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 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.
Profit is a much better indicator of how their business is doing.
A lot of businesses don’t even have profit which is just crazy.
I have two businesses and one made $75,000 and the other made $100,000.
They both get to pay themselves and put in profit $40,000 - $50,000.
I would take the $75,000 business over the $100,000 business any day.
You might be asking why because the person is getting to pay themselves the same amount and put in the same amount of profit. The reason is because that $75,000 business is so much more healthy than the $100,000 business. Somewhere in there, there is a $25,000 discrepancy which is probably going into expenses that they don’t need so heck yeah, give me the $75,000 business any day over that $100,000 one.
Revenue doesn’t really mean anything unless your profits are up and your expenses are low. This creates FREEDOM!
If your expenses are too high, even if you are getting to take money for yourself and profit for yourself, it would take only one or two bad months of not getting new clients or something dramatically happening in your life or income, and your business will be sunk.
That’s just not where you want to be.
You want that profit to handle your expenses if you have bad days and those rainy days. You want to know that your business is growing and getting healthier because that’s going to mean that you can leverage yourself and not put as much into your business.
I should also mention that there’s one more thing about having that profit!
You get to take a quarterly distribution!
When you have that profit sitting there, you get to take a little bonus, which is awesome! Some people don’t even know that they have that there. They can take it! A lot of people don’t have profit to be able to take it but won’t it be nice to get a little paycheck every quarter that’s a little more than what you normally pay yourself?
I think so!
A little celebration for how good you’re doing in your business.
So, next time you see one of those posts where people are raving about how they can help you hit this number, that number, they MAY be able to help you with that and that’s awesome- great for them and great for you if you take their advice. I know a lot of you are coaches so you’re coaching and you’re putting the same stuff out there, but you need to look behind the scenes because bringing in that kind of income does not mean that’s what they’re paying themselves or that’s what’s going into profit. They’re going to also have to pay their expenses and they’re going to have to save for taxes as well.
I hope that this has been helpful and if it has, you can like the video (if you’re on youtube) or you can comment on this post as well!