I had a great month, why am I bleeding money?!
If you are like me, this situation has happened to you at least once before.
You are rocking and rolling along. You just had a great month. You sold a lot of merchandise. You got a lot of new followers and people subscribed to your mailing list. You feel pretty good about yourself.
Then you check your bank account somehow it’s the exact same as when the month started.
How does that happen?
You know you made a bunch of money that month. General reaction to your work has been great. People were buying your product by the barrel load! You If anything, your bank account should have shot up, and yet it didn’t.
Worse, it’s actually lower than where you started the month. That is so depressing.
But why is it happening? Let’s throw out some reasons and some fixes.
1. Your expenses are too high. If you are selling product for less or around what it costs you to make it, then there’s no way you can get ahead. Expenses aren’t just your time or the cost of goods and materials either. They are overhead expenses for your space, labor costs, appearance costs, marketing costs (aka customer acquisition costs), and all the costs that go into making your product.
Fix 1: Lower your expenses. Maybe you don’t need your co-working space, or maybe you can buy in bulk and cut costs. Maybe you can split tables at cons, or buy less marketing material. Regardless, lowering your expenses while selling the same means more profit.
Fix 2: Raise your prices. If you need to sell 30 pieces at $20, you would only need to sell 20 pieces at $30, and your expenses would be less too b/c every piece would cost less to make in materials and time. This also works if you have a profit maximizer offer for your rabid fans.
2. Your spending habits are out of proportion to your income. Maybe your business is actually doing fine. Maybe you are profitable. However, that doesn’t mean you’ll get ahead if you are a Spendy McGunderson in your personal life.
Fix 1: Make a Strict Budget. There are a lot of free budgeting softwares like Mint and Wave, but if you want a good business one I use Quickbooks Self Employed, which we got on discount for $4.95/mo. It’s the cheapest of the paid solutions, and it’s quick. You have to know where you stand so you’ll know how to fix it.
Fix 2: Get multiple bank accounts. One way to fix this is to get 4–5 different accounts for your business. One of them for expenses, one for your salary, one for profit, and one for taxes at least. Then, you can split everything into their appropriate categories and you’ll know exactly how much you have left to spend on personal stuff. You can also do this with envelopes at home, but then you need cash.
3. Find more, better clients. Maybe you are drowning in low profit clients who demand the world from you. This could be fixed with just raising your prices, but let’s say you’ve already done that and you still are stuck. You’ll need to find better clients and more of them, but how do you find the good clients and not the time sucks?
Fix 1: Discover your ideal client. In any group of clients, there are 20% that give you most of your profit and provide the least headache. You need to identify those people, what makes them unique, and talk to them about why they have chosen you as a vendor. Then, once you have a good profile of those people, you can target your marketing those those ideal clients who have the lowest customer acquisition cost.
Fix 2: Cut out draining clients. You’ll probably have to do Fix 1 before doing Fix 2, but there are an additional 20% of your clients who give you 80% of the headaches while giving you absolutely nothing in return. If you can cut those clients, you will be able to focus on your high profit clients and deliver more for them. This is really scary I know, but it is also really effective.
So there are three of the most common problems when you’ve had a great month, but still aren’t getting ahead. If you like this I can show you some ways to keep getting ahead month after month, once you’ve fixed these issues.