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@jairekrobbins
26 January 2021

$1 million in Revenue vs. $1 million in PROFIT

Jairek Robbins

This is Part 2 of a 9 part series in which I asked a number of my clients to share what the biggest thing they did that helped their businesses to grow from under a million dollars to more than a million dollars in revenue. 

They were very helpful and shared their views and I will be sharing with you what one of my clients said was responsible for helping them to move from a million in revenue to a million in profit.

Growing big vs. growing rich

First off, what is your biggest interest for your business in 2021? Number one, would you like to see it become big (increase reach, increase revenue, increase employees, etc.). Or, number two, would you like to become rich (grow profit, lean team, grow its reach, etc.)?

Let’s pause a little bit and I share something about my philosophy. When I first started out in the not-for-profit world, I interacted with people with incredibly huge hearts who wanted to do a lot for those in need. In contrast, those on Wall Street were all about making more money, and they hired the smartest people to do that. These two worlds couldn’t be further apart!

However, I met someone who worked really hard and built a huge business, and then he went and invested part of his profits in building seven schools in one year for those in need. This person was at the intersection between those who worked to get lots of money, and those who had huge hearts for humanity.

I was blown away and decided I would spend my life engaged in “for purpose” activities (growing businesses which could then invest money into good causes.

Do you monitor the numbers of your business?

So, back to our question. Would you rather have a big business or become rich?

When we first started out, I wanted us to get really big; reach lots of people, have a big team, and so on. And we have really done well in that regard because we have active clients learning from us in 115 countries around the world. 

What I wasn’t really good at for the first about 6 years with the numbers of our business. Let me ask you a quick question, how often do you review the numbers of your business; do you do it weekly, quarterly, or annually?

Let me share with you some research which was done. In that study, they asked small business owners how often they reviewed their numbers. Things like the P&L, the balance sheet, etc. how often do you look at and analyze them? 

Hopefully, you review your numbers pretty often. Imagine flying a plane from Tokyo to Los Angeles. How often do you want to check in to find out where you are during your journey? It would be really bad experience if you realized, 6 hours into your journey, that you had headed in the wrong direction and don’t have enough fuel to reach your destination.

Many of us do exactly that in our businesses. We take off at the beginning of the month and only check our numbers at the end of the month, hoping that things went well in our business. If you aren’t really lucky at the end of the month, you would be in a lot of trouble since there is nothing you can do about your situation at that point. 

In contrast, if you created a system which enables you to check in periodically throughout the journey and then do a little recap at the end of the journey, you can correct course. What is fascinating is that the more often you check in, the more opportunities you have to correct course before it is too late.

If you don’t check in and know where you are, there’s a chance you are going to run out of fuel one time and not even know it.

The research shows that 50% of business owners only check their P&L (profit and loss statement) once a year. When I read that, I almost choked! And that one time that they do it during the year is when they are getting ready to file their tax returns. 

Check your numbers regularly

And so the first principle or lesson that I would like to share with you today is that you should get into the habit of checking your financial numbers more often. One of my favorite quotes from a man (Warren Buffett) who has done very well in business is “accounting is the language of business.”

You can’t win the game if you can’t read the scoreboard

Your P&L, as well as your balance sheet, is the scoreboard. Imagine trying to play a sport and you don’t know how to read the scoreboard. How do you know if you are winning or losing the game? How do you know how far ahead or behind you are? One of my business mentors pinned me on this and said if you can’t read the scoreboard, you can’t win the game.

Let’s now go back to getting big vs. being rich before we look at the text my client sent me while explaining how they moved from a million in revenue to a million in profit.

Related: 10 Tips To Master Your Money

Examples of why business numbers are important

Imagine you find a way to get big and help a million people. Assuming you generate a hundred bucks from each person, which would give you a hundred million dollars. That’s huge revenue.

But then, you may need a team of about 200 people to pull that off, and let us say it costs you about $90 million to run that business. This means you will be left with $10 million net at the end of the year. 

Many people will be excited that they are helping a million people, giving 200 people jobs, spending $90 million and getting $10 million in profit each year. 

How many of you would want this business? This is an important question.

Let’s look at another example of a business. Let’s say it also helps a million people just like the previous one. But, this one produces $20 million in revenue per year. It requires seven people to run it, and its annual expenses are $10 million a year. It therefore remains with $10 million dollars net after expenses.

Big question, which of these two businesses would you prefer?

When I first saw those two scenarios, there was absolutely no doubt in my mind that I wanted the business in the first scenario. My business mentor proverbially whacked me on the head and said if I wanted anything other than the business in the second example, I didn’t know enough about business. 

He explained that if I realize the amount of headache, the amount of friction that goes into business Number 1, and if you can eliminate $80 million dollars of expenses, and only need seven people vs. 200 people in the first company while remaining with the same amount of profit, one would be silly to still choose the first business.

He told me that if the purpose of the business is to deliver extremely great value to clients, and they would be thrilled to pay us an awesome amount of money for that experience, and we can take that money and reinvest it into causes that matter, then we were running a for purpose business.

The goal is, how do we run that business as lean as possible, generate as much profit as possible while making as big an impact as possible? If we do that right, it makes a really huge difference. That means we have to be incredibly smart in what we do. We work hard at it too, but we have to be very smart regarding the way we go about it. 

How do you get to a million dollars in profit?

When I asked my client how to get to a million dollars in profit, the client said this happened when their marketing got really strong and targeted to the extent that they were able to get the type of clients who were willing to pay a lot and reduced the low-paying clients they had in the house.

That is very important!

If you want to increase the profitability of your business, can you identify who your best clients are? Meaning for every dollar invested, can you get a 10x or even 100x return on that investment. For every hour invested, you should get multiple hours in return. 

Can you figure out the clients who give you the best ROI when you work with them? Can you get more of such high-paying clients?

If you get more of those clients, they get unbelievable results each time they work with you. Two, they will be willing to invest significantly more to work with you. And three, that leaves you with a huge mountain of profit at the end of each year.

How we can help 

So, to recap the lesson for today. First, if you cannot read the scoreboard, you cannot win the game- accounting is the language of business. Two, are you trying to get big, or are you trying to get rich? You should be looking to be rich as the head of a for-purpose enterprise which makes a ton of money to reinvest in causes you believe in. 

In order to do that, you need to be focusing on option #2 and learning how to profitably run that business. 

If you are reading this and you would like some help in building a business along the model of option #2, we have a business accelerator starting this month (January). It is limited to 10 people, and we already have 5 people who have paid and confirmed their slots, so we have 5 slots left. The qualifications for joining is that ideally, we want you making a minimum of $20,000 or more each month in revenue, and we will help you grow it from there. That threshold means you have figured out what works, so we can work with you to take it higher.

There’s a form below that you can fill out providing some information which will help us determine if we can or cannot help in your case. If we can help, we will send you an email with three short videos highlighting our process so that you can decide if it is a good fit for what you are looking for.

I hope this Part 2 was useful and that you learned something. Talk to you all soon!

To Your Success,

Jairek Robbins

 

 

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