ABOUT THIS EPISODE
Most owners judge their business on revenue. That’s the wrong number. If you’re turning over $2 million and barely making a profit, you haven’t built a business, you’ve built a job you can’t leave. In this episode I break down why margin matters more than revenue, and the margin audit we run with every client to find where the money is actually going.
Here’s the thing. When you sell a business, it’s valued on a multiple of profit, not revenue. A $5 million business profiting $50k is worth a fraction of a $500k business profiting $250k. And if you’ve got 500 customers making you the same money as someone else’s 5,000, you’ve got less overheads, less team and way more room to move.
Here’s what I cover:
-What margin you should be aiming for. Online businesses should sit somewhere between 50 and 70%. Brick and mortar should be aiming for 30%. Every business is a bit different, but at a bare minimum we get clients over 30%.
-The $500 a week that halved a client’s profit. His fixed overheads jumped $500 a week out of the blue, locked in for two years. His profit went from about $2k a week to $1.1k overnight, and none of it was in his control. That’s exactly why you need a buffer. You’re the one taking all the risk.
-The agency doing $60k to $80k a month with no profit. They hired the team before they fixed the systems. Everyone’s double handling and doing things manually, so the margin is gone. It’s a fine team without the right processes behind it.
-The tradie call-out fee making 20% margin. When we ran the numbers, the call-out fee barely covered the time and fuel. Three of their four services made 70% plus. So drop the call-outs and put all your energy into the services that actually make you money.
-How much to raise your prices, and how many customers you can lose. We map out the margin on every service and every type of customer, then forecast what a price rise does. Maybe your one-on-one sits at 50% and your group at 80%. Either do more group, or price the one-on-one up to match. Then work out how many customers you can afford to lose and still make the same profit.
Timestamps:
00:00 Intro: your $2M business might be worth less than a $500k one
01:06 Why profit matters more than revenue
01:47 The margin you should be aiming for
02:12 How businesses actually get valued
02:41 The $500 a week that halved a client’s profit
03:38 The agency that hired before fixing systems
04:41 Know your margin, then forecast
04:57 How our margin audit works
05:24 The tradie call-out fee making 20% margin
06:22 Margins by customer type: group vs one-on-one
06:45 How much to raise prices and who you can afford to lose
07:39 500 customers vs 5,000 customers
08:07 The three pillars: time, margin, revenue
08:32 Podcast views have doubled, send me your feedback
If you’re a business owner doing $250k to $2m a year and you’re working flat out but not seeing the profit, book a free Leverage Audit with me. We’ll go through your systems and processes, work out what to automate, delegate or delete, and run the numbers on where your margin is leaking. Want the margin audit template? Send me a DM on Instagram or Facebook. Link’s in the description.
Find out how to get 20 hours/week back -https://leveragedceo.com.au/getyourtimeback1
