The Product Biz Podcast by Monica Little Coaching

What to do if you didn’t make a profit last month

October 05, 2022 Monica Little Season 1 Episode 20
The Product Biz Podcast by Monica Little Coaching
What to do if you didn’t make a profit last month
Show Notes Transcript

Have you noticed that you’re making a good amount of sales and maybe even hitting your highest sales months… but you aren’t making a profit or creating more money in your bank account?

Listen to this quick episode of The Product Biz podcast to learn what to do if you’re struggling to make a profit with your small business.

When you finish listening, I'd love to hear your biggest takeaway from today’s episode.

Take a screenshot of the episode you're listening to, share it to your Instagram stories and tag me @monicalittlecoaching - or send me a DM!​

While you're there, make sure you follow me so you can see behind the scenes of how I grew my handmade organic skincare small business to multiple six-figures... and how you can grow and scale your business, too.

LEARN MORE FROM MONICA LITTLE

Website:www.monicalittlecoaching.com

Instagram: @monicalittlecoaching

My small business:www.shopplantbasedbeauty.com

INTRO:
Are you ready to go behind the scenes and learn what it really takes to create consistent sales each and every month with your handmade small business? Join me Monica little self-taught multiple six-figure, small business owner and your product business coach, as I give you the insight and inspiration on how to better run your business and increase your sales in ways that you may not have even been aware of, so that your business can truly become what you knew it could be fact, when you first start, learn how to let go of perfection, overcome the fear of failure that is holding you back. And finally, start taking action so that you walk away feeling like you've cracked the code on how to run a successful small business. You're listening to the product biz podcast.

Hello, and welcome to episode 20 of the product this podcast. Today we are doing another short and sweet episode all about what to do if you're not making profit in your small business. So if you tuned into the last episode, then you know I am moved from Chicago all the way to Scottsdale Arizona. We just got in on Monday. So we've been here about a week now. And it's been so absolutely crazy trying to get settled in. It's so bizarre how fast-paced Chicago is and how much you don't even realize it until you really step away. So even when you go on a vacation and you get away from the city, it's not the same as actually like picking up all of your stuff and moving. And it's been the most bizarre week trying to get settled in to this slower pace to not having like sirens and trains, and boat tours and people and cars all around You 24/7. So it's been super, super, super weird trying to get settled into a little bit of a slower pace, but super enjoying it.

But with that being said, still getting settled in is still not 100% in my element and just yet, so I'm going to be recording this super quick episode for you just to chat about something that came up with two of my product base Academy students this week. So I thought it was a really important message for me to share with you in case you feel like you're in a similar spot. So what came up from two of my students is that they are working on their business. They both started their business this year, so relatively new, but they're not making any profit just yet. So what that means is they're making a lot of sales, they are selling a ton of items. But at the end of the day, the amount of money that they're truly making after covering their costs isn't where they want it to be. So they're not making enough profit after they account for all of their expenses to actually run their business. And there's a couple things that I want to mention on this because number one I can totally relate. I remember my first year when I was running plant-based beauty. When I was also at my corporate job, I was in the red for about the full year, almost one whole year where I was struggling and trying to get out of the red. And I was keeping track of all my expenses. And no matter what I did, I couldn't make enough profit, I couldn't generate a profit. And I was trying so hard and I was selling a lot but I wasn't getting there. And I can relate to this. So I want to level set with you that number one, this happens to a lot of small business owners. But number two, there are so many things that you can do to make sure that you are actually selling your products at the right price.

So you have a big enough profit margin. This is where the problem really starts is a profit margin. So profit margin is what you sell your product for. If you sell it for $22 Then you subtract your costs if it may be $10 or $5. And what you have left is your profit margin. This is the amount of profit that you make and you can look at it as a percentage of your total sale you can look at it as the pure dollar amount that you make on every single individual item sold. So when my two students came to me, one of them and Etsy algorithm secrets one of them in product is Academy saying that they just aren't generating enough profit. The first thing I said to them as you have to double check your numbers for what you are charging for your products. This is where most people get caught up because they set their pricing for their products based on a number that feels right based on an emotion but pricing is not an emotional thing pricing is based on data pricing is based on numbers pricing is not gray. Pricing is black and white. So you have to make sure that your pricing is setup right and when you set your pricing properly, you take out the emotion you take out what you think your pricing should be you take out the feeling behind it and instead you look at

