Peaceful Profits Podcast Ep. 15 - How To Fix Broken Profits
Synopsis:
In this episode, Mike Shreeve reveals the surprisingly simple steps to boost your business profits by rethinking your pricing and fulfillment models. Discover how slight price increases can significantly impact your bottom line and why adding recurring revenue is crucial for sustainability. Mike also discusses how to improve your fulfillment model to reduce costs while maintaining quality, and how to stop shiny object syndrome from eating away your margins. If you're looking to scale Peaceful Profits with less stress and more income, this episode is a must-listen.
Transcript:
Peaceful Profits Podcast: How To Fix Broken Profits
[00:00:00] Hello, my friends. Hope you're doing well. As promised, here is the second part of our examination of profits and revenues. If you haven't watched our previous episode, please take a listen In it, I break down what your realistic expected margins should be. Profit margins on million dollar and $5 million a year businesses.
I highly recommend that you listen to that. It's a longer episode, uh, simply because. We're taking a look at two different levels of revenue and those are two, uh, a million dollar business and a $5 million business are two pretty different businesses from the standpoint of an entrepreneur, what your day to day is, et cetera.
I break down all the expenses, who those expenses should be going to, and we look at margin and it's a really good examination. Full transparency of what you should be aiming for if you are in the help industry. That episode's not gonna help anybody in e-commerce, restaurants, manufacturing, et cetera, just for the help business.
This [00:01:00] episode is about, uh, it's for those of you who listened to that last episode and you were like, oh dear, my margins aren't even close to that. We're gonna be talking about three of a potential 50 different ways. To increase your profits. Now again, I'm assuming you're following our model where you have a low ticket offer.
We like to use books, uh, that offsets the cost of advertising. You have a core offer that helps people to achieve some kind of outcome, and then you have an upgrade from that offer, which helps people to, uh, continue that journey of progress and helps them to, you know, come up with some other outcome or maybe more outcomes, et cetera, et cetera.
Okay, so it's a three. Offer model that we follow Within that model, there are lots of different ways to increase profit. We're gonna be talking about those now. So the first thing that I always do when I'm working with a new client is I look at their pricing model because, [00:02:00] because after doing this now for 15 years, literally thousands of businesses I've been able to look at.
I, I can tell you almost everybody is undercharging, especially in the help industry, okay? They are using an incorrect pricing model, and a big component of pricing model is the actual price that you charge. So the first way to fix your pricing model is just to charge more. Now, this is a funny thing, and it really reveals human psychology.
Somebody comes to me, they say, I need more profit in my business. I say, great. Are you selling something? They say, yes. I say, fantastic. Increase the price. And they say, okay, I will, but, and they start listing excuses, but I need to add more stuff. I need to make the marketing better. I need to da da da da. I need to da da i.
They to start listing all these fears and anxieties. And stuff that they are just pulling out of the [00:03:00] scared part of their brain. But the reality is, is in order to raise your price, all you have to do is go to your invoices, go to your website, and when you speak the numbers out loud, just change what you have written down.
Just change what you say. If it's normally a thousand, next time you're on the phone, say 1500. Uh, if it says a thousand dollars on your website, go in there. Maybe you can do it late at night. If you just, if you really are feeling nervous, then nobody's gonna be on there and sneak in there and change one of the zeros to a five and then click it and run away and go to sleep and wake up.
And you'll find that nobody cares that the difference between 1,015 hundred is almost nothing to the consumer, but it could be everything to you. The business owner who lives and dies by margin. If you are looking [00:04:00] at business as a sustainable effort saying, I want this business to be the thing I do for the rest of five years, 10 years, 15 years, you can't realistically run a business that isn't sustainable.
Your business should be easy now, not easy. In 10 years, you won't last 10 years. So it has to be easy now. So if it's as simple as just changing some numbers, you should do that. For those of you who are especially nervous about changing price, little trick I learned many, many years ago, all you have to do is raise your price by 25% every six.
That's it until you hit a margin that you're happy with, and that's a nice little baby step way. Because if you're on the sales call and you raise your price by 25% and you say something was, say, a thousand, and now it's 1,250, that's [00:05:00] probably easier for you to say, isn't it? Than to go from 1000 to 8,000.
