by Karen Skidmore | 02,16 | Pillar Articles
There’s a difference between the price you sell at and how much you pay yourself … you knew that already (didn’t you?!)
Turnover is vanity, profit is sanity, cash flow is reality.
And then there’s gross profit and net profit; the difference between your sales, cost of sales and running costs. Not to mention all the other costs that need adding to your final end of year accounts, such as running an office from your home or depreciating assets.
OK … OK
Don’t let your eyes glaze over.
Please!
I don’t want this to be a bookkeeping lesson and, quite frankly, I am not at all equipped to be giving your tax and accountancy advice.
But one of the reasons why many clients come to work with me is because we talk True Profit.
It’s True Profit that I want to bring to your awareness today.
True Profit is much more than just figures on a spreadsheet. And as much as I would love to give you a simple formula to work from, everyone’s True Profit calculations will vary depending on your values, priorities in life and your personality.
Your True Profit is so much more than gross and net profit margins.
If you are running a service-based business, around your expertise, your day to day running costs are likely to be quite low. You don’t have retail space to rent, you probably don’t have a team of people you employ, there are no huge utility bills to be paid nor are you importing raw materials or paying distribution costs.
The running costs of your business are going to be your phone, internet, web hosting, advertising, marketing, home office, possibly travel and outsourcing such as a virtual assistant or web manager.
NOTE: If you really don’t know the exact running costs of your business, you need to get a handle on them right now. Especially look out for all those small monthly subscriptions to tech services you’ve got quietly running away from your Paypal account … they can add to hundreds every month if you’re not careful!
An important part of your expenditure is probably going to be around your cost of sales. And these are going to vary depending on your business model.
It’s these costs of sales where I want to start you on to help discover your True Profit.
Let’s take events.
If you run in-person events, your venue costs are going to be dependant on where you’ve decided to position yourself. The more expensive the ticket price, the bigger the budget you’ve to spend on your venue.
But if you’re staying cheap to keep the price of the tickets down, you could be penalising yourself in the long term. Let me explain.
Venue costs are directly proportional to the positioning of your event and thus what you charge for them.
Staying cheap and choosing a venue that only charges you £25 a head, there’s every chance you decide to charge a classic £95 per person. That’s 73% gross profit margin (before any marketing costs, etc).
Moving to a venue that charges £95 a head, the price for the same event wouldn’t only be increased by £70 … the value of the event has proportionally increased and there’s every chance you’d be able to charge £495 or more for the same day.
Not only has your total gross profit gone significantly up, but you are also up to 81% gross margin.
Taking this workshop example further, at a price tag of £495, you’d have to sell far fewer places to create far greater sales and profit.
It’s a mistake that many coaches, trainers and experts make when running training events, workshops and seminars. You believe that by setting a price at £95, this will make the event easier to sell. Thus you are forced to secure a cheaper venue to ensure you stay in profit.
And yes, I know … some will run these kinds of events as lead generation events; no profit made on the day but the profit is realised as you engage and build on that initial relationship. But let me put that strategy to one side for now, because to have a lead generation strategy like this needs to be seriously considered before you decide on your business model.
When you realise you will go through the exact same amount of effort to sell 1 place at £95 as you will 1 place at £495, it pays to pay more for your event venue to enable you to position your price better.
Plus, higher prices generally attract better quality clients. You only have to run 1 event with 40 people at £95 to realise far fewer people will step forward into other programmes with you compared to a room of just 10 paying £495.
OK … with this example, I’ve dealt predominantly with sales revenue and event costs here.
That’s just one small part of your personal True Profit formula.
True Profit also takes into account the following:
Health & Wellbeing
Some people thrive on launching and event promotion. I know I used to back when I was 10 years younger (I’ve been 12 years running my own business now). I used to love the hustle and the energy of promoting a live in-person event. The thrill of selling tickets and then running the day.
