You want to grow your business, right?
Did you know that if you aren’t careful, you can actually end up with LESS money – even though technically you’re making more?
There are three main reasons this can happen:
- Shooting for turnover, not profits
- Prioritising the wrong kind of income
- Cutting your profit ‘pie’ into more slices (thank you, taxes!)
Issue 1: Shooting for turnover, not profits
Have you noticed that people often talk online about their ‘6 figure business’ or their ‘7 figure business’, as if that in itself is the mark of success?
Turnover tells you how much money a business has brought in before costs. It indicates how hard the business has had to work to make a profit.
But turnover can actually be a very unreliable measure of how well a business is doing.
Without knowing the costs your business has incurred – that’s the money the business has spent in the process of delivering the work charged for – there really isn’t any indication of whether the business owner has anything to show for it.
The information you NEED to have is how much profit the business has made.
Because if you have made 6 figures by SPENDING 6 figures, you’d be better off not doing any work at all.
Business is all about making a return on an investment.
So it doesn’t matter how much income a business can bring in. A high turnover is not the goal.
If costs are so high they cancel out any profit, the investment has been fruitless.
Issue 2: Prioritising the wrong kind of income
This is a trap that is SO easy to fall into, but unfortunately, it is also a surefire way to ‘grow your business’ without increasing your income.
Your business revolves around selling hours of your time to clients, for example, you provide HR consultancy services for a daily or hourly rate.
In order to increase the size of your business you can take on more clients, but once you run out of hours to sell them, you’ve capped your income.
Any hours that you then take on beyond your maximum availability either has to be done by you on top of your existing full schedule (which means your business now consists of one tiny cog spinning faster and faster to keep up), or outsourced to another expert (which means you just lost a significant chunk of your profit due to your costs increasing).
You’ve probably noticed, but neither of scenarios feel much like progress!
What you need to do instead is grow your business in the RIGHT way. You need to scale your services so that the value you provide to your clients isn’t measured by time.
When this is at the heart of your business model, you build a business with multiple cogs that can effortlessly produce more profit with less drama.
Issue 3: Cutting your profit ‘pie’ into more slices (thank you, taxes!)
The third way businesses can be bigger but make less money, is all to do with the transition you go through as your business moves from making its first dollars or pounds to bringing in more serious money.
When you run a business that brings in a small amount of money, you’re exempt from a lot of the taxes that later hit you.
As we’ve already established, we’re aiming for profit here, not just turnover. To calculate profit, you start with your turnover (that’s the total money your business has brought in) and minus your costs.
It’s that simple.
And the profit is yours to keep.
But as you grow your business by another 20 or 30K, your income hits more and more of the thresholds you’ve not had to think about before.
Suddenly, your profits are divided into more slices – many of which you don’t get to hold onto. The biggest one is tax. But there are also other associated rates that kick in, especially if you employ staff on your payroll.
The result is you end up keeping less money – even though technically you’re making more.
I hear people say all the time that they want to grow their business to a 6 figure turnover. But actually – a 100K turnover can be a vulnerable position to be in.
You need to plan your growth to 100K very carefully, so that you don’t hit all the income thresholds at the same time and end up with less money than if you had never grown your business.
Growing Your Business The Smart Way…
So how can you avoid getting stuck in a situation where you are working harder, and your turnover is booming, but you actually have less money to show for it?
In short, you need a roadmap to get you to 100K and beyond.
You need a plan that is built around prioritising profit, not just turnover.
You need to know that you’re not going to be scaling your business into a corner (and pushing yourself into burnout!), but you’re unlocking the path to effortless growth and actually LESS work for more money.
And you need to be ready to take account of the speed bumps you will hit as your income increases, so that you can be sure you won’t end up giving away the lion’s share of your hard-earned profit.
Don’t risk finding out too late that you would have been better off if you had stayed working from your kitchen table.
If you’re ready to grow your business the smart way, head here to find out more about how you can work with me.
“After being a successful freelancer for almost a year, I knew I needed help to structure my business and set it up for sustainable growth. I liked Jessica’s no-nonsense attitude from the start and, having a solid business background and grown consultancies similar to mine in the past, her skills and experience were exactly what I needed. Because Jessica is a “real” business coach who knows a lot about business, we were able to put the infrastructure in my business that I need to run it in a sustainable way and grow it beyond my wildest dreams!”
Christina Brauer, Digital Marketing Strategist