While putting together a workshop in Nhulunbuy about spreadsheets this past week, I decided make an awesome pricing and profitability spreadsheet to show just how useful they can be. Especially when using formulas and conditional formatting to highlight the good and the bad.
I even put in my own data on pricing and sales targets. Which is when things went horribly wrong.
Not with the spreadsheet. But with my assumptions about my pricing, my profitability and my business.
Three out of five of my businesses activities were not doing so well. And the other two were only just keeping me afloat.
That soured my mood for the week. But it also brought home a truth that I had been avoiding for a long time.
I don’t just need to change my business to survive.
I need to completely wreck what it has been about since I started it in 2016.
You can’t read the signs if you don’t look at the signs. 🛑
One of the things I both love and hate about being a trainer, is that this gig constantly retrains you.
There’s no room for faking it – you have to know your stuff.
There’s no room for complacency – you have to learn new things.
There’s no room for pride – because you’re going to be humbled.
I didn’t think much of the task ahead of me.
I had to prepare a class on using MS Excel as a tool for managing business finances. Not exactly groundbreaking stuff. After all, I’ve been in business a while now. I should be across this.
So I designed two spreadsheets with lots of formulas and conditional formatting that show a monthly budget and a price and profit calculator across a few lines of business.
To test it out I entered data from my own services and lines of business. And discovered a few things that I wasn’t ready for.
Three of the five lines of business were not looking so hot. And two of them were running at an outright loss.
Ouch.
There’s a difference between investing and hurting yourself. 🤕
I’ve always worked with the assumption that there are some things that I run at a loss that are an investment in the future.
Sometimes it’s speaking for free at a conference. Others times I’ll be hosting a free workshop.
I can easily tie these activities to a future benefit because they introduce me to a group of people I would normally not reach.
But running a line of business at a loss for no reason is just bad business.
In my case, after paying myself and all my expenses and overheads, it would take me this many projects to turn a profit at my current pricing:
+ 9 WordPress websites
+ 15 Google websites
+ 9 Social Media content projects
+ 195 private advisory sessions
That’s crazy! And it’s any wonder sole traders find it hard to grow their businesses. Sure, I am getting paid for my time, but that’s not paying for me to be able to expand my business and be able to take on employees again.
This is why so many of us fail to get past simply getting paid for our time. It takes a profit margin AFTER you’ve paid yourself at your hourly rate to be able to expand.
What are the options to make this kind of situation work better? 🙋
The way I see it is that I have two things I could look at to make this work better than it is. Because leaving them the way they are is not an option.
+ Reduce my overheads and costs
This is one of the first options that people will consider, because saving on costs feels easier than putting up your rate.
I have been steadily reducing my overheads (those costs that keep your doors open, like rent) since mid 2022. But I really need to get my costs down (those things that I have to pay to deliver that service.)
My biggest cost is myself. At my hourly rate, I get paid, but I have no room for growth. But what would the impact be if I could get someone else to do that same work for 20% less. Or even 60% less per hour?
That could get me profitable from the very first project. But it could impact on the quality of what is delivered. But it would increase my capacity to deliver more. But then I would need to manage someone.
Ugh… adulting is hard!
+ Increase my rates
This is one of the things that I find hardest to do. And that’s because I like to be able to position myself as a more affordable option for smaller businesses and those who are starting up.
The trouble is that operating like this is like operating a government program. You don’t need to make money. You are funded externally for that – so you can just get on with delivering what you want to deliver in the way you want to and to the people you want to delivery it to.
Sounds great!
But it doesn’t work as a private business. You can’t subsidise the cost of what you’re selling to someone when no one is providing you with the gap between what it’s costing you and what it’s costing your customer.
You are not Medicare.
Which brings me to what I’ll be doing.
The numbers are telling me what to do. 🔢
I need to increase my rates on a couple of things. That’s a given since everything else in my life has gone up.
But there is one service that I need to stop providing altogether. Even with a 200% rate rise, it will take too long turn a profit on it.
It simply has to go.
But I’m one of those guys who is an all-or-nothing kind of person.
So I’m taking a wrecking ball to the whole business and completely changing it’s direction. I started doing this a little last year, but now I have to complete the kill.
That means a new website. New social media. New SEO focus. Pretty much new everything.
It won’t be easy or pleasant. But like they said in my Landmark Forum session back in late 2019, transformation is messy.
Ryan J Melton has quite inspired me in this. He is constantly looking for the right business model to support his goals. And I’ve watched him pivot and adjust a number of times now as he gets closer and closer to his sweet spot.
Transformation is indeed a messy business. Watch this space.
Stop paying monthly subscriptions for social media scheduling!
Your story is worth sharing on social media without a monthly subscription.
Sociamonials has all the regular features you need in a social media scheduler but with one big difference. There’s no monthly subscription.
Just pay once and you’re done. Never pay again.
You won’t find this deal on their website – you’ll need to get it here.