Yesterday my bookkeeper sent me my 2016 Profit and Loss Statement.
There was good news, good news, and really bad news.
Good news #1: My business revenue doubled from 2015 to 2016.
Good news #2: Uncle Sam wasn’t going to come after me with a huge tax bill.
Really Bad News: My profit margin was less than 25%.
Wait, seriously, WHAT?
I didn't even make 25% of my profits?! How did that happen?
First of all, let’s talk about what this 8.2% Profit means...
Basically it means that although my business doubled in revenue, my earnings (aka money left over in the bank) were less than a quarter of my revenue!
Imagine getting less than a quarter for a job you thought was paying you a dollar. I mean seriously, that's what it comes down to.
Want to see the real numbers?
I thought you might say yes...
Here's a breakdown of my expenses:
But wait! There's more.
If you add it all up...
That's $151,479.06 in EXPENSES!!!
I'll admit, I was a lil' shocked to see those digits. But more than anything, I felt an overwhelming sense of gratitude. I have spent the last 6 years building my business to get to this level of revenue and it's happened.
And once I moved passed the gratitude, I got down to business.
Less than 25% margin is UNACCEPTABLE.
As I began to dig deeper into my numbers, I saw a ton of opportunities to cut expenses for 2017, which I'll share with you in a future post.
Today I'll focus on sharing 3 important lessons I learned:
#1. Monthly Money Dates are Critical.
I used to look at my money on a monthly basis, but I got a little complacent and fell off the wagon. Had I been looking at my monthly profit & loss statement, I would have found critical areas where we were overspending; essentially bleeding money.
Our non-negotiable for 2017 as a team is a monthly P&L review with my bookkeeper to make sure we're operating as lean as possible.
#2. Numbers Tell the Story.
Going line-by-line of my P&L, I saw a beautiful story of all my team and I have created and experienced in 2016. The story was one of travel and adventure (to the tune of $20,000!) and luxurious photo and video shoots (portrayed in Line 6345 totaling to over $16,000).
The story also told that I had failed in my goal to contribute at least 10% in charitable contributions. In reality, less than 1% of my revenue went to help others. I didn't like that story at all.
As we re-write the story for 2017, 10% of weekly revenue is earmarked to go to different charities such as, such as To Write Love on Her Arms, which bring awareness to mental health disorders and suicide prevention.
I'm also committed to tithing 10% of my personal owner's salary to my church as a way to share in my blessings.
The numbers certainly told me a story - I've been living a beautiful, fun, travel-filled adventurous life and it's time for me to turn the tables and pay more forward.
I'm excited to share my 2017 P&L with you next year and tell you a different story.
#3. Decision-making Gets Easier When You Pay Attention.
Now that we have the data and the numbers, this year making investment decisions are going to be easier than ever.
Looking at the numbers, I can assess how much revenue each expense generated. If the possible revenue potential isn't at least 2:1 then the expense won't be made. It's that simple.
The numbers don't lie and I can see that investing in graphics, advertising and photography generates a ton of revenue whereas traveling to certain locations and events were simply fun adventures that didn't translate to the bottom line.
There you have it. The numbers tell you everything you need to know.
I challenge you to commit to monthly money dates this year. Get savvy with your numbers because while I loved doubling my revenue, I see where I left a lot of opportunity for scale on the table.
A mistake I won't be making this year and one I hope you won't make either!
Until next time,