Are You Making Money or Losing It? Also: Porridge
May 7, 2013
In: Money Talk
It's never just about the money coming in; you have to consider the money going out.
When you take on a job, sure, you might earn $5,000.
But what's the cost of earning it?
If you have to forfeit 3 other projects (and your favorite Wednesday night TV show) for a combined total revenue of $15,000, you're not making money. You're losing it.
As an example, when our team embarks on a copywriting project, oftentimes we get asked for heavy consulting advice, too–from how a program should be structured, to what a service should include, to what price points should be…and every element of their business model.
So in order to serve those folks, say we decide to offer some type of $500 consulting add-on.
Sounds like a great upsell, right?
Wrong, and here's why.
Because consulting takes time, and it takes energy, and it takes a lot of it. It isn't something you can just throw out there off the top of your head–you've got to be strategic. You've got to investigate. You've got to dig deep. You've got to form an educated opinion, based on a client's specific circumstances. In short, you've got to do a good fucking job.
And while that's all good and well, if I have to dedicate the rest of the working day to doing that, then I can't use it to do other things. Things like: Writing a book proposal, marketing our company, creating business-changing workshops, building useful resources, and more. In other words–all of the other high leverage activities that are much more useful to a whole group of people, instead of just one person, and are also more profitable, too. (My favorite win win.)
So when you frame it like that–which makes better business sense?
Allowing for a $500 consulting add on, maybe selling 4/month for a total of $2,000…because you feel obligated to.
…Or giving yourself the bandwidth to make an extra $100,000 this year through smart, higher leverage efforts?
Because if you could have made $100K doing something else, then offering your consulting add-on for $2,000/month or $24,000/year in revenue minus expenses (like employee salaries), then at best you've just lost $75,000.
At worst (and more realistically), you've lost more than that.
It isn't that you don't want to help people. It isn't that their money isn't perfectly good money. It's simply that you need to pick and choose your business battles.
And pick and choose your business strategies.
Put on your cost-benefit analysis thinking cap.
And while you're at it?
Don't run around doing business without a contract, for goodness sake.
It's poor form, and then I'm going to have to come visit you in the slammer, and then you're going to be all mad I didn't bring cookies, and then I'm going to be all, “But I don't bake cookies,” and then you're going to grimace and fling a spoonful of porridge at me.
And then I'm going to be pissed.