Today it’s a very different story for me. My energy levels are lower now being a “women-of-a-certain-age”. I’ll happily admit that the thought of standing in front of a room full of people all day exhausts me. I just can’t do it. Give me a day with my Academy members who I’m working intensively with over a course of a year … yippy de do. I’m a pig in muck.
But being presenter, trainer and speaker for a whole day … no way.
Thus the lead generation strategy that I mentioned earlier – sell lots of low priced tickets and then build and nurture those relationships to reap rewards during and after the event – is just not part of my business model.
Although it could be hugely profitable – and it is for many experts out there – it would affect my health and wellbeing and thus my True Profit would plummet.
Stress
There’s lot of different types of stress when you run your own business. There’s the stress of running around like a headless chicken with too much to do through to the stress that gnaws away at you slowly when you’re getting week after week after week of No’s.
Stress from not making enough money. Stress from believing you’re going to get found out one day … you’re not as good as you think you ought to be. Stress from having too many should-be’s cluttering up your to-do list. Stress from working with too many clients.
Many business owners, like you, take on work when you know you should be saying no. And many business owners create a business model based on what works for others … but just doesn’t work for them.
Stress of running live in-person events would be high for me and, of course, would affect my health and wellbeing. But for others, they love the excitement and the buzz – stress doesn’t even enter the arena.
What is not stressful for some, could be stressful for you. So make sure you take this into account when working out your True Profit.
Time with family and friends
Time is a critical part of your True Profit calculation.
Time is constantly ticking by hour by hour, day by day. It’s a resource that feels endless (there’s always tomorrow) but the reality is that it goes with a blink of your eye.
What you decide to do with your time is, of course, always up to you. And how you work time to yourself in and around your business is something you do have control over.
For me, my core objective when I first started working for myself was to create a term time business. My children back then were 3 and 5. I needed to be able to work only whilst they were in school or asleep in bed. It was the only way that my husband could carry on working full time, without the need for hiring live-in nannies or au pairs – something neither of us wanted.
It wasn’t all Easy Street straight off the bat. I was constantly frustrated by the short working days I had. It seemed I just got into the swing of doing some copywriting or arranging a couple of meetings, that I had to switch off and go pick up 1 or both of my kiddies.
But because my focus was Term Time Only, I worked hard at shaping my business model around school hours and terms. I am proud to say that I have maintained this term time approach in True Profit style 12 years on … and need it more than ever as my eldest embarks on her A Levels shortly and my youngest starts his GCSEs.
Time with family may not be your focus. You may have an elderly relative you need to care for. You may have a new love in your life that you want to spend leisurely long weekends with.
As I wrote at the start of this article, your True Profit will be different to everyone else’s. You need to clear on why time is important to you to give the motivation to go make a business to make it happen.
Holiday and days off
This follows on from time with family and friends, but I like to keep this separate because planning and booking holidays often needs long-term thinking to make happen. A member of my Academy realised last year that, although holidays were incredibly important to her, she always found herself too busy to book any because she was a self-confessed workaholic. She loved what she did, so she allowed herself to keep going month after month before getting to the end of the year and realising she hadn’t gone away.
This year, she started the year by booking holiday dates in her work diary first … and then went about creating her business strategy and plans around them.
Now that’s True Profit.
Education and personal development
Another problem I see happen is business owners “forgetting” to allow time for personal development and education. If you were an employee as an HR or accountant or legal professional, you’d probably be obliged to complete your CPD (Continual Professional Development) hours.
But work for yourself and where does this obligation come from? When you have no clients, you worry about taking time out to learn because it’s not bringing in leads. But when you get busy, how do you make the time to take out from client paid work?
Scheduling in and making education and personal development is critical if you want to keep your business growing because if you aren’t growing, stagnating is a dangerous place to find yourself.
A business model that allows this, will give you the True Profit that you need to make this happen.
Resources and hiring of a team
This is an interesting part of the True Profit equation. Hiring a team is often a critical part of ensuring your business is not ALL about you. You can’t be the expert, web designer, customer services manager AND the tea maker. At some point, you will need to hire to ensure your True Profit is realised.
