[Read] How to run a profitable business as a big hearted entrepreneur
In order to run a profitable business as a purpose driven entrepreneur you need to:
(1) Decide how much money you want to take out of the business every month (from your net profit);
(2) Understand how much it will cost you to generate that net profit (this is the cost of building and running the business); and,
(3) Build an offer that you both love, but that also generates the sales (revenue) to fund the whole endeavour.
This is as opposed to focusing on sales first and taking out what’s left at the end. And as opposed to turning up to help at any cost without having enough money to take time off, stock up and enjoy life in between. Purpose driven entrepreneurs can be guilty of both.
Building a business generates expenses. This is why they say you have to spend money to make money.
So, instead of working, working, working and seeing what’s left at the end, I’m suggesting you decide what you want to TAKE OUT of your business first. Set that as your initial benchmark and then ask: How much to I need to generate in sales to make that possible. For example, if you want to take out £5000 a month from your net profit as a business owner, you will need to generate closer to £8000 or £10,000 in sales to make that possible. Because it costs money to build a business, and that’s okay if we accept it and work with it.
In this article, business coach Lisa Bean is going to outline how to build a profitable business that scales and lasts.
How to build a profitable business
Being good hearted is not good enough
Can we talk about business for a hot second? Specifically: can we talk about the importance of purpose driven entrepreneurs becoming more commercially minded in order to grow a profitable, scalable business that stands the test of time?
I’m bringing this up because I’ve spoken to so many good hearted entrepreneurs over the last year and these are variations on sentences I’ve heard:
“Money makes me cringe, I just love what I do”
“I’m in partnership with a friend, we just decide as we go”
“I just need enough to get by, I don’t want to be greedy”
“My husband / wife / accountant does the numbers so I leave it to them”
If you want to change the world, it won’t do to ignore the more commercial aspects of your business, like profitability. I always say ‘there are people out there right now looking for exactly what you have to offer’. This means there are people out there counting on your ability to reach them with your product or knowledge. To reach them, you need to make money to invest in your brand, your knowledge, your marketing and your systems. You also need to make a profit so you have money to re-invest and money to re-energise yourself. (We’re all allowed a break.)
No. Your freebie won’t make you sales. This is the true purpose of a ‘freebie’ or ‘lead magnet’ in funnel marketing
When you’re a good person with an amazing offer, you can sometimes feel ‘it’s not fair that I don’t earn more money’ or ‘people who know less are growing faster than me’ or ‘I just need a lucky break’. I don’t believe in any of that. I believe that being good hearted is not enough – we must learn what other people have already learnt in order to have our desired impact in the world. If they’re having more impact, they must know more or be doing something differently. And it’s linked to their ability to craft an offer people can’t pass on, their ability to talk and move people through stories and their ability to run a profitable business that sustains their work.
So ask yourself: Have you come here to help five people, five hundred people or five thousand people? You might feel like you have an outstanding offer, but an offer is only outstanding if you can support it and get it in front of the right people at the right price at the right time. In order to reach more people with knowledge, products or expertise you have, it’s important to build a profitable business that supports your efforts.
I’m sharing this because it has taken me so long to figure it out how to build a profitable business and I want more purpose driven entrepreneurs to know and apply this knowledge. Over the last two years, I have felt my passion really deepen around helping good people make money, both for their own financial independence but also so they’re well funded in the work they want to do. It is my view that more good people need more money because they’re going to put it to good use. And so it really is crucial that purpose driven entrepreneurs know how to make money, how to keep money and how to invest money to turn it into more money. More money = more good.
What does it mean to be ‘commercial’?
To be commercial is to be engaged in ‘commerce’ – the buying and selling of goods at a profit. It means buying something for one pound and selling it for five pound, so you can cover:
- the costs of sourcing (or creating) that product,
- the costs of storing (or hosting) that product,
- the costs of repackaging (or branding) that product,
- the costs of finding a market (marketing) for that product,
- the costs of offering ongoing support to the person who bought that product; and,
- the costs of building a brand so people learn to trust you when they want to buy that product.