At your actual costs, and then you calculate your wholesale price. And when you have your wholesale price, and you calculate your retail price, and your retail price is what you sell it for. So if you feel like you aren't making enough profit, the first thing that you need to do is to check your overall profit margin. What is the price of your product, and are you actually making enough profit on that item. So I'll give you one example of my avocado and LG facemask, I sell it for $22. It costs me about $4 to actually make it. So every single product that I sell every single avocado algae that I sell, I'm making $18, which is a really, really, really good profit margin. And it took me a while to get my avocado analogy costs down to $4 per unit. So that is the other part of the equation. Not only do you need to make sure that your pricing is priced, right, so you're making an accurate profit on each item sold. But you also need to make sure that your costs are as low as possible. So if you're buying ingredients in small doses, and you're paying a lot for ingredients, well, that's going to increase the costs of what's in your product. And that's going to either reduce your profit margin, or require you to charge a really premium price for your product if you're not managing your costs the right way.

So I want to level set with if you don't feel like you're making enough profit in your business, the first thing that you need to do is understand your costs, understand your profit margin, understand the prices that you set for your products, and to make sure you have an adequate profit margin within them. So you are making money on every single sale that you have. And if you're not sure how to do pricing, if you're not sure how to reduce your costs, that is entirely one module inside product base academy that I teach, to show you how to price your products, the right way to take out the emotion of I feel like my pricing is too high, I feel like my pricing is too low and instead actually look at numbers and price it where it should be. So you're making money on every single sale. And reducing costs is something I also teach your product this academy, but just to give you some insight into what impacts the amount of profit that you make on a monthly basis. That is one part of it. Make sure your pricing is right. So many small business owners are not priced right, then they go to sell wholesale and they are losing money on wholesale, then they give free shipping. And they're losing money with that there are so many things that I see that small business owners do that are just eroding their profits, eroding all the hard work that they do. And then they end up not making any money. And then they're wondering why at the end of the month, they have no extra money in the bank.

So that is one of the key things that you have to look at. The second thing I want to mention about profit, your products should be priced right to the point that you are making money on each sale and you're making a good amount of money, you should have income you should have money coming in. But with running a small business, the first year or maybe even the first two years, a lot of that money is going to be reinvested back into your business. Because as product business owners, we have to buy ingredients, we have to buy things to make things right. It's not a service where we are selling something that someone can read online, we are selling a tangible product. And because of that we have tangible ingredients, tangible inputs that go into that product. So I want to make sure that we level set that the first year, the first two years, the amount of money that you make in your business will most likely be reinvested back into your business.

And this is where it's so important that we have to have a long term vision of our business. Our business isn't meant for us all of a sudden, this first month that we're in business for us to make millions and millions of dollars. Our business is something that's going to take time it's going to take energy, it's going to take effort, but we have to have this 2, 3, 4 , 5-year goal of where we want our business to go. And we have to show up day in and day out with that vision in mind. We have to show up to the point that if you aren't making a profit for a couple of months, you're so dedicated, you're so passionate, you're so committed to your business that you are going to keep showing up every single day until you start to make a profit. And this is where you see who's really in it for the long run and who's not because a lot of people will get so defeated when they aren't making profit right from the start. But as small business owners selling a physical product, we have to invest in raw materials. We have to invest in a printer we have to invest in a making table we have to invest in a making space.

We have to
invest in so many components to keep our business up and running. And that first year and second year is going to be reinvesting back into the business 100,000%. That's where all of your money is going to go back in. Because you have to essentially build your machine. And this is what I was telling Diana today, when you're in the first year and second year of your business, you're building a machine, you're building components and systems and procedures, and you're buying ingredients and making your operations as easy as possible and buying all the components that you need to create a machine. And this machine is your business. And it's going to take a couple years to build this machine to get in a rhythm of generating consistent sales, to buy all the components that you need it to operate your business, to invest in the knowledge and the skills that you need to grow your business. But after a year or two, when this machine is built, and you have all of the components, you have all the individual pieces that come together, then this machine will work for you and it will generate sales for you. And now since you've bought all the components needed, you don't have as much to invest back in because now you have a machine that actually works for you and generate sales for you and brings the sales to you.

