Episode 427: Thinking Time - Straight to the Bottom Line

Hey everyone, well, if you're like most people, you probably— and much like myself, you may have overindulged just a little bit over the last 6 weeks. Thanksgiving, Christmas, New Year's, not to mention some of the candy back in Halloween. You know, I feel like it's always been a difficult time of year to be able to kind of resist the temptation to eat some of the food that I seemingly really only eat once, maybe twice a year. And you know the result— your pants seem to fit a little bit tighter, you're maybe a little more sluggish, even though I was attempting to try to still get into the gym during that period of time. But look, no worries, it's New Year's, you got resolutions, you get back in the gym, you start eating more salads and fewer of the other things. But I think that it's similar in our business. I think expenses over the course of a year just begin to creep up and they kind of catch you. You know, you see this now with Rocket Money. They talk about— I'll bring somebody over and say, how many subscriptions do you have? And they apparently will connect it to their bank account and say, you know, I think I have 6. And they show that they have 16 or 18 or whatever that may be. And the subscriptions can begin to add up little by little. And whether it's subscriptions in the business or just flat out expenses in the business, that $9.99 for the barnauburn.com, uh, at the time, you know, you think, hey, well, I'm gonna, I'm gonna really read this message board post, or the $35 a month that I spend on Title Wave Car Wash to be able to wash my truck, you know, seems like a really great deal at the time. Look, do any of those break the bank? I mean, clearly they don't break the bank. And you, for a business owner, it's, you're able to absorb that. But it's really the combination of those things over a long period of time that really does. The one crescent roll at Thanksgiving or Christmas, not a big deal. But the issue is, is 12 of them. I think you get the point. Look, let's say that you're, you're a business that's doing $1 million in annual revenue. So you're doing $84,000 a month in top line. Well, 1% of that $84,000 is $840 a month, or $10,000 for the year. I really do believe and trust that if you spent 15 to 20 minutes— and if you're a Club Capital member, it's easy to do this, but even if you're not— you go into whether you use a credit card or whether you use a debit card for most of your expenses, and you went through the last just even 2 to 3 months of expenses— and I'm not talking about I'm not talking about the things that were unique because of the Christmas time. I'm talking about the things that you may have not kind of gone through with a fine-tooth comb. I think this exercise is 15 minutes to 30 minutes at the most. And I think what you'll find is, wow, you'll see some expenses that you just have forgot about. Last week I did the same thing. I tried to do this once, maybe twice a year. I don't think this is an exercise you need to do monthly. Maybe it would be a good best practice to do it quarterly. Truthfully, I think once a year or so. Now again, if you work with someone like Club Capital as an example, they may be able to stay on top of some of these, but this is really about looking at the actual individual transactions. And I did that and I found $937 a month in expenses that we just didn't need or just simply were not using. In my case, most of it happened to be software for one of the companies that, you know, you, you start to look at, hey, I think the software can help us to solve a problem at the time, but for whatever reason, we just never fully integrated it or started to use it. And I felt like we could actually simplify some of the tech that we were using. And so we're able to shrink the tech stack, so to speak, that we're using and save a little over $11,000. Now look, where do you think that money goes? It goes straight to the bottom line, hence the name of this episode, AKA more profit, which can either then be reinvested into some other things, maybe some marketing, maybe even people on your team. It could be distributed, of course, to you as the owner. It can just simply be saved as cash on hand for a rainy day. Ultimately, it creates margin in the business. We use a concept called the Rule of 40, uh, for our members, and that is the combination of your year-over-year growth plus your profitability percentage. We want that to be 40% or more. And this 15 to 20, 30-minute exercise or so could be something that helps you to get 1%, maybe 2 or 3, depending on where you are, of additional margin that goes straight to that profitability percentage. It's a worthwhile investment. Again, is it worth doing weekly? No, I don't think so. But again, a couple times a year to kind of go through your spending and your expenses with a fine-tooth comb. Does this help me? Is this helping me personally to develop? Is this helping us to get more customers? Is this helping us to keep the customers that we have? And if you think about it from that perspective, is this developing me personally as a business owner, as a person? Is this helping develop our team? Is this helping us to get more customers or keep more of the ones that we have? And if it doesn't, then it may be something you may want to consider to be on the chopping block. And majority of the time, we're talking about simply cutting the fat. We're not talking about cutting deeper than that. Just cut the fat. Our business owners, they want not only to have a business to do an annual revenue of a million dollars, but they also want the thing to be growing and profitable, of course, as well. And so those are a couple of the first two milestones of what it means to be able to scale. And so ultimately, that's what we do. So hopefully this episode helped you and helps you to kind of go through and really simply spend 15 minutes— I think that's the amount of time I did. Now, took a little bit more time to go through and actually go through the process of canceling some of those, etc. And the team is going to go and, uh, take care of combining some of the software that we're going to use. Again, yours may not be software, but it may be other things in place that are going to be able to help you to grow, scale your business by creating a little bit more margin, dropping some of those expenses, increasing your profitability so you can go make that reinvestment or maybe put it in your bank account in 2025. So hope that helped you. Hope that served you. Look forward to 2025. I hope it is your best year yet. Lead well and go be great.