I was at my daughter’s 8th birthday party and one of the mom’s asked me, “Jennifer, what do you do for a living?”
I said, “Well, I take seven figure businesses and I help them actually be profitable.” Then she said, “What?! A seven-figure business? You mean like a business that makes more than a million dollars a year?” I responded, “Yeah, absolutely.” She says, “Isn’t a seven-figure business already profitable?” I said, “You would be surprised.”
So the topic I want to dive into today is:
We have a seven-figure business and it seems like we should be profitable, but we’re barely breaking even. How can that be when we make so much money?
In fact, 80% of businesses today either break even or operate at a loss. So it’s far more common for businesses to actually not be profitable and struggling with cash flow at the end of the month. In fact, so many businesses live check-to-check they are just one bad month away from bankruptcy.
How can it be when the sales are so large?
The answer to this question is at the core of the business model. When you dive deep and figure out the problem at the source, then and only then will you be able to fix whatever is broken.
I often see business owners so focused on growing top line revenue the corresponding expenses get overlooked. I know as I was growing my first company I would say:
“Oh, if I can just get to half a million my money problems would be over.”
“Oh, if I can just get to three-quarters of a million THAT would solve the cash flow.”
Then when I hit seven figures it was, “Hey I’m a million dollar business.” Which, in my brain, means I’ve got a million dollars a year that I can spend. But that’s not true.
I might have been a million dollar business, but my hard costs were 65%, which really made me a $400,000 business. Big difference.
Instead of making financial decisions based on the money I really had to spend, I was spending the million. I was making financial decisions based on the wrong information (and I had been doing it at every stage of business growth). When I started making decisions based on the correct amount of money I had to run my business, that’s when my cash flow changed for good.
It’s entirely possible to own a 7 figure business and still be struggling with cash flow (I lived it myself!). The good news is it can be fixed, and fixed for good.
Do you need help increasing your profits? Schedule a call with a Profit Advisor to discuss your specific business needs. Our complimentary one-hour session, is the first step towards a financially solid company. Schedule a call today.