Being commercial is to know: It’s not enough to buy something for a pound and sell it for 90p. You haven’t just lost 10p, you’ve lost all that time and energy that went into coming this far and you haven’t built up any energy for your next deal.
Being commercial in the knowledge sector
When you apply this to the knowledge sector, the idea remains the same. You spend years investing money in courses, books and coaches to build up expert knowledge and insight. You apply this knowledge and insight at your own cost and make mistakes and learn.
When you come to sell the knowledge, you’re not really selling the knowledge. You’re selling the time saving you’re passing on to the customers to get the same results you have. When you think about it, they are going to learn in one month (through one course), what you learnt over three years from all sorts of places. You might also be selling the access to you so you can help them avoid the same mistakes more quickly. And you might be selling access to the community of likeminded people you’ve brought together.
You need to cover the cost of building up this knowledge, delivering it effectively, managing the community and there must be enough left over for your ongoing personal development so you have more to teach along with the downtime needed to recharge effectively.
We’re never really pricing the item or the knowledge, we’re pricing the complex process that brought that item or knowledge right to the customer’s door. When you understand that, you understand commerce. Getting commercial therefore means understanding what goes into bringing this ‘thing’ to your customers’ feet, and charging enough to cover that process and the energy you need to keep going!
So before you move on, decide how much money you want to take out of your business each month, how much it truly costs to deliver on a product / service and how much you need to do in sales to balance those two numbers.
There are five key sides of business:
There is another thing to consider when it comes to running a profitable business and that’s your own personal journey as a business founder. Most entrepreneurs don’t get into business because they love contracts, admin and accounting! But, a lot of business is actually contracts, admin and accounting.
Here are the five key aspects that make up any business:
- The concept and the offer – how are you adding value to the market in a unique way
- Positioning the offer – building a brand, building trust online and marketing your offer
- Selling the offer – having sales calls / building sales funnels to generate revenue in a way you can scale
- Finances – knowing the profit you want to make, how much it will cost to make that profit and the sales you need to support it
- Operations – actually delivering on your promises and setting up systems, managing people and introducing processes to do this well and do it consistently.
Each is an area we must consider to build a profitable business. There is no point selling if the offer doesn’t hit the needs of a customer. There is no point hiring if you can’t afford to. The is no point having an amazing offer if you can’t get it in front of buyers.
In the beginning, you will be covering all five aspects by yourself, as you have probably experienced! But, as your business grows, you will want to hire people (or freelancers) to help you build and deliver on certain aspects. For example, maybe you’ll hire an accountant to help manage the books. Maybe you’ll employ a graphic designer to help lift your brand image.
It helps to decide which areas you want to pass off right from the start so you can plan for this and budget accordingly.
What is your intention?
The easiest way to do this is to decide what your intention is in setting up your business. Is it that you’re really creative and love coming up with new ideas? Do you love the idea of making money and being more financially independent, perhaps with multiple revenue streams? Do you love running things ‘and being the leader’. These are three different intentions that speak to the three roles in running a business:
- Entrepreneurs – come up with new ideas, disrupt the market, make things better for end users
- Business owners – own the business, but the business success isn’t tied to their time and expertise
- Operators – run the business day to day, without them it couldn’t deliver on its promises
When you’re on your journey to your first £100k, you are a mix of #1 and #3 – entrepreneur and operator. You come up with the idea, bring it to the market and deliver on all aspects of it! On your journey to £1m, you must transition to #2 – business owner, employing more people to run and grow the business on your behalf. It is just not feasible to do £1m in sales and deliver on £1m worth of promises by yourself. So what will you focus on and keep and what will you pass over and outsource.
4 considerations for turning a profit
A lot of purpose driven entrepreneurs set out because they have a passion to share what they know, they want to make a living doing what they love and they love the romantic notion of business. As soon as they quit their job and focus on their business full time (or become financially dependent on their business) they realise it takes a lot more to make it profitable!
