From in the red to $100k profit for the year

Meet Jeremy and Sadie

Jeremy and Sadie run an online store, selling their own brand of women’s clothing.

Where they were

When we first met, they’d been in business for a few years and had a goal of selling their business, investing the money, and living off the earnings (though this goal wasn’t initially clear… more on that later).

They’d been working really hard to grow their business, but were running at a loss. Their goal seemed really far away, and they were burning out.

What we did

We jumped on a Roadmap call and went deep. Here are the three big things that made the most difference for Jeremy and Sadie:

1) Checking the goal

The initial goal they told me was $10 million in annual revenue. It felt really far away for them, partly because they hadn’t got to $1 million yet.

So I kept asking them ‘why’. Why $10 million in annual revenue? Then for every answer, another why, until eventually the real goal emerged: they wanted to sell the business, invest the money and live off the earnings.

Next I stepped them through some calculations, starting with how much income they actually needed, then factoring in their taxes, a range of investment return percentages and common business valuations, all the way through to how far off they were from their real revenue target and how many new products to launch to get them there.

The end result of the calculations was that they needed far less than $10 million in annual revenue to reach their goal. They were much closer to their goal than they thought. This reignited their motivation and helped repair the burnout.

2) Marketing return on investment

As part of the call, I analysed their financial statements. One of the big things I noticed was how much money they were spending on marketing, so we talked about their marketing initiatives and the returns they were getting.

In an effort to rapidly grow sales (remember they’d had $10 million annual revenue as a goal), they were spending thousands and thousands of dollars per month on online advertising. But when we looked through the numbers, they were getting a super-low return on that investment.

We culled the ads and freed up thousands in extra profit per month.

With the extra cash and time, they were able to invest in other marketing tactics that had success for them in the past, as well as experiment with new tactics.

The experiments helped reignite their motivation, but also helped them refine their message and audience selection, so that when they came back to online advertising later the return was much higher.

3) Margins

One of the biggest factors in the financial success of a business is margins. It gets a whole module to itself in my Profit Foundations course because it’s so important.

Quick definition: “margin”, short for “Gross Profit Margin”, is the difference between what you charge for a product and the cost to manufacture and deliver the product. No overheads are included here, so no rent, marketing, accounting, bank fees, insurance, admin team.

(The calculation is the same for service businesses, but the cost part of the equation is the team and/or software that delivers the service.)

Because it’s so important, we spent a lot of time on the call checking the margins. Sadie and Jeremy had done a great job putting together costing sheets for each product, so we were able to see the margin for each product.

For each product, we compared the margin to my ideal number. For products above the ideal margin that were selling well, they promoted those more. For the products below the ideal, they were either cut, reduced in quantity, or increased in price. And I walked them through an implementation plan for each of those scenarios.

Jeremy and Sadie knew exactly what to do with each product, and had the skills to do it themselves in future, ensuring that future product launches would be more profitable. They dramatically improved their margins, which had a big impact on their profitability.

Results

With renewed motivation from the goal-checking process, Jeremy and Sadie quickly implemented the marketing and product costing changes after our Roadmap call.

As a result, their business flipped from running at a loss to ending the year with over $100,000 in profit.

They also turned around personally from feeling burnt out, to feeling motivated to tackle their now-in-reach goals.

From Jeremy

“We had read popular business numbers books, but hadn’t been able to implement them successfully. I’m really big on hiring people at the expert level, like you, to help us implement and to save us from things we don’t know we don’t know.”

From Sadie

“Money is the most intimate aspect of business, plus we’re a married couple with different personalities and different experiences within the business. I felt like you handled that with a lot of grace and a lot of care. You got to really know what we want and found a middle ground that works for both of us.

“In the beginning, we were quite down in the dumps. When people are in that scarcity mindset, they feel like they have to figure things out themselves, but this is what they need to do to get them out of that hole.

“Now today we’re in the very best place we’ve been. You helped us steer the ship out of some very murky water.”

Summary

So that’s how Sadie and Jeremy went from being in the red to $100k profit for the year: clarifying their goals, revamping their marketing return on investment and improving their margins.

If you’d like to see if these tactics can grow your business and help you reach your goals, click here to book a call and let’s have a chat about it. If I think these tactics aren’t the best next steps for you, I’ll point you in the right direction.

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Ben McAdam

Hi, I'm Ben. I uncover hidden profit opportunities for small business owners. I've been advising business owners in Australia, the US, Canada, the UK, Europe and Asia for over a decade on how to grow their business, and their profits, faster. Book a free call to see if we're a fit, or see here for different ways we can work together...
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