Now, for those of you who are courageous, I say, go for it. What's the worst thing that can happen? Somebody says No. What happens if somebody says yes? What happens if your sales don't slow down at all? And this isn't just for your core offers. This isn't just for your upgrade offers. This is true for your front end offers.
So you have an offer, it's kind of selling, but you're not really getting the money you were hoping you would getting. Maybe you can increase the price of an order bump, increase the price of an O bump, which is what I just said. Increase the price of an upsell, increase the price of the front end. It's just typing numbers.
As soon as you realize that's all it is, you can. Literally use math to give yourself the profit you need to sustain your business for the long term to hire, help to work yourself outta the parts of your business you hate, and et [00:06:00] cetera, and et cetera. Okay, so there's massive price elasticity in the help industry.
Again, this advice isn't helpful for restaurant owners and manufacturers and e-commerce. This is very dependent upon this specific business model that we use and we help our clients to create, and it's very specific to this industry, freelancers, coaches, consultants, agency owners, et cetera. Okay? Next thing you can change in your pricing model is to charge more often.
So a lot of people do a lot of work getting a client to, to pay them one time, and then they wonder why every month they have to start over fresh. So adding some kind of continuity, adding some kind of offer somewhere in your offer scheme, in your offer, uh, whatever you want to call it. Strategy. You have to add some level of [00:07:00] recurring charge.
Why? Because you probably have recurring expenses in your business. This is, this is when you hear this stuff out loud, you just face palm, right? Oh my gosh. No wonder I hate my business. I'm trying to bend the laws of physics. Think about this. If you have a recurring expense. Why are you trying to cover that recurring expense with one-off payments?
That is like trying to hit a baseball with a wet noodle, okay? That it's not the right tool for the job. So add recurring income, recurring revenue. And you'll find not only will your stress levels go down immensely, but if you are matching revenue for expense, expense for revenue, [00:08:00] that's when you'll start to see the margin start.
It'll look like a, uh, so there's like Pacman in reverse, but it'll, it'll start growing. Uh, over time. Okay, so those are two very simple things, just on one idea. Change your price model. There's 20 other things you can do to change price. Those are the two you could do today. You can work on those now. You don't need to buy anything.
Just go increase your price and change how often you charge people. Number two, change your fulfillment model. Okay? Some of you are running offers, which are too expensive for you to actually run. There's no way in this known universe, you're going to be able to get that offer to work even by increasing the price, because it's too attention heavy.
It's too resource heavy. It's too, uh, the demands are too high for yourself, for your [00:09:00] team. It's guaranteed to disappoint clients. It's just a nightmare offer in your business. So we need to change the fulfillment on it. Alright. There's a couple ways we can do that. One is just promise less. I don't, I don't know why people don't talk about this.
More promise less because I can, I can promise you that your clients don't actually want more, they just want the result. So if you spend time figuring out how to get someone a result for much less of your team or yourself involved in delivering that result, the client's happy, they got what they paid for, you are happy because you just eradicated a huge portion of your monthly expenses.
Again, I could probably do a whole workshop on this, on what that looks like in terms of, uh, [00:10:00] creating offers that still sell well, but you don't have to spend so much unnecessary energy on delivery. What we're really talking about here is sitting down undistracted pen and paper or with your team thinking about how can we more efficiently.
Deliver the same result. So don't, this isn't about going through your marketing and going through your sales and having your marketing and sales team all of a sudden change everything, right? That's a source of chaos. Your business will implode if you start doing that. Too often it's about saying, okay, we have, we're gonna say we can help people lose 10 pounds.
In 30 days, and that's what we've been selling and we've been selling it and it's a group program and our sales team loves saying that on the phone and our marketing is working and we're doing all these things, but oh my gosh, you [00:11:00] guys, we have no profit in the business. We close these sales, but it isn't working.
Well, you can turn that off or off, which is a shame 'cause it works or. You can change the marketing and the selling for a less better offer. And so lower the promises. You know what's gonna happen, then It's not gonna work that well. You may lose salespeople. Why are you changing things on us, et cetera. Or you can just figure out, if I couldn't talk to this person, if I couldn't touch the thing I was building, if I had to have.
Uh, you know, if, if, if the client had to do this all by themselves, how could I still guarantee 10 pounds of weight lost in 30 days? And then you build that. It. It can be fun. I like it. It's a fun exercise. I pretend to tie my hands behind my back and I give [00:12:00] myself all sorts of constraints. You can't do this.