Starting small with an assistant who may help manage your diary appointments and answer your phone is a good place to begin. Over time, as you learn to delegate, you will outsource more of the doing of your business; graphics, content creation, bookkeeping right through to online business managers and possibly salespeople.
However, there is a tipping point that hiring a team eats into your True Profit. A very good friend of mine found herself celebrating a 6 figure plus business. From the outside, her business was a huge success and she was recognised as one of the leading experts in her field. But pull back the curtains and there was an 8 person team working away costing her thousands of pounds every month. Her turnover was high but what she was paying herself was minimal.
Her True Profit was almost non-existent.
So hiring people works in principle but only if your business model ensures you get your True Profit.
What else have I missed?
There will be other parts of the True Profit equation that will be important to you. Perhaps it’s having one of your children come work in your business. Perhaps charitable contributions rate highly in your values.
I’d love to know what else you value and how it affects your True Profit calculation.
Want to discuss your True Profit potential with me?
Then head on over and book up one of my Catalyst Calls.
There only a limited number of these available each month so if you don’t see any times on my calendar when you click through, email my assistant Alexia at [email protected] and ask to be put on this month’s waiting list in case we get a cancellation.
by Karen Skidmore | 01,16 | Pillar Articles
If you are reviewing your business, you may have got some kind of plan together for this year.
You may have set your intention to make this year your best year yet; smashing all previous goals out of the water.
Perhaps you are being a little more cautious, deciding to err on the side of caution.
Or perhaps the thought of business planning fills you with you dread so that you avoiding making a plan at all costs (you may want to skip straight to this article here if you feel planning ain’t your thing and you find you’ve got a severe allergic reaction to anything goal related!)
But wherever you are at with your business, there is one thing that’s certain.
As each year goes by, marketing gets more and more complicated.
New marketing tools come out promising to be the secret cure to your problems. Your inbox fills up by the hour quicker than your Friday night wine glass. And there are more productivity apps to test out and distract you from your focus.
And it’s not just the tech.
As you go from one marketing blog to the next and register for yet another webinar or seminar, you get told about the next latest, quickest, easiest, fastest way to get clients. You try out blogging and then get told that periscoping is where it’s at. And then you turn around to hear that Twitter ads are starting to work and, even though you haven’t got your head around Facebook ads yet, you then start to feel that slight panic about having to learn about something else … just to keep up.
Keeping up with what marketing is working is exhausting and because it is my quest to simplify the act of client attraction, I want to share with you today my 6 rules for keeping marketing really simple this year.
Rule Number One: Less gives you more
I’ve been reviewing business plans for the past couple of months, both for members of my GID School and Mastermind Academy, and one common problem I see is cramming in too much. Yes, if you run a large business, with dedicated sales and marketing teams, then you can afford to divesify and spread yourself over mutiple channels and opportunities.
But as a solopreneur – a consultant, coach, designer, trainer, therapist – you are your own marketing director. The time, energy and resources you have to dedicate to marketing you and your business are limited. So trying to blog, tweet, periscope, network, speak, write your book, run webinars, create courses, setting up events, running your own Facebook ads …. it ain’t gonna happen!
All those plates you start to spin … they are going to come crashing down sooner rather than later. And when they do, it’s demoralising and you often lose your confidence. Not recommended.
And as many entrepreneurs are creatives (you love an idea!), this is hard rule to stick to. But stick to it you must if you want to see yourself get traction and results.
Focusing on just 2 or 3 core marketing activities and communication platforms will keep you focused on getting better results. Plus you’ll be a lot less stressed as your to-do list evapourates as a result.
Rule Number Two: Sell in person first before selling online
It’s become too easy for you to hide behind your screens and sit in your offices in your pajamas each day. The dream of running an online business from your phone in your back pocket and your local coffee house is possible. But it’s not an easy reality if you’ve never sold in person.
