Key Mindset: Mastering Your Margins
Raise your hand if you aren’t an accountant! Keep your hand up if you don’t love Excel or crunching numbers. Hopefully you’re a normal human and still have your hand up but in the off chance that you disagree today’s topic will still benefit you.
It’s a call to embrace a margin-based worldview of your business.
It seems simple when you hear it this way, but someone once eloquently said, “If you could make a machine that turned $1 into $2, you’d back up a truck full of money to feed into that thing.”
Hell, you’d probably even borrow money to put into this money making machine. Well, if you’re in a business that works, you have a machine like this! It might be more complicated than described above, but as the metaphor goes:
The $1 You Put In = Your Cost of Doing Business
The $2 That Comes Out = Your Revenue
The New $1 Difference = Your Margin
While everyone should have a proper accountant and financial diligence, if you know your margins you can run your business with incredible freedom and upside.
Margin-Based Mindset: How to Expand
Need to grow but don’t understand how it will affect overhead & payroll? If you know your margins, you can have clarity about the future before it comes. If taking on more business means you’ll need to hire more people, a simple margin calculation can inform exactly how to hire for growth.
Need to grow but don’t know how to spend on advertising? If you know your margins, you’ll know exactly how much you can spend to win a new customer. If a new customer has a $400 value, you can spend up to your margin of profitability on $400 to win them as a customer in good conscious, for example.
Know your margins and drive new business with intensity!