You can't do this, you can't do this because if you do, you're not gonna have the margins available. We've already maxed out our price. Sales team doesn't wanna change the promise, so what are we gonna do? And then you make your offer more efficient. And that changes your fulfillment model and you can find a lot of profit hidden just in that, that one activity.
And then of course you take all your current customers and you say, Hey guys, we made it better. So it becomes a thing that helps you build loyalty and it's just a lot of fun. I love doing it. Okay, next is, uh, one way to change your fulfillment model. Is to increase the demand so that your fulfillment volume drops because you can raise your prices so much.
So what? What do we mean by this? There are [00:13:00] some fulfillment models. Which when they're scaled don't make any sense whatsoever. So for example, if I were to go out into the world and start a Facebook ads agency, I would not try to be a volume based Facebook ads agency because Facebook ads are getting more complex.
The likelihood of hiring juniors who can actually do a good job is very low. Instead, I would try to be a premium boutique agency. That works with like four clients and we charge an arm and a leg, but we're the best in the business because, because we charge so much, we can hire very good people to fulfill and the margins make sense.
But in order to do that, in order to be able to, to run a business like that where you're making enough money to have enough margin, you have to create a really high demand. [00:14:00] So this is about really, it's, if you haven't gotten a book funnel, go make a book funnel. I mean, that's sort of the short version. Uh, or at least adopt some kind of marketing strategy, right?
And what we're talking about is the fulfillment of your marketing and sales. Uh, changing that model that you've been following today. So, for example, if you've been growing your Facebook ads agency because of organic traffic and, and outreach, you can't create a a in demand boutique agency off of outreach, right?
You interrupted them. Why should they pay you high prices? Or you can flip the tables, write a book, put the book in a funnel, crank that thing and say. Hey y'all. I get four clients a year. Uh, last year one of our clients discontinued 'cause they decided to bring it in-house. I have room for one client this year, and that's your whole [00:15:00] business.
And each of those clients pay you 20, 30, $40,000 a month. And, and I know that sounds pie in the sky, but as that would not be very hard to do at all. Uh, it would change again, it changes some of the fulfillment issues. Maybe you, yourself can handle three, four clients, no big deal. And so you don't even need to hire anyone because it takes you two hours a day to fulfill on three or four clients.
Fantastic. You wanna do it, you gotta create demand. If you create demand and you've got a book out there selling 24 7, you're selling 40, 50, 60, 70 copies a day, you're building a big email list of people who love you. You don't sell anything else, or maybe you do, maybe you're selling courses or whatever, group coaching, whatever, but that that offer that you see as the one that's currently broken because you're currently using a volume model, hiring juniors and just become a nightmare.
Low margins. Flip the entire way that you fulfill on marketing and [00:16:00] sales. The core way that you fulfill the thing through creating so much demand that the pricing makes sense for you to either do it yourself, hire really good people, or just look at decreasing the volume has a way to increase your efficiency.
Okay, the another way to change your fulfillment model is to extend the contract. So what do we mean by extend the contract? Let's go back to the Facebook ads thing. Let's say most Facebook ads, people say Pay us a monthly retainer as soon as you pay us the first monthly retainer. That's it. And that's a great model, right?
It's month to month and it's wonderful. But what if you extended the contract to say it's $7,500 for the setup? And then it's $5,000 a month. Or let's say you have a $25,000 offer that you normally are taking $25,000 upfront, and that you give them [00:17:00] everything that you could ever possibly do for $25,000 a month.
Why not take. A portion of that thing you're doing for 25 grand a month and pop it into something for monthly. Like say for example, you build someone's funnel and then you also help run their ads for a couple months. Well, why not just build their funnel for one price and then for $5,000 a month add on the extended contract?
Does that make sense? You can do this for all sorts of different things. So you could say. It is $5,000 for my group program for the first 90 days, and then it's $500 a month after that. You don't even have to charge a lot in the extended contract. We're just trying to add opportunities 'cause there's so many businesses in the help industry that are fulfilling beyond what they're getting paid for, meaning they have recurring [00:18:00] expenses in their business.