Of course, there are always going to exceptions to any rule. So before I get blasted by examples of people who have done this successfully … let’s get real here. For the majority, a pure online business will never happen because by hiding behind your screens, you won’t know your market place well enough.
The quickest and simplest way to market a new product or service is to get on the phone with a handful of potentially interested people and make them the offer in person.
And yet, what most people do when they have an idea of new course or programme is to spend weeks creating websites, making sales pages look gorgeous and shiny, write long, lengthy email sequences, decide they want to do a webinar (so the quest of learning how to run a webinar gets chucked into the equation!), realise that they need an online payment system and they want it synched up perfectly with a shopping cart and automatic fulfillment process … oh my … I don’t know about you, but I’ve just come out in a cold sweat and adrenalin is pumping around my system!!!
All this before you even know if your new product is any good and anyone is going to spend money with you.
When I first launched my Get It Done Marketing Programme 3 years ago, all I had was a basic web page with about 500 words and a link to fill in an online questionnaire. There were no paypal buttons or webinar or sales video or long form sales page. I sent an email out to just 130 people, told them what I had planned and if they were interested, they had to click on this web page I’d knocked together and fill in the short online form so I could arrange a time for us to speak.
I sold all 8 places at £750 each within 10 days of that first email.
Even I impressed myself how simple my marketing campaign was back then.
So whether you like the idea of selling in person or not, get over it. I’m not suggesting you starting pitching or going into double glazing mode … I’ve referring to having conversations with people who are interested in what you may have to offer.
Conversations that you spend most of the time asking questions and listening; not spending 30 minutes blasting them with reasons why your latest offer is so brilliant.
Ask questions and LISTEN.
Once you’ve started doing this, you get to understand and connect with your market place. And if you decide that it’s right to make an offer during that call and the other person says yes, you know you’ve got a product or programme that you can then spend time to refine your marketing campaign.
Rule Number 3: Stay off Facebook
Seriously .. this one’s a doozy.
Facebook is the gateway to endless opportunities. It’s a powerful traffic generation tool, connector of people and can position you as an expert almost overnight (with the right content you share).
But this same gateway of opportunities also distracts you, taunts you, pulls you away from your daily focus … if you let it.
If you need a reality check of your online activity throughout your working day, use a web application such as https://www.rescuetime.com/. It’s similar to those awful weight loss TV programmes where they display the week’s worth of food consumed in front of the “contestants”.
Rule Number 4: Know your Best Client
All great and awesome marketing (AKA marketing that generates sales) starts from the “who”; the person you want to attract and you know would love to spend money with you in order to access what it is you offer.
I call these people your Best Client.
Your Best Clients aren’t just people who buy stuff. Your Best Clients are people who pay the prices you deserve to charge; they don’t quibble or huff or puff or haggle. They pay their invoices on time; they don’t leave your invoices to the last to pay or stop taking your calls when you start asking for your money. They are the people you love to hang out with (perhaps even socially!). They are the people who take action on what it is you do with them; they keep to project timeframes, submit coursework on time, take action on the advice you deliver. They are people who love what you do, who you are and what you represent. They are people who recommend you to others and willingly give you testimonials or share your posts on social media and within their own communities.
They aren’t the people who you think you have the best chance of making money out of. Nor are they the people who you feel more comfortable in approaching. And it’s really easy to end up feeling desperate & willing to take on anyone when you start to lose control and your marketing goes scatter gun.
The reason why most of your marketing doesn’t work (AKA doesn’t generate sales), is because you’ve usually started with the platform and the message. You’ve decided that you want to use Facebook … or Linkedin … or that you want to run a webinar. And this then sends you off on a merry dance of learning from course after course after course.
When you’ve identified and emotionally connected with your Best Client, you will know where and how to find them. You will know whether they are active on Facebook … or on LinkedIn … or whether a webinar is a right place to start.
Starting with your “who” is marketing 101 … and yet hardly anyone does it because you get distracted with tech and start learning about platforms and tools and websites and stuff.
