Episode 4: Turn Your Business into a Profit Machine
Based upon the book "Profit First," Ben and Mark share the concept of setting aside profit for yourself first by simply creating different bank accounts (for operating expenses, owner's compensation, taxes and profit). Then, you put a percentage of what is made each pay period into each account. Each quarter, you change the percentages as needed. One of the many perks is it helps you assess reoccurring expenses more often. The four keys to creating stability include:
1. Keep your overhead low
If you value a really nice office space, perhaps sublease part of that space to cover the expense for your own space. With spaces like WeWork and other coworking spaces, having a really expensive space should be lowest on the priorities.
2. When you hire someone, make sure they pay for themselves and more
Make sure they for pay themselves, are the value of their work and there is a really good profit margin. Charge three times the service someone is offering but make sure you have enough work for them to do beforehand. "Hire when it hurts," making sure your workload is consistently too heavy for a time period and and not just if you have extra money. You can also hire if you want to offer additional services that you otherwise wouldn't be able to offer.
3. Create subscription based products/service
This helps with forecasting. There is a scare factor because you aren't sure how it's going to work. One of the perks is it eliminates proposals. Charge a flat rate for the same services every month, and you are, for example, an on demand content department. Offer subscriptions based upon the client's budget. It helps the client see you as a partner instead of "a doer." Once you have the stability and security, it allows you to really grow because you aren't scrambling to meet the budget each month, You know what is coming in and you can plan into the future.
4. Pay yourself consistently as the business owner
Pay yourself consistently each month to give you a consistent baseline. Then, if needed make sure you have the ability to make an owner's draw. If you follow the process, every quarter you will get a bigger bonus.