But they're not receiving the recurring revenue for providing those services. Does that make sense? If, if this is your business, this will make sense. If this isn't your business, ignore what I'm saying so that you never do it because it's a terrible idea. It's a terrible idea to offer, say for example, lifetime support on something where people don't ever have to pay you again, right?
Unless. You've extended the contract in a way that isn't even obvious. So for example, let's say that you have lifetime support on a community that people just have to pay $5 to get in. Wow, that's amazing. You better turn that $5 community into an opportunity for upgrades, which include recurring income because you're spending money to fulfill on the community.
So you need someone [00:19:00] somewhere to pay for the recurring expenses. So you better have opportunities within that community to upgrade. Does that make sense? So again, these are fulfillment adjustments and for the extended contract, if you don't have any recurring expenses, this kind of doesn't really make sense.
Okay? So for those of you, again, those of you in this situation, this will have hopefully been a light bulb. For those of you who aren't in this situation, consider yourselves fortunate. That you didn't make that mistake A lot of people do. Okay, number three is figure out how to advertise for free. Uh, a better way to say this is figure out how to get advertising to pay for itself because there is no such thing as free advertising, even when you are having to do manual organic outreach.
Et cetera, et cetera. Uh, show up for a podcast. Yeah, you didn't have to pay to be on that podcast, but you have to pay with your time. Time is most valuable, organic, et cetera, et cetera. I say this all the time, everybody says it. [00:20:00] It's the thing that you have to always keep in mind that if you're doing anything and you're saying, I'm doing it because it doesn't cost me anything, it's costing you more than you think.
Okay. It's just a general rule of business, so you have to figure out how to get advertising to pay for itself, because advertising is typically the number one single biggest expense in the help industry. I. So, again, this is not true for other businesses, but most of the p and ls that I look at, the number one expense is advertising.
It beats payroll, it beats everything. Definitely Beats software, definitely beats a lot of different things. So what you have to do is look at how can I get my advertising to cover itself? This is why we use the three ticket model. Okay? This is why I like a book it, I can eradicate the single biggest line item on my p and l.
By writing a book, sticking it in a funnel, and using that machine to grow my [00:21:00] business. And that right there in so many businesses, their advertising is eating between 30 to 70% of their monthly budget. So just imagine getting revenue to cover that 30 to 70%. And what do you think happens to their margins?
Well, it goes up 30 to 70%. So this is, I mean, this is really, really powerful stuff. Um, and it's simple and it's doable and we can help you if you need to. Uh, but there's lots of different strategies for doing this as well. Okay. Alright, last one. This is a bonus one. And, uh, this is probably really more important than these other ones.
And this is. Something that's difficult to do as an entrepreneur, but if you do it, I promise you it'll pay off and it's to stop chasing all the shiny objects. Shiny [00:22:00] object chasing is so expensive for business owners. A significant amount of margin is eaten up in post-analysis by shiny object change, uh, chasing.
So let me give you an example. You have a good month in your business. You just cleared 50 grand and you did a really good job and you used organic, so you don't have necessarily advertising costs, although we're just gonna ignore the fact that you probably didn't factor in how much you should be paying yourself for all the effort.
But let's just, for simplicity's sake, $50,000 and you have like a virtual assistant and some software, and so you get to take home 40 grand of it. 45 grand, whatever. You pay your taxes, you've got like 20, 30 grand left over and you're feeling pretty, pretty happy about things. So what do you do? You say, I made it.
I did it. I made 50 grand. And like most businesses you say, what's next? [00:23:00] What's the next thing I can do? And so you go buy a course, you go buy a coaching program, you go hire this person, you go hire that person, and then they don't work. As well as what you were doing before, and so you flop back to that other thing and you say, oh, maybe that other stuff doesn't work.
Uh, 'cause you're not, you don't know about Kelly and O'Connor's emotional cycle of change, and you don't realize that every time you start something new, you're really bad at it at first. And so it's not gonna be as good, you're not gonna be as good at something as, as you were that for on the thing that got you there.
Right. It is just, you're not gonna. Get $50,000 a month from something you just started, if it took you six months just to get to $50,000 a month. But a lot of people forget that. So they go back to the old thing, then they try something new and they go back to the old thing and then they're in the old thing and they're tired of that.
