Why more revenue doesn’t mean higher profits. I find a lot of entrepreneurs get frustrated about this topic because they don’t understand. They are bringing in more sales and working longer hours, but their bank account isn’t growing. They aren’t able to pay themselves a salary and worry about upcoming expenses.
In short – “why aren’t I making a profit?”
More business means more work!
Bringing in a higher revenue won’t automatically lead to a higher profit, but it WILL lead to more headaches. You are working so much more but you still aren’t getting paid because your financial system is broken!
So many of us entrepreneurs think that we can solve a problem by throwing money at it. We hustle. We sign more clients. Maybe we even doubled our revenue. But you can’t fix a problem using money if the problem is you!
Your financial system is probably broken
If your financial process is broken, it’s going to stay broken whether you’re making $5000 revenue or $25000. If you don’t know what’s going on in your bank account, then you don’t know where the problems are.
I’m guessing you have a process in place for hiring employees, sourcing inventory… why not for your finances? For a business to be profitable you need to be pouring as much energy into understanding your data as you are in day-to-day operations.
Entrepreneurial poverty is REAL, and I want you to have a secure financial system in place that means with every sale you – the person behind the business – makes money. Brings home a paycheck. Doesn’t lay awake at night worrying about paying your staff.
You’re never going to be able to fix your broken financial system unless you identify where the problem lies.
Sit down and look at your numbers
Numbers don’t lie. They tell the financial story of your business so you better make sure you’re reading the books!
If that sounds intimidating, it’s ok! There are simple steps I want you to follow to identify your problems and fix your financial system:
Log into your bank account and start looking closely at where money is coming in and where it’s going out. There are two common problems people start to see when they do this:
- Invoicing – You’re bringing in a lot more clients but not necessarily getting paid for all the work. If you don’t have a rock-solid financial system, there’s no process for invoicing and chasing up these payments!
This might have slipped through the cracks when you were only making a small revenue each month. But as your business grows that outstanding $10000 payment becomes more of a problem.
- Expense Errors – When you start looking closely at your numbers you’re going to identify areas where you’re still paying out for things you thought you’d cancelled. Or maybe you’ve been overcharged here and there. You will find errors that, whether intentional or accidental, will eat into your profits.
Once you’ve identified these and taken steps to rectify the issue, you’ll see more money straight away.
Identify the obvious problems. When you start really looking at where money is coming in and out, you will see the issues leaping off the page at you:
- How much you’re spending on supplies
- What your payroll amounts to
- Your total ad spend
Once you’ve got a clear picture of exactly where your revenue is going you will immediately understand what areas you need to fix.
Start fixing your financial processes
Looking at your figures gives you a to-do list of how to fix the problems.
You might be feeling kind of intimidated and wondering where to start. Don’t worry – I’ve got you!
Grab your copy of my free Profit Plan tool to walk you through exactly how to unravel your finances. It’s simple and easy to use, but you just need to make sure you’re dedicating time to get this done!
If you want to watch me talk through this concept then please make sure to check out my YouTube video. I hope I’ve has cleared up some confusion around why increased sales don’t lead to more profit. I urge you to take a close look at your finances!
I’ve had clients reaching out to me at absolute breaking point before. They’re so stressed and so tired from working, working, working with no money to show for it. They haven’t taken time to sit down and mend their broken financial systems.
I’ve said it before and I’ll say it again: Money won’t fix your problem if the problem is you.
Check out my website to learn more!