Profit Margin Lies I Tell Myself
Have you ever told yourself a big fat lie?
I’m not talking about the one that’s conscious…the one you KNOW is a lie.
“No one saw it, so you did NOT gain weight during covid.” 😉😉
“The calories in THIS cupcake don’t count because they’re on your birthday.”
No, I’m talking about a lie you actually believe. The one you realize is a lie later because somehow you overcome it, and you prove it wrong.
My Stupid Numbers Lie
“I’m just not a numbers person,” I said for the 5 ba-zillionth time. (Neither 5 nor ba-zillionth were big enough numbers alone to communicate just how many times I said that to myself. Thus, the combination.)
I was looking at my business financials. Maybe I said it because I didn’t like what was seeing, and I didn’t want to take responsibility for it.
But honestly, I had tried many, expensive, “proven” systems to make a profit in my business, and they didn’t work. So, I started believing I couldn’t figure it out. I decided I wasn’t a numbers person, and I covered my eyes and hoped for the best.
Unfortunately, as you can imagine, the cover your eyes and hope it goes away strategy doesn’t work for flamingos, and it didn’t work for me.
As a side note, did you know that flamingos don’t bury their heads in the sand to get away from things? They’re actually sucking up the sand and sifting out tasty morsels of food. I like to think that’s what I was actually doing. Taking a little break while I sifted through the sands of understanding business financials to pull out morsels I could digest.
Alas, my ignore it strategy probably made things worse.
Which made me doubt myself even more.
The thing is, it was pretty stupid lie. I have an MBA.
I’m not saying that all smug face with my eyes closed to brag.
I had to remind myself!
I had to say, “Tina, you received the highest score in your MBA class on your accounting and finance final. You know how to calculate financial numbers.”
On top of that, numbers are my job. They are my life in this website and marketing business. I’m forever talking to clients about website traffic percentages, click through rates, return-on-investment, conversions, lead-to-purchase rates, and more.
If you are a marketer, a consultant, or a creative, you’re probably working with and calculating numbers constantly. I just had a mental block when it came to my business financials.
So, I tried again. Probably because Geraldine Carter, founder of She Thinks Big Coaching, gave me a big kick in the butt and reminded me this was “figureoutable.”
Wanna know what I figured out this time? Watch my latest video on using my profit margin to tell me when my prices are too low.
And for those of you who just zoned out as soon as you read “profit margin,” come back to me! The words make it sound more difficult than it is.
I looked at my business financials again, and I kinda shrugged at first. And I finally realized my big mistake. I knew how to calculate financial numbers. I just didn’t know where to aim. That’s a WHOLE DIFFERENT PROBLEM. And it’s one that’s solvable.
As a matter of fact, I went to my Profit First Professional (Linda Stapf with Stapf Financial) and asked one simple question. What profit margin should I have if I’m a healthy and thriving marketing business?
I had previously been aiming for a 30% profit margin. For some reason, that’s the number that stuck in my mind from some business school case study on a manufacturing business. And then I used it (30%) as my “mark-up” number to get my pricing right. If I want to pay myself $x or if I pay someone else $x, I’ll just add 30% to get the price I set for my clients.
However, when we did some digging into my specific numbers, we found out that a 30% markup (and yes, for you numbers people, I know that’s not the same thing as a 30% margin, but I didn’t take the time to think about it) meant my business was dying.
Looking at the specifics of my business, we came up with my gross profit margin number – 70%. And now, I look at that number every week.
You too can figure pricing out! You might need a Profit First Professional to help you figure out what the profit margin should be for your business. But you have the resources, skills, and ability to do this!
If you’re anything like me, you probably ARE numbers person after all. You just need some clear direction to know where to aim.
Read More About Diagnosing Pricing Problems with Profit First
Watch the video, and then let me know in the comments if it’s all becoming clear-er.
Here’s to not letting words we don’t love keep us from building a profitable business! And here’s to proving our stupid lies wrong.