Profitability and that Business Manager

Hey guys, today we are gonna talk about profitability. My name is Juliana Marlanda, founder of Skill Time, and I wanna discuss why this little word is so important for our business. Now, one of the first things that we think about when we think about profitability is making sure that things are lean, and I love to think about it as how are we making sure that our business

is a lean, mean, working machine that is as efficient as possible, but without losing quality and effectiveness. The other thing is, all right, around profitability and around really getting to know what are our numbers, we wanna know what are the numbers that are really most important to our business. Because people tend to throw the word profitability around, but there's all sorts of profitability. So we're gonna go

through that today. Also, how often should you be looking at your numbers? Is it a daily, weekly, monthly, bi-weekly, quarterly thing? And what types of numbers are we looking at in terms of those frequencies? And lastly, it's gonna be all about hiring a business manager. And you know, we've been talking about this, we've been talking about setting up your business for autopilot, and really what is gonna

take for us to do that, and how does that relate toward numbers? Now, the first thing that we want to really understand, right, in terms of really getting very intimate with our numbers is that this is so important, not just for the sake of numbers, because depending on what type of agency you are, especially if you're more on the creative side, you might be like, oh, numbers,

or even if you're very, very numbers-oriented, you still aren't in the numbers of the business, right? You might be looking at marketing numbers, it cost a back position in LTV, and all of these things that, you know, you're like, oh, these are my day-to-day, right? My numbers. But we need to be looking at your operational numbers as well. And the reason why is because a lot of

business is done and created via emotions, right? And I don't wanna negate emotions, or, you know, depending on what type of mindset modalities you might subscribe to, but there is something about having hard data and making actionable decisions based on that data and not about our feelings that is going to allow us to stay ahead of the curve and really have a very strong foundation in which

we can build our empires. Now, the other thing that's really important about having a highly profitable business is that we have to understand that it is getting extremely competitive out there, right? And all of our marketing platforms are making it, I'm gonna say simple, not easy, to be highly competitive. And it sounds like everybody in their grandmother is a marketer, an agency, a course creator, a coach.

So that need to stay competitive is going to be much more affordable if you have a lean business. Also, in times of economic suckiness, having the ability to have a business that's agile because you have that amount of profitability is going to be huge and set you completely aside from others. And if you are paying attention to your numbers, if you are understanding your profitability, it starts

to become much more easier to see what is clogging up your profitability or as one of our members had said, the fact in his piano, right? Now, things to take a look at could be the lack of delivering on time, right? Like if we have things that are clogging up our production, they're going to be clogging up our resources and hence our profitability. That's internally. And externally,

clients that are dragging ass, clients that are taking way too long to get you back feedback, iterations, reviews, they're crowdsourcing to everybody and they're not going to be what you need so that your team can produce and produce in a timely fashion. Now, it could also be team members. Maybe they're not being effective. Maybe they're not performing. Maybe you don't even know who is being effective or

performing. So you can't even tell whether or not people are being profitable. Poor resourcing. We might have the right people on the wrong jobs, the wrong people on the right jobs and vice versa. Or your people are overwhelmed in that capacity. And then lastly, just really inefficient processes. And the list continues. But once you have those numbers in place, you can start to see where you are

getting stuck in terms of your ability to have more efficiency in the business. All right, now let's take a look at the numbers. Now, of course, we are saying, okay, profit, right? Profitability, the whole module is based on this, which is sales or revenue minus your costs. And you can start to get really nitty gritty on this. But if we just take a look at a profit

and loss statement and we say, okay, what is our top line? Minus our bottom line will give you your profit. And if we want to get more sophisticated, we can start taking a look at gross profits versus net profits. But for the sake of simplicity, we just really want to say like, how much are we making versus how much are we expending? Now, I love this little

diagram that I once drawn a whiteboard. And we can see why it's so important to be profitable. So check this out. If we are a million dollar business with a 20% margin, I'm gonna talk about margin just in a moment, right? Our profit is 200k versus a business that is a quarter million dollars, right? You're doing 250, your margin is 80% and then your profit is 200k.

