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One Thing: Day 70: How To Snowball Profits
Day 70: How To Snowball Profits
Yesterday I was explaining common sizing and how it’s the second most powerful thing you can do with a coaching client’s income statement.
This is the kind of magic accountants should be providing for their clients but rarely do. Part fault of the accountant and definitely partly due to the disorganization of the average client.
Hence why they should hire you as their business coach… cough cough. Common sizing and other financial magic is not rocket science by any stretch.
You can’t win a hockey game without looking at the scoreboard.
For some insane reason LOL… I’m going to stay on financials/accounting even though I know it’s the kind of topic that puts you to sleep.
BTW I could use some!
And if you haven’t seen (heard) my Unedited, Unfiltered, Hard Hitting, Get and Find Instant Financial Results For Your Coaching Clients Podcast yet… go check it out.
Leave a review and go into a draw to win a trip to Business Coaching Mastery 6 (BCM6).
Your OWN THING today
Is that I am going to explain why your prospective coaching clients say this with ridiculous predictability:
“I’m spinning my wheels and feel like I just can’t get anywhere / get traction.”
Here’s the reason why.
It comes back to what I said the other day… Expenses have an incredible propensity for meeting revenues.
It’s up there with the other 7 wonders of the world like the Taj Mahal and The Great Wall of China, The Colosseum etc…
The solution lies in, reasonably elementary, FINANCIAL EDUCATION and their psychology once educated (told).
Once your client gets to a certain point (Breakeven, cough cough) they start to “roll downhill” because the spread increases dramatically.
Let me explain.
Simple Definition of Gross Profit = Revenues Minus Cost of Goods Sold (COGS).
If my daughter had a ‘Hot Chocolate Stand’ her COGS would be cocoa, marshmallows, and water.
Simple Definition of Net Profit = Revenues minus COGS AND Expenses
The Hot Chocolate stand expenses would include rent, paying for the Urn to boil the water, salaries to pay her buddies. These are examples of expenses outside COGS.
Let’s assume Gross Profit (revenues minus COGS) is 50% and Net Profit (Revenues minus COGS and Expenses) is 20%.
Breakeven is a simple calculation ‘overhead divided by the gross profit %’.
A simple example:
Total revenue = $1,000,000 (she operates one KICK BUTT Hot Chocolate Stand)
Gross Profit = 50% = $500,000
Net Profit = 20% = $200,000
Overhead therefore, must be $300,000
300,000 / 50% (0.5) = $600,000 (breakeven)
Here’s the MAGIC of the above and what I want you to REALLY DIGEST and how you’ll solve your client’s problem of:
“I feel like I’m spinning my wheels and just feel like I can’t get anywhere.”
Once the client gets past ‘breakeven’… ALL future profits are based on Gross Profit, NOT Net Profit.
As in 50% rather than 20%.
Said otherwise… The spread increases dramatically post breakeven and they finally start to realize financial returns.
But they never get past ‘breakeven’ cause their expenses keep creeping up to revenues for no other reason than they’re not watching / paying attention / care / experienced etc…
IT’S NUTS WHEN YOU REALLY UNDERSTAND THIS.
Once they get there they start saying “when it rains it pours”… as in they start making some money and real ROI.
What is really happening is they’ve surpassed breakeven and experiencing gross profit margins (50% in the example above) which is a LOT more fun than net profit only.
The above is all psychology for your client.
The closer you get to the finish line… the faster you go.
Think of someone with 100 yards to go in the marathon.
When your client realizes they’re at breakeven and that every dollar above and beyond this point (provided they don’t jack up expenses) is a 50% profit VS 20%…
They’ll go that much faster/try that much harder.
I’ve seen it MANY times.
If you can get across the above examples and realties of your clients’ financials… they’ll have significant long term financial wins.
You heard it here first.
Speak to you tomorrow.
Obsessed with your business coaching success,
Karl Bryan aka King Karl
PS. Shoes that don’t fit your wife properly aren’t a bargain at any price.
PPS. If you haven’t seen (heard) my Unedited, Unfiltered, Hard Hitting, Get and Find Instant Financial Results For Your Coaching Clients Podcast yet… Go check it out.
Download and leave a review to enter to win a trip to Cancun for Business Coaching Mastery 6 (BCM6) as my guest.
Here’s what others are saying:
“I closed a coaching client the same day thanks to your guidance. Pure Gold and thank you.”
“You’re a genius. I’ll never undervalue my coaching ever again. Thank you for your brilliance.”
“How do you come up with this stuff? You’re bloody hilarious and totally crazy… it’s refreshing.”
“Karl, you could charge tens of thousands of dollars for this material.”