Why Profit is a Better Marker of Success than Revenue

Today we are going to be talking about why profit is queen and revenue is irrelevant. 

(Okay so I lied.)

Revenue is relevant but only in terms of how much profit it can produce. For instance, you cannot have $2,000 in profit, if you aren’t making more than $2,000 in revenue and that is the only reason why revenue would matter.

I see a lot of coaches on social media, especially on Facebook, who are always talking about hitting a $5,000 month and how you can too (or a $10,00 or a $15,000, whatever it is)! They’re so excited and they get so pumped up about hitting that big milestone or revenue but they never even talk about the expenses or the profitability of their business-

Profitability

Profitability is huge! It’s just never even mentioned! I think that by just going off of revenue and never seeing what their profit is, they're missing part of the story. There’s no way to possibly know if your business is healthy or if it’s something you even want to emulate without knowing if it’s actually profitable.

You don't know if they actually get to have the financial lifestyle they want to have, if they’re saving for taxes, paying for taxes, what tax bill they have at the end of the year (overpaying, not paying enough) 

It's too many things you don't know just by looking at their revenue.

How to make steady income with repeat clients who love your business

Do you ever find yourself in the feast or famine game of entrepreneurship?

I'm sure it doesn't feel like a game, but I hear this problem all the time! Entrepreneurs, especially freelancers still selling time for money, not knowing if they will make enough to cover expenses this month.

There are a couple different ways of coping with this, but the one we will be talking about today is having a continuous stream of income through return clients.

You likely started your business because you wanted freedom - freedom from the 9 to 5, freedom from a small paycheck, freedom to do a job you love, and freedom to pick which jobs you take and which ones you deny. The sad truth is, many entrepreneurs jump in without a plan or simply a plan to get all the clients they can and charge what they're worth!

There are some problems with this.

A client base takes time to build. You can't just jump in and expect to have a full-time continuous stream of clients all at once. Even within 6 months is difficult, especially if what you do is a one & done offering.

Separate your business and personal expenses (get a business bank account!)

Ask any bookkeeper or accountant what the most important first step is in setting up their business finances and books is, 9 times out of 10 (maybe even 10/10) they will tell you to set up a separate bank account just for your business.

Why is this so important?

Well there are three reasons really.

1. For an LLC or Corporation, this keeps your barrier from liability intact.

These business entities set you up for certain protections in the case of your business being sued. Whether or not you maintain that invisible barrier is up to you.

Treating your business like a personal piggy bank is called piercing the veil and it is more than enough reason for you to lose your protection from liability.

2. You aren't perfect; expenses are bound to fall through the cracks.

Sure, you could comb through each personal bank statement five times just to make sure you didn't miss anything, but who's got time for that?

Doing your books this way is a faulty system. There will be breakdowns in the system. Expenses that could be used as tax deductions will be missed.