Revenue is vanity, profit is sanity, cash is king.
I have talked about this with thousands of clients so many times but what does it actually mean?
There is often a resistance in people to talking about money and numbers. It is almost a taboo subject and when talking about the details causes much squirming. And yet there is a huge trend in the online space for beautifully coiffed individuals to be shouting about their multiple 6 & 7 figure revenue businesses.
This leaves those in their wake feeling significantly inferior and doing anything they can to boost that revenue for fear they will become one of the 50% of businesses who fail in their first five years (according the Small Business Association). The reality though is that revenue is a vanity number, it gives you no indication of profitability. 6 & 7 figure revenue means absolutely nothing if it took 6 & 7 figure costs to get there. When it comes to cash, given so many sales are taken on payment plans, you can almost guarantee that a 6 figure launch is not 6 figures in the bank in the short term. In fact, if the payment plan is 12 months, a 6 figure launch doesn’t even mean 5 figures in the bank in month 1!
So now you know what the saying is all about, it’s time to get real. Simply put, revenue is not everything. In fact, without profit and cash it is nothing. If you are a new business owner in the online entrepreneurial space how do you avoid the curse of vanity in your business?
Revenue is not everything; you must consider how profitable the revenue stream is. So often when my clients analyse their costs they had no idea that a particular revenue stream made them zero profit. Do not look at your headline revenue numbers alone, look at the costs that go into generating them – if it’s not profitable, then unless it’s a high converting lead income stream into a profitable revenue stream, stop selling it now.
Multiple income streams
You must have more than one source of revenue. Multiple income streams are essential. Over dependence on one income stream for the long term, will likely kill your business. Consumer tastes change and more importantly than that, once you have given the client the result they came for, there is nothing else for them to buy, so they will go elsewhere and forget all about you. Build a staircase of income streams – begin with a bitesize, easy to achieve result. This builds the trust factor with your customers – you mean what you say when you sell a result – this is hugely important. Now offer them the next step and let these incremental steps take them all the way to your all singing, all dancing, life and (potentially business) changing result.
To build your own wealth, you need to create passive income. Running your own business (often alone) means that if you cannot work, there will be no income if all of your revenue streams are active and require you to be there. This is the biggest headache for solo business owners. We build wealth for freedom ultimately and passive income is the key to this. There are lots of ways you can build passive income (although you do need an audience and to have had results from what you are selling first. Don’t just design a course and sell it when you have never used the process actively with clients as you just don’t know what they want or need or indeed if it works and that’s shady). Some ways to build passive income include online courses, membership platforms, affiliate income, book sales.
Source of income
Do not rely on other platforms for your revenue – if all your leads come from Facebook or Instagram or Twitter and you leave them there, what will happen if that platform is taken away from you? By all means market on those platforms but get your potential customers to your website and more importantly on your mailing list. With the potential customers’ consent, you now have their email address and can build a list that becomes YOUR asset. So long as you comply with GDPR and deliver consistent, useful content that your list is interested in, you can cultivate your very own, slick lead machine. Owning your own list is important. Building it should be high on your priorities list.
Manage your costs
Review your costs regularly, they have a natural tendency to just increase as you sign up for various tools you think you need and then never use. Watch your profitability every month and keep a tight control on your costs. Do not forget about taxes. Like death, they are inevitable.
Cash will always be king
Cash is king. Cashflow, or lack of it, is what kills a business. Track yours weekly (maybe even daily). I advise everyone to implement a simple cashflow forecast that details cash incomings and outgoings for at least the next 6 weeks, if not 12. Live by your forecast. Chase up income, don’t leave outstanding invoices and simply hope you will get paid, chase. This is a business you are running and you are a business owner, this is not asking your mates to pay back the tenner you lent them last weekend. Own your numbers and be confident in chasing what is yours. Stop being dazzled by shiny object syndrome, if it is not in your forecast and you don’t have the cash for it, then you absolutely don’t need it. In entrepreneur land there is a terrible tendency to invest in something because you know that will be the key to increasing your revenue. You then invest, don’t implement, get no results and have no cash. Stop.
Start implementing these points in your business right now. Don’t wait. You don’t want to be a vanity business; you want to be a King or Queen. If you need help with your mindset, energy or strategy and you are ready to Get REAL, drop me an email and let’s see how we can make that happen or check out the free goodies on the site.