Building a business isn’t like having a hobby. You can’t pick it up and put it down when you want. And you certainly can’t fund it yourself or with loans alone. Your goal is to build a system that generates leads, makes sales and delivers on the promises you make to customers…profitably.
A business exists to generate a profit. And we must make a profit in order to grow, scale and support our own lifestyle.
To build a profitable business, there are four key things you need to do:
(1) Develop a system for making new irresistible offers your audience want to buy and rave about
You might have one course or a range of products right now. Are they still relevant? Are they desirable? Are any changes coming down the line that could change that. Entrepreneurs are constantly coming up with new offers or new variations on their existing offers to keep adding new and novel value to the market. It’s why we always see upgrades to phones, cars, courses and paint colours! People like to buy new things, updated things, relevant things.
Build in time to assess your current offer, speak to customers about what they’re looking for, assess what’s happening in the market and offer new products to stay relevant and stay useful. What makes them remarkable? What makes them shareable? Why would people choose you and recommend you?
If you’re new to funnel marketing, check out this video I made on the four key stages of making sales online
(2) Create a system for generating a profit
Use an Excel sheet or profit and loss template to calculate how much money you want to take out of your business, how much it will cost you to build and run a business of that size and how many sales you will need to make to support that level of profitability.
Decide where you’re going to invest (because there is a serious advantage to your brand or customers) and decide where you’re going to save. If your business model isn’t profitable, make some changes. Will you increase sales, will you increase prices, will you cut costs. You can use past bank statements to calculate this or use estimates based on the current running costs you have. Just make sure you know how much is coming in, how much is going out and what’s left over. If the numbers don’t work, your business doesn’t work and it can’t possibly last. So make the changes now.
(3) Earn enough to afford increased expenses
This might sound odd when you first read it but bear with me. If you want to make £100,000 in sales in a year, you’re going to need more money for marketing, sales and branding. You might even want to hire someone.
You can’t just get a loan or finance the growth yourself indefinitely. The best growth in the early days comes from sales because it’s what makes your business commercially viable – able to support itself. So how are you going to make more sales? More specifically, how much do you need to make and how many sales at what price point will generate this revenue? For example, if you want to make an extra £10k a month, that’s 10 clients at £1k a month or 500 clients at £20 a month. So what activity do you need to prioritise to make those sales? As you hit your sales targets, you can start to increase your expenses and get help or outsource jobs you don’t enjoy doing…or take out more money from the business to live a great life!
Honestly, business owners don’t put ‘sales’ in focus enough. Think about the activities you’ve completed in the last three weeks. How many hours did you spend on sales / generating revenue? What was the rest of your time spent on? To grow your business, a portion of your time should be spent on sales daily or AT LEAST weekly. Otherwise, how will you possibly grow?
(4) Have an exit strategy so you can walk away
This one might be controversial. I’m sure you can’t possibly imagine selling your business right now! And of course you don’t have to! But, thinking in this way offers some unique perspective. What would happen if you got ill, or burnt out, or needed some time off for yourself? Would your business continue to grow or do things stop when you stop?
In the beginning you will be doing everything yourself. But as you start to grow you will outsource more and more things, perhaps to freelancers, perhaps to team members. Whilst you will want to save costs in the beginning, you will need to invest in people, systems and processes to grow.
When making a difficult decision, I like to ask myself: What would I do if my business were 10x bigger? I try to invest in systems or build processes that will help me build the business I want, rather than trap me in a business I don’t want. Even though it’s hard, I try to outsource tasks as soon as I can so I can get back to what adds most value to my business: coming up with new offers, writing unique content like this and making offers to make more sales.
The impact you can have in the world will always be determined by the limits of your commercial acumen. It’s not hard to learn, but it does take applied focus, just like with any craft or expertise.
I would love you to bring the commercial aspect of your business into more focus. Spend some time thinking about the viability of your business model. How much does it cost you to sell one spot on your course or one of your products? How much net profit would you like to generate? What expenses will you need to cover as you start to grow. Plan it out. Get visibility over it and turn your attention to building a business that can scale and stand the test of time.
More money = more impact.
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