A word on profit…
I coach and strategize with a lot of small business owners and independent entrepreneurs and there always seems to be some funky ideas floating around on profit.
Today, I want to clear one of those up. I’ve got a good example to help us all understand profit a little better starting now.
Let’s say you want to buy a new laptop for your business.
For sake of simplicity, let’s say it costs $1,000.
Let’s say you bill out your clients at $100/hour.
And, let’s say your operational expenses are $80/hour.
Here’s where so many of us have gone wrong in the past (but not in the future, since we’re fixing this misconception right here, right now).
The incorrect/problematic/please-don’t-do-this approach to this equation is to think, well that’s easy, it will only take 10 hours of work to pay off the purchase,
Cue the game-show-honk of an incorrect answer.
Actually, you need to look at your profit and calculate your expense based on that.
So if your profit is $20/hour, you would divide $1,000/$20 hour profit, and discover, perhaps to your astonishment, that your shiny new laptop will actually take you about 50 hours of work.
Learning that earlier in my business life was transformative. Finally calculating how long it would take us to truly pay for certain expenditures helped to laser focus me on the expenses and experiences that mattered most and made the biggest difference to our bottom line.
So here’s to more profit and a clearer understanding of how much profit it actually takes.
Does this help? Do you still have questions? Feel free to reply here and let me know. I’ll answer everyone I can!
p.s. My FAVORITE business challenge of the year is starting September 12, and, trust me, you’ve just got to do it. It’s Jennifer Kem’s (a mentor of mine) Brand Story Challenge. It’s a phenomenal, business-transforming multi-day exercise you can do. I would recommend you buy a special notebook or set up a new Evernote space for it and get ready to dive in. If you don’t end up bawling your eyes out with a newfound clarity about why you do what you do, I’ll be shocked. Click HERE to register.
p.p.s. If you didn’t catch my Instagram with an exciting announcement about a new project I’ve got in the works for you, check it out here.