Double check the numbers. Full transcript below.
Welcome to the Business Numbers Podcast. I’m your host, Ben McAdam. I’m a profits coach, virtual CFO, and entrepreneur. And I’ve created this podcast to help you grow your business profits and understand your business numbers without judgment and without burying you in a whole bunch of jargon that you don’t need, just actionable tips and case studies to help you grow your business. For show notes, go to the website, businessnumberspodcast.com.
On a coaching call yesterday, an agency owner wanted to discuss how to improve her gross margin as it was well below the Golden Rule that I taught her. I’ve talked about gross margins and golden rules on other episodes and blog posts on my website; if you’re not familiar with what I’m talking about, you don’t actually need to know that to listen to the rest of the episode.
She had done a great job of putting together a spreadsheet with the relevant costs and the gross margin percentage was in fact low when she put that spreadsheet together. And the natural next steps to improve gross margin are sometimes big projects like raising prices, optimizing processes, or making changes to what may be a high converting offer. Before we looked at which of those projects were most appropriate for her business and talked through the steps to implement it, I suggested we double check the numbers, just in case.
And it was a good thing we did because her gross margin wasn’t actually as bad as her spreadsheets said. We found a couple of costs were in the calculation a bit higher than they needed to be. For example, some team members that shouldn’t have their costs 100% included in the calculation. Some of them should have only been in there 50%, because those team members were doing something else elsewhere in the business and shouldn’t be part of this calculation.
So the big advice from the call was not to raise prices, not to focus on processes. The big advice was actually to just go sell more of these profitable packages. That is going to result in more growth for her business than if we just accepted the numbers the way that they were in the spreadsheet and worked on a different project instead. Her focus wouldn’t have been as heavy on sales in that case, and so naturally she wouldn’t generate as much new revenue.
The lesson here is to always double check the numbers. Even me, I help people with their numbers all day (and with the things that contribute to their numbers as well), even I use a calculator or a spreadsheet rather than doing sums in my head, and I double-check everything because of the big difference it can have.
If I had advised her to raise her prices or I had advised her to remove her focus from being so heavily focused on sales and to work on her processes and try and make it more efficient, then think of all the revenue and sales she would’ve missed out on. This could be the difference between an extra $5k, $10k, $100k, $300,000 a year more revenue if she had spent a month working on those other projects, rather than just realizing that everything is fine and she should just sell more of it.
Important lesson, and something useful for you potentially, is whenever you’re using the data to make decisions, whether that’s a spreadsheet that’s been put together, or whether it’s looking at your bookkeeping software, your bookkeeping reports, or any of your marketing dashboards, or sales numbers, anything like that, whenever you are making a decision, especially a big decision based on data, always double check that the data is right before using it to make a big decision.
So I hope this was helpful. A bit of a shorter episode this time. If you have any questions for me to answer on a future episode, you can reach me through profitscollective.com or businessnumberspodcast.com. I might combine those websites one day. Let me know your thoughts on that, if you have any.
Thank you as always for listening. If this is something that someone you know needs to hear, or would find helpful, or if the podcast in general would be helpful for another business owner, I would appreciate you sharing or leaving a positive review. That helps more people be helped and I would really appreciate it. So thank you for listening. I’ll see you on the next episode.
Before you go, two quick things:
- If this was useful, please give it a review and share it with a friend who it might help.
- If you want help from me to unlock growth and profits, and greater clarity around your numbers, book a call through ProfitsCollective.com and if we’re not a fit I’ll point you in the right direction.
