I remember the day.
I was sitting across from Bianca at our kitchen table.
We were reviewing our monthly financial reports, and it hit me.
We make plenty of money.
But… We keep very little of it.
I’m working my face off to bring in new clients.
Revenue is going up.
But, my expenses are also going up rapidly.
We are becoming less profitable as we grow… WTF
What’s the point of bringing in more clients if we are not making more profit?
I thought about just going back to being a solo operator as it was far more profitable and easier.
But I knew that other people had solved this problem, and it was something I was doing.
If it were a terrible idea to grow a business, no one would be doing it.
I started to compare my business to other businesses in the space.
I had many friends running similar agencies at the time.
It didn’t take long to work out where my problems were.
A large number of my clients at the time were on old legacy pricing.
Not only that…
We were still employing team members to deliver on those legacy projects despite not offering that service anymore.
How dumb was this!
I was employing a graphic designer full-time to deliver legacy projects that took up about 20 hours a week!
He was at half capacity, and I didn’t see it.
As I was trying to grow this business, all those legacy clients and delivering on those legacy services were draining the profits from the business.
I wanted to do right by the clients and honour the deals we had done with them, but it got to the point in which it was becoming crippling for the business.
Not how a business should work…
I was also worried they would leave if I tried to raise prices.
But something needed to change
Once I saw how much of my profit was being drained…
And knowing we would not be able to grow because of these legacy clients and services.
I began setting up calls with all the legacy clients.
I had to raise prices or end (on good terms) the service.
The calls were brutal
60% left on the spot
Some accused me of being greedy.
Others begged me not to change the pricing as they couldn’t afford it.
I felt horrible doing it.
However, 40% did stay…
And instantly became profitable clients.
Not surprising, my overall profit dramatically increased.
My big lesson:
Marketing and sales DO NOT solve all problems.
One must pay attention to the profit killers in their business.
Anyhow, in this week’s episode of the podcast, Grant and I go over the many profit killers that businesses can have.
More importantly, we share how to avoid and fix them.
Tune in to this episode now!
All information we share is NOT financial or investment advice and is purely intended for entertainment and educational purposes only. Always seek professional advice before acting on any financial decision.
00:00 Welcome to Business and Investing
01:45 Looking into the factors that destroy your profit
03:44 Holding onto legacy clients and suppliers
11:05 Why is it difficult to get rid of what we’re used to
13:00 Reasons you shouldn’t do ad hoc services and products
17:21 Changing directions too quickly
23:46 Ring fencing new ideas
24:52 Dealing with team drama and toxicity
30:03 Is re-recruiting a wise step to take?
36:55 How much does training cost your business?
40:47 Keeping your team when the business has changed
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