“I run a $3 million business.”
Great. But how much of it do you actually keep?
Revenue is one of the most overrated numbers in business.
We celebrate hitting $1 million, $5 million or $10 million in turnover as though revenue is the ultimate scoreboard. But I’ve seen businesses turning over millions while their owners work ridiculous hours, carry enormous risk and still earn less than some of their employees, or worse, consistently lose money.
That’s not success. That’s an expensive job.
Welcome to our next Financially Unshakeable focus: Profit.
Revenue might impress people at a barbecue, but profit is what builds wealth, funds growth and rewards you for the risk of owning a business.
Here’s a number I want you to obsess about: your net profit margin.
Take your profit before tax and divide it by your revenue.
If your business turns over $2 million and makes $100,000 profit, your net profit margin is five per cent. For every $100 of revenue, you fight to generate, you’re keeping just $5.
While every industry is different, I’d consider a 10 per cent net profit margin a solid starting target for most established SME businesses.
If you’re well below that, your business is on life support and you need to understand why.
If you’re above it, protect it, then look for opportunities to push it even higher.
And please don’t assume the answer is simply more sales.
More revenue at lousy margins can mean more staff, more stress, more complexity and more risk for very little extra reward.
Your challenge this week: improve net profit by just 1% of revenue.
On $2 million turnover, that’s $20,000.
Increase prices. Cut waste. Fix unprofitable jobs. Improve productivity. Stop giving work away for free. Find your one per cent.
This quarter, we’re not chasing impressive revenue. We’re chasing profitable businesses worth owning.