time To Let Go

There comes a point when you can not and should not be doing everything in your business. When you have to let your inner "control freak" go. You have most likely heard this referred to as "Delegation".

Here's the problem when many, if not most, business owners start "delegating". We hand off a task or responsibility to someone on our team and then proceed to stand over their shoulder and try to make sure they do it exactly the way we would. That's not delegation, that's micromanaging. You don't like it, I assure you, your team members don't either.

You know what else frustrates your employees? When they have responsibility without authority. If someone has to come running to you to get your permission to do something all the time, you haven't delegated. You've simply given a job to do without all the tools to get it done.

Which brings us to Need #3 on the "Order" Level of the Business Hierarchy of Needs (BHN) - Outcome Delegation.

Question: Are the people closest to the problem empowered to resolve it?

When a team member is truly empowered, that means that you give them leeway to not do it exactly like you would, and also to accept the outcome. If the problem wasn't resolved in a fashion consistent with existing guidelines or values, that is a conversation you can have to help decision making in the future. But unless they did something that is illegal or jeopardizes the business in some way, you need to stay out of it.

Another key phrase is "people closest to the problem". As your business grows, that won't be you anymore. For instance, if you own a gym and are consistently hearing from your admin that the check-in process isn't working, you have two choices:

1) Insist that it's not being done because of X, Y, Z, and tell her to just "get it done".

2) Ask her why she thinks this is happening and how she thinks it could be made better.

I think we can agree number one isn't going to win you any "boss of the year" awards. The second is probably more powerful than you realize. When an employee knows you are willing to listen to ideas, they feel good about themselves and about you. It brings out creativity and problem solving, and often the solution is much better than the current process and better than the one you would have come up with.

It would be no surprise to those who know me and those who worked for me that I struggled with this as we added team members. I like things done my way, and it caused conflict until I realized that just because the idea wasn't mine, or wasn't like I would do it, didn't mean that it was a bad idea. Usually just the opposite. They were closer to the problem, which meant they had perspective I did not have. And it can work the other way. Sometimes explaining (or reminding) why you do things the way you do them brings your team a better perspective and you get better cooperation. Just don't get caught in the trap of "that's the way we have always done it". That leads to stagnation and frustration.

For the business owner, it all starts with the willingness to listen, learn, and when appropriate, let go.

How are you doing with that?

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