Episode Transcript
[00:00:00] Hi, guys. Stephen Edwards from Grow Profit First Accountants, and welcome to this week's Profit first podcast. You might be reading this, you might be watching it, or you might be listening to it. So I want to talk about something that's resonated with me in the last week or so, and I think it will resonate with you as a business owner, particularly if you've been chasing growth for the last few years, but you feel that profitability is kind of running away from you from some extent. It doesn't mean you're not profitable, but you feel like you're, you know, you'll be profitable when your turnover is X. You'll have enough money in the bank when your turnover is X. And I think a lot of business owners, we get stuck in this revenue trap where the we think the answer is constantly revenue, revenue, revenue. And don't get me wrong, for a lot of businesses, it would be great if we could just double our profit by 50% or increase it by 50% for a lot of people. That might have a nice, healthy impact for them. But if you've not got solid foundations and you're not profitable already, actually, in our experience as accountants and seeing people's numbers, often they are scaling problems. So the big thing thing, the big subject I want to focus on this week is how to make sure you are profitable now, this month, this quarter, this year. Forget trying to grow all the time for the sake of growing. And for the record, I love growth. I want to double my revenue long term. I'd love to triple my revenue. I'd like a bigger team. I want to make more impact to more people. However, we need to get to the point where we don't need it, we want it. If you feel that you need to grow just to pay the bills, we're in quite a dangerous place in our business. I want to give you some examples around numbers of a business and how it can transform your thinking around profitability and revenue and growth. And this really ties into the whole profit first way of doing things that keep on saying turnover is vanity and profit is sanity at the end of the day. That's why the book was written in the first place. So let's take a business let's currently do in, I don't know, let's say 20k a month. And out of that 20k a month, it's doing £3,000amonth in profit. So it's doing 15% in profit per month, which is not that untypical for a business that's growing because they might Be reinvested in team equipment, changing premises, all this sort of stuff.
[00:02:53] However, if we run that business, a 20k month business, through profit first, it's more than likely they should be aiming to closer to £10,000 in profit, not £3,000. It doesn't mean, you know, you get there overnight, there's no magic wand. But long term you should be aiming for a far higher figure than let's say £3,000. And the reason this business, and I'm giving you a hypothetical business, but I want you to think about your numbers in your business, what this looks like for you and because this can make a profound impact to your own finances. So let's say you know you've got 20k business and try and replace it with your numbers. If you know these numbers, if your client just reach out, we can confirm that to you. If you're not a client, ask your accountant or go into your software. So let's say you're 20k a month and you're getting 3k a month profit out of that. But the reason why it's only 3k month profit is because you might have a team. You've probably got a team, you've probably got overheads, you've probably got rent, you've probably got marketing costs. You might even be, if you're like me, investing in self improvement, training, growth, mentoring, masterminds, all these sorts of things, business courses, workshops, which are brilliant and I honestly think it can make a huge impact to your business. The owner kind of upskilling themselves and being a better version of themselves. However, at some point we need to look at our numbers in ourselves, pretty black and white and say, when am I going to be profitable? If you keep on having these expenses, it's in hoping you're going to grow, why don't you just be profitable? Now just think about that for a minute. Let's say this 20k a month business has got 5k a month or let them. I'll make it a little bit more numbers work for me better. So 4k a month of expenses that are not essential. These are expenses that you're investing in to grow. It could be your gambling around your marketing. And there's a time and place for marketing. If it works. If it works, do more of it, why not? But you could be gambling in your marketing. You could be spending things and billboards, you know, advertising at the local rugby club, random flyers and newsletters. You don't know what they're doing, dabbling with pay per click advertising, just throwing money at it but not really know what you're doing. And within that you could be in some sort of business mastermind, business mentoring. So let's say that comes to 4k a month and it might be within those costs, you've even got a team member. They're only in your business because you're expecting to grow. You're actually expecting revenue to go up.
[00:05:35] So that's 4K.
[00:05:37] Let's say you stopped worrying about growing. And I want you just to run with this with me for a minute because I love growth. We changed our name to Grow Profit First Accountants. We love growth. But just think about this for a minute. If that business didn't stopped chasing the growth because they're investing in growth, to use their own language, which we hear quite a lot, that 4k a month will go straight onto their bottom line. So instead of making 3k a month profit, they could be making 7k a month profit. And we're now over 30% profit instead of 15%. We have just literally doubled that businesses profit by just giving you those examples.
[00:06:24] So it might be hard for you to think what does that look like for my business? So what I suggest you do is take a average or bad month of your figures and then look at your expenses as they are now. And what you'll find is your profit is often squeezed. Because when you have a bad month or an average month, often our resources are based off good months. We're hoping to grow, we're building in this extra capacity.
[00:06:54] When you look at a bad month, you should be resourced. Unless you've got very clear, very structured, strategic, well, intentional, you know, roadmap of growth. If you're just hoping to grow, you should be resourced at a poor month's revenue. So what that means is even if you have a terrible month, you are making an amazing profit for yourself as the owner, for you and your family and there's less stress. You don't need to keep on chasing the revenue to make the ends meet. You're not chasing turnover for the sake of it. So just think what that means in your business. What does a bad or okay month look like? Not a good month. What does an intentionally, relatively unexcited month look like? Look at your costs and see what they should be to make sure you are always profitable. What that means is when you do have a good month, you'll be super, super, super profitable. I've done some modeling in some businesses recently and we are talking about doubling people's profit potentially within 18 months. If they can apply these principles. So I just want you to kind of think about what that looks like in your business. I will be sharing soon that we are coming up with a profit strategy blueprint for people in 2025, where we basically do a profit audit. We give you the plan, we put you through a three step process to scrutinize your numbers and give you the roadmap to double your profits in 2025. It doesn't mean you're guaranteed to get there, but you're going to be way you'll have the chance to double your profit in 2025 if you apply these strategies, these tools, these processes. I'm going to share more of that with you in the coming weeks, but if you want to hear about it before announce it officially, please feel free to drop me a message. Reach out. More than happy to have a chat. Thanks guys, and see you next week.