So they try something new and they jump over here, and they jump over there. And this is all money that's coming outta your pocket. It's all money that's coming outta your pocket, and it's eating into your margin. Chasing shiny object is so expensive [00:24:00] because it. Destroys your focus. And so while you are blowing money out of your business, you're also degrading the efficiency of the business that existed already, right?
So maybe you finally hit $50,000 a month and you're going through this process and you're very excited and you start taking a coaching program that. Is very intensive and you start doing less of the organic outrage 'cause you need to complete this coaching program. And so two things are happening, money's going out, and you are being less efficient in the business that you have currently.
And so your margin doesn't just go down, but expenditures go up while margin goes down. So the best advice I can give you for increasing your profits. Is to just be more mindful and [00:25:00] purposeful about what it is you're actually doing and what you're actually spending your money on. And stop chasing shiny objects.
Uh, now am I saying don't go buy coaching. Don't go hire people. Of course not. How there's no way to grow except to go learn new skills and to bring people onto your team. But when you go learn new skills, understand why you're learning it, when you go bring someone on your team, commit to keeping with them until it works.
'cause if you're hiring, firing, hiring, firing, hiring, firing, thinking that it's just because you haven't found the right person necessarily. It might be because you haven't given the person enough time to figure out how to do a good job in your business. And the more you hire and fire and hire and fire, the longer it's going to take for you to figure out how [00:26:00] to get somebody to that point.
Same with coaching programs, same with courses. You buy one, you don't finish it, you buy another one. You don't finish it, you buy another one. You don't finish it and you say, ah, coaching doesn't work. Or you buy it, you don't even really know why you bought it. You just bought it 'cause the marketing was good and you're not exactly sure how you're gonna put it into your business.
And then turns out it wasn't even the right thing for the business that you're in. So you have to invest in your business. That is an expenditure, that is a line item that every single business has. You have to invest in knowledge and you have to invest in people, but you have to invest. And investors think about what they're going to do.
So be mindful and you can reduce a lot of what's eating into your margin. Okay, I think I've kind of touched that point enough. Uh, again, these are not the only options. So we talked about changing your pricing [00:27:00] model, changing your fulfillment model. Uh, learning how to get advertising to pay for itself and then stop chasing the shiny object.
Uh, there's 50 different ways that you can do this. Jay Abraham, his, uh, quintessential three, he talks about you can either get more customers, you can sell more often to customers, you can sell more stuff to customers. Those are things you can do, et cetera, et cetera. What I wanted to show you in this podcast episode though, was that there are really simple ways to increase your margin.
Like really simple ways. You just have to do it. And the beautiful thing about business is it's all made up. One of my favorite things about, uh, one of my favorite quotes is from whose line it is. Anyway, I dunno if you ever watched that show where he said the um. The, the game is made up and the points don't matter, or something like that.
That's, that's what business is. Business is not a fill in the blank color in the picture kind of [00:28:00] thing, where you look at like, what's my job description? That's not how business works. Business works, how? It's more like an artist who says, this is what I want to create, and then they go make it. And the only thing that's constraining them are the laws that govern.
You know, red has to look like this because of the light spectrum. When you put this kind of material on paper, it makes this kind of shape and texture. And same is true with business. So you can have whatever business you want as long as you know what you want, and as long as you're mindful enough to find the people who can help you to create that specific business.
Okay, so just some words of encouragement for those of you who might be listening to this, because your profit margin isn't where it is. You are in control. You are 110% in control. You can make this whatever you want it to be. It's entirely up to you. If you would like help [00:29:00] and you know that this wouldn't be a shiny object purchase, give us a call.
We're very good at helping people to create peaceful profits by doing things like this. By helping them to install the three offers into their business so they can pay for advertising, so they can have a core offer, so they can have an upgrade offer, they can have the margin in their business that they're looking for.
To do so, just go to peaceful profits.com/call. If it would be a shiny object, move to work with us. Don't book the call. Don't buy anything. Until you're ready, until you know why you would buy this thing from us and why you want this specific help. If you want more information on the kinds of stuff that we do, just go to peaceful profits.com and you can buy one of our books.
We have all sorts of different books on, uh, the stuff that we do for deeper dive information into things like why we love book funnels, how [00:30:00] do we make book funnels, how do we make the books and et cetera. Okay, my friends. That's it. Otherwise, I will see you in the next episode.