But the key is, we have to focus on building the machine. And this was one of my biggest regrets when I was working full time, that first year when I was running plant-based beauty and I was also working full time, I was so focused on making a profit, and making enough money to match my salary and my full-time job. Because if I could match my salary, then I can leave my full-time job. That's what I told myself. So I put so much pressure on myself, to make a profit. While I'm literally just starting out in my business, which is so crazy to think the pressure I put on myself to make a profit. When I had to invest in infrastructure, I'd invest in raw materials, I'd invest in coaching, I invest in so much for me to grow my business and to meet to grow personally as the leader of my business. And I had so much pressure on myself during that time. And my biggest regret. Looking back on my full-time experience when I was also running my small business is not dropping this intense pressure that I put on myself to make a profit and instead focusing on building a machine. Because when you're building a machine, the profit will come later. But you have to have some sacrifices in the short term for that long-term vision for that long-term goal for the long-term legacy that you're building. So I encourage you, if you're in this spot where you are also stuck with profit not making a lot of money, you're making sales, but you're not generating profit from it, I encourage you to remind yourself that if you're investing in your business, then you are building a machine. And that is going to set your business up for success in the long run. Like I mentioned at the beginning, we obviously need to make sure our pricing is right, because you can't build a machine.

If your pricing is wrong, and you don't even have any income coming in in the first place, then building that machine is going to take you 234 or five years. But if you're priced properly on every single product that you sell, you're generating money, you're investing it back in your business in terms of knowledge in terms of skills, in terms of equipment, in terms of raw materials, in terms of expansion, then you're building that machine that will generate profit for you in the long run. So I want to encourage you to not make the same mistake that I did, I had such a short term vision that I needed to make profit now in order to justify me to leave my full time job. how that story ended, is I didn't end up making the same amount with my business until I left my full time job. Because if you think about it, to match a small business, to my full time salary, what I'm working full time 40 hours, and my small business is only getting a few hours every night, in order to build my business to be a large enough income. That's really challenging. And usually that doesn't happen until you have the time to invest in your small business. So I love my full-time job, not because I was making enough money to match my salary. And that's one of the biggest questions that I get like, Oh, were you ready to leave your full time job? No, I wasn't ready to leave my full time job. I just couldn't do both things any longer. I couldn't build my own small business and work 40, 50, 60 hours a week and a stressful job. It wasn't possible because I was giving all of my energy to my full-time job. And then I was putting all this pressure and expectation on my small business when my small business was just getting a few hours every single night. So I left my full-time job because I physically couldn't take
handled doing both.

Something had to give. I knew I could grow plant-based beauty 10 times faster and 10 times further, if I was focusing all my time on it. But in the meantime, while you are working full time, if you're in that situation right now, I encourage you to change your mindset on how you feel about your business and putting this pressure on it to reach a certain level. And instead focus on building a machine, focus on building something sustainable, focus on building something scalable, focus on investing in yourself while you're working full time while you have an income that's covering your living expenses, because then you can really build that machine without the pressure of it having to provide for your living expenses at the same time. So that's just what I wanted to mention today super top of mind based on the conversation I've had with the members of product visit Academy of what do you do when you're generating a ton of sales, but you're not seeing profit. So number one, just to recap, make sure your pricing is right, you should be making a good amount of money on every single transaction, you shouldn't be fueling your business with cash, you should have money coming in. But number two, know that that money coming in, it should be reinvested to build a machine to build that long term goal that you have for your business and invest in yourself invest in your business. And then in the long term, you will see those consistent sales, you will see that profit increase, you will see you reaching your goals.

But it takes a trade-off. There's a trade-off of the short-term profit for that long-term goal, that long-term vision. And you have to hold that vision. And you have to keep going towards that vision, even when the profits are not coming in right now. And that is one of the hardest parts to do. But that is what's required of being a small business owner who truly wants to grow their business to reach their dreams. So I just wanted to wrap that up really quick with another very quick 15-minute episode. I am actually heading out to Sedona right now for a retreat with my intuition coach, it's going to be an intuition and business retreat in Sedona. So I'm going to pack the car up, head out. But I wanted to make sure I fulfilled my commitment to you of sharing a podcast every single week. And I also want to mention that I am right now in the middle of relaunching product biz Academy. We are starting on Monday, October 10. So if learning about business has been exciting for you and you're ready to take the leap to learn how to actually grow and build and market your business, then I encourage you to sign up, please reach out to me at Monica little coaching on Instagram and I'll give you all the details. We're starting on Monday, so just a few days away. But if you've been listening and if you're interested, then please reach out and we'll chat more but thank you so much for your time. Let me know if this was an interesting and valuable episode for you and that I will be back next week and I'll talk to you then. thank you so much for hanging out with me here inside the product biz podcast. If you love this episode, don't forget to subscribe and to leave a five-star review. And if you're interested in learning more about product biz Academy my signature group coaching program for handmade small business owners like you who are looking to create consistent online sales with their business, then go to the product biz podcast.com to join the waitlist. Doors are currently closed but you'll be first notified when they reopen.

Thank you so much and I'll see you on the next episode of the product-based podcast.