(If you want to fast track your marketing and spend just a few hours working out your Best Client, click here to find out more. Use the promotion code BLOG on the order form to get 50% off today.)
Rule Number 5: If it works, do it again.
Your marketing can be made so much simpler if you spend a little while each and every month reviewing what’s working for you.
I know I’ve had a real problem over the years of getting bored very easily. As soon as something started to work for me, it felt too easy and I switched lanes to start something new. Back when I first started in 2004, I began to run a workshop every half term. After a while, I narrowed down the topics to just 2 that sold out each time and I would get 15 people along in a room for a morning’s workshop. In each of those workshops, I would usually get 3 or 4 people who wanted to speak with me after and take up 1-2-1 coaching with me.
After 12 months I had my marketing system working so well that I could fill each workshop with just 3 or 4 emails and I’d get enough clients to keep me busy.
But I got bored. I decided it was too easy and switched lanes to do more stuff online and, although it worked in my favour over the long term, I went backwards before going forwards again.
I’ve learnt now that boring (AKA doing something that works over and over again) is good is for my business. Every time I get a little twitchy, I remind myself of my priorities and why I do what I do, which reminds me of the pain of going backwards when forwards is so much easier and fun.
Of course, you need to keep reviewing. What works one year, may not work as well the next. We live in a fast-paced society where is it difficult to predict where our businesses may be more than a year ahead. So keep checking in with how your marketing systems and activities are working for you; keep track of some simple sales metrics – whether that’s number of calls booked into your diary each week or number of proposals sent out or number of new sign-ups on your email list – and keep track of trends up and down.
You can afford to be flexible enough to change direction very quickly if you need to … but only do so when what you are doing, stops working and NOT because you get bored!
Rule Number 6: Trust that ideas and opportunities are endless
When you work from a place of scarcity, you’ll know how scarce business becomes. Without getting too whoo whoo on you, the Universe has a knack of knowing when you are desperate and when you are holding back.
It’s the same with ideas and opportunities.
As you start to get known and your business attracts more clients, you also start attracting opportunities; other business owners suggesting you get together to create a joint programme, someone wanting you to co-host a new podcast, someone else suggesting that you really should write a book, a conversation inspires a new product idea.
Ideas are not a problem for most of you. Ideas & Opportunities keep piling through to you, day in and day out – especially when you are busy and feel on a roll.
You start saying yes to stuff because you feel it’s better to say yes, then miss the boat. You start creating huge long to-do lists of all the things you feel you “ought” and “should” be doing to the point that you wonder whether the Andrex puppy is going to bound into your office any minute.
But here’s the thing. Ideas and opportunities are always there. And saying no to some now may actually help better ones come your way.
If you find yourself in one of these mind-fog periods, where your head is buzzing and you are starting to feel overwhelmed, get yourself a piece of paper and write down everything that’s going through your head. Keep on writing until you can’t write anymore.
Take a picture of that paper on your phone so you’ve got a digital record of it and then throw the paper away.
Now that’s your head clear, ask yourself what’s your ONE thing that you want to focus on.
You’ve not lost all those ideas and opportunities. You’ve got a picture of them on your phone if you need to ever look again. But here’s the thing … I bet you never go back and look again at that photo because once you’ve got your ONE thing, you know what to focus on.
And even though you’ve cleared your head, you’ll find new ideas and opportunities still keep on coming.
They are endless and you’ll never be at a loss for ideas or new ways of moving your business forward.
Once you realise this, it takes all the pressure off you trying to do it all; all the things you feel you “ought” and “should” be doing because you now know that it’s impossible to do them all. Your job is to do just ONE thing at a time because that’s what makes your marketing simple and that’s what gets you better results.
(If you want to read more about doing ONE thing, then I highly recommend Gary Keller’s book The ONE Thing.)
So there you have it.
My 6 rules to keeping your marketing really simple this year.
I know have more rules to share with you – I’m sure those will come to me as soon as I hit the publish button – but I want to keep things simple here. And I know you’ve got stuff to do. So go do it 🙂