You started your agency to make money. But you’re not a profitable owner, which means the agency isn’t going to grow. It’s time to dig into the financials to solve the problem.
I’m about to cover some really sexy financial stuff.
Don’t roll your eyes. Yes, dealing with the numbers isn’t the most exciting thing you’ll do as an entrepreneur. But you’ve got to do it if you want to build a profitable business.
More importantly, you’ve got to do it if you want to lead a happier life.
Profitability helps you to scale. When you’ve got money coming in, you’ve got money to dedicate to marketing and lead gen. That’s going to bring in more clients, which means the agency keeps growing.
You want to scale your profit, time, and agency so you can achieve market dominance. And ultimately, that can lead to the happiness and fulfillment that we all value.
So we’re going to dig into profitability.
I think this is an area of your business that you just can’t spend enough time working on and fine-tuning. But it’s also one of those areas that’s a little too easy to ignore.
That’s why I’m going to give you Five Hot Principles that will make you a profitable agency owner.
Hot Principle #1 – Pay Yourself First
Too many agency owners don’t take a salary from their business. They pay everyone else first before they pay themselves.
I want to push you to do it the other way around.
There’s this entrepreneurial myth out there that says the owner gets what’s left.
But here’s what I’ve learned over the long run:
When I pay myself last, things start falling apart.
Think about what flight attendants tell you at the beginning of every flight. If the oxygen masks drop, you put your own on first before you help anybody else. That sounds a little ruthless but there’s also a reason for it.
You can’t help anybody if you’re not in a fit state.
If you can’t pay your bills, your stress seeps into the business. Ultimately, that’s going to affect everyone.
Now, I’m not saying you need to pay yourself a competitive wage right off the bat. If the agency’s struggling a little, that might not be possible. What I’m saying is that you need to give yourself something.
Make a consistent deposit from your business account to your personal account of whatever you can afford.
Think about it like this. Going months without getting any income from your business changes your perception. It might make you start to resent it and hate the idea of coming into work.
Or, the agency might become more of a hobby as you end up focusing on something that makes money.
Either way, your business is on the verge of collapsing at that point.
And if that happens, nobody’s getting paid.
Strap on your own oxygen mask before helping anyone else with theirs.
Hot Principle #2 – Create Your Numbers Habit
Peter Drucker once said that what gets measured gets managed.
I want you to make measuring your numbers a key business habit.
I’m talking about weekly scorecard reviews and monthly P&L reviews. You can throw a quarterly deep dive and a yearly super-deep dive in there as well.
The point is that you have set points to where you revisit your numbers on a regular basis.
I spend 15 minutes reviewing my scorecard every Wednesday. I’ll look at gross revenue, net profit, receivables, and a bunch of other metrics. Any immediate lagging indicators that tell me if I’m going to hit my targets go onto the card.
Yours might be a little different. Even so, you need to have it and you’ve got to keep reviewing it.
Having a numbers habit will also stop you from spending on stuff you don’t need. I’ve lost count of the number of people who tell me they’re subscribed to something that they never use. You could spend years paying $50 a month for some software that isn’t vital to your business.
Catch it and get rid of it.
Put it like this. Imagine you’re playing baseball but there isn’t a scoreboard. You and your team have to keep all of the numbers in your head for the entire time you’re playing.
Everyone’s going to spend an eternity trying to figure out what’s actually going on. And you’re going to make mistakes that ruin the game.
Your scorecard gives you a super clear picture of what’s happening in your business. One looks tells you the points that you need to work on.
Hot Principle #3 – Get to Know Your P&L
There’s a huge difference between having someone create your profit & loss statement and actually knowing your numbers.
What is a good revenue target?
What’s good in terms of your percentages?
What costs of goods sold figures should you aim for?
If you don’t know your P&L inside and out, you can’t answer those questions.
Now you could go out and read a bunch of complex financial books to figure this stuff out. But my advice to you is to just check your P&L every month for one year.
By the end of the year, your financial acumen as it relates to your business will explode.
Think of it like going to the doctor to get your labs done. The first time you do it, you get handed this sheet with a bunch of numbers on it. You have no idea what it means.
But you keep going back regularly for checkups. And each time, you learn a little bit more about the labs. You figure out which numbers you want to hit.
And that means you can create a plan to get to those numbers. Whether it’s exercising more or changing your diet, you can do something.
It’s the same with your business. If you know your numbers, you can figure out what you need to do to improve them.
Hot Principle #4 – Project Your Budget
I want you to think of your budget as a boundary.
Your budget sets the boundaries within which you’re able to play. Going past those boundaries puts your business in trouble.
Imagine you’re on a soccer field. You’ve got the goal that you want to score in. And you’ve got the lines that mark out the field’s boundaries. There are rules about when you can do things past certain lines. And if you let the ball go out of play, you lose control of it.
Your budget’s there to create the same restrictions.
It’s not there to make you feel all optimistic. And massaging the budget to make it look a little rosier isn’t going to serve you.
It’s there to keep you in line when you’re managing your agency.
Your budget’s going to tell you what you need to say no to. And sometimes you won’t want to say no. It’s going to hurt, especially if you’re saying no to something that you really want.
But you need to get knocked back into play sometimes. That’s what’s going to help you stay profitable and keep control over your numbers.
Hot Principle #5 – Forecast Your Sales
This is the last piece of the financial puzzle and it’s really important.
When you project your sales, you have to ask yourself one big question:
Do we have the marketing to get us there?
Say you want to make an extra $10,000 per month. That sounds great on paper but you have to figure out what that means in reality. How many more clients do you have to bring on board to hit that target? How will marketing efforts need to change to reach that number?
Say you’re working on a big website project right now and you feel like you’re at capacity. When you make your projections, you say you want to double your revenue.
But if you’re already at 100%, how are you going to do that?
When you forecast your sales, you start to understand the answers to these questions.
You’ve got to keep things realistic. That means making projections that are within the scope of your agency.
Become a Profitable Agency Owner
I’ve shared Five Hot Principles that will help you to achieve profitability as an agency owner.
Each one handles a different aspect of your agency’s finances. You’ll get to know your numbers better, which means you can make more accurate projections. And you’ll create boundaries for you to operate in.
That means you scale more effectively and sustainably.
But I’ve just shared the principles. You’ve got to put them into practice. And I’ve got a ton more to show you about becoming a profitable agency owner.
Would you like to learn more?
With UACADEMY, you can. Apply online today to discover if you’re eligible for a FREE strategy call.