Isn't that insane? And in this diagram, you might ask yourself, do you really want to be making a million? A 20% margin or 250 at 80% margin? Now, chances are, right? And I'm not advocating for not being at a million. I'm all, you know, I'm all for scale. It's in the brand, guys. But what I am saying is this dude here doing 250 with 80% profit margin

is chilling at the beach. Systems are good. Stuff is on autopilot. You know, pricing is on point. The offer is good. Chances are there's so much, like there's such little overhead, like this person isn't managing much. The person at a million, right? With the margin at 20%. Now, this in agency world, if you've got a big agency, it's still not bad, right? But chances are there's fat

in the overhead. You've got people under producing, underperforming, your systems are not on point. Things are falling through the cracks and you're stressed out. You're trying to make sure that there's enough here to pay taxes. You know, here comes April if you're in the US and if you're over the world, it's gonna be a different times but you still gotta pay taxes. And you're dealing with stressors

probably giving out discounts, trying to figure out how to make sure that you're making payroll, right? So there's all difference in massive difference in our state of being, in our mindset, in our lifestyle, if our margins are higher, because you're just dealing with less resources, right? You're thinking about how much are you managing when you have a low margin versus a high margin? And in order to

get your profit margin, you can see it's profit divided by revenue times 100. So you're gonna get that percentage. And as you can see, higher profits equals higher freedom. And the reason is, is that you're technically managing less resources, which is huge. Now, I wanna also take a look at a case study, right? Now, this is a client that was doing Facebook ads agencies. And the other

thing that I want you to think about in terms of your profit and your profit margin is two things. You can take a look at profit margin per client and this is huge, especially as you start to get bigger. And if you have multiple clients and you might have multiple price points for these clients, if you don't have a strict offering, you might be doing different types

of offerings and everything starts to get mucky if you're not paying attention to your numbers, right? We can take a look, right? That, you know, for example, and I've just created clients A, B through whatever and I repeated it. So it's not going A through what not. But I took out the names of the clients for privacy sake. And, but we can see, we have clients here

at 500, which are legacy clients and, you know, with the spend and then we have clients with the spend of 12,000 and 18,000. So we have, we haven't cleaned out the types of clients. Then we can also see that the offerings are different where we have some with a minimum fee, some of them have a percentage of ad spend, some have been converted to a percentage of

profit instead and like the total revenue here and this is a monthly number, right? Then we can take a look at account management hours and you want to take a look when you're looking at your profitability is for clients, you want to pay attention to how much time are you or is your team spending talking to clients? Is the conversations, you know, are the client meetings efficient?

Are they being run with a proper frequency and cadence? Because sometimes when you're feeling overwhelmed by a client or when your team just basically wants to blow up a computer, if the client sends another client request because they are just so had it with that client, chances are they're spending a lot of management hours on the account, spending with the client and that client has now become

unprofitable. Even if the revenue itself might seem high, you want to start looking at the actual profitability, right? And then there's execution hours and execution hours are how much time are we spending on those campaigns for the client or producing the deliverables or milestones for the client, right? The total hours and then you can start to see, okay, what are the costs in this particular case? They're

paying $18 an hour for execution and I believe this is US, I took out the column that said GDP. Then we have account management hourly and this is account management. Now, if you're doing your own account management, like if you're the sole person that is talking to the clients, this is you. This ends up being your hourly and I switched it out here because they actually wanted

to have an account management hourly of 100. But when we did it, the revenue minus the cost, all of this was negative. It was so negative, it made us cry. So I switched it over just for demonstration purposes. We put like 50 for these and 25 for those and 10 for those and then you can start to see how the numbers start to affect the margin, right?

We have to go all the way down to $10 to actually start creating margin. And this is what I want you guys to look at because it is so much more worth it to start to delegate parts of the business so that you can then be making sales, cutting out the clients that are not profitable and really running a profitable business because it's not only about your

total revenue minus cost, you start to see the fat in here and then you also start to see it in terms of your team and how they're producing. Now, this is just going to give you a very generic overview of what it looks like once you start playing with your numbers and being hyper-hypertentional about how you're running the business. Now, one of the other questions that I'm

often asked is like, how often should I actually be looking at the numbers? And you're trying to run the business, you're trying to run the business in a way that's intentional. So how do we do that in a way we're not stuck to the numbers all day, every day? Now, for sales, especially because most businesses that are under 25 million are still doing massive acquisition. And even

if they're above that, you're still doing acquisition and you start to have sales teams and those sales teams, depending on how big or small, should be looking at the sales numbers on a daily basis, all right? We want big, bold daily metrics for sales and especially if you have several people in sales, it's great to have everyone's number in the same place. It feeds that happy but

good competitiveness that is healthy where sales is that type of thing where it is very, very metrics-driven and you wanna be paying attention to that on the daily. Then you have your client data. Now, I tend to think of client data, especially if you're an agency, it's most likely gonna be around marketing and I put it for simplicity's sake, treat yourself as a client as well, right?

If you're looking at your client data that is around marketing, you should be looking at your exact same data for yourself in the exact same way, right? And this is really great, after you get out of a launch phase, right? I'm not saying when you're in launch, you're really taking a look at things on the daily or as you're validating. But once you're past that optimization and

you're comparing campaigns, you wanna be taking a look at things weekly, why? Algorithms change, things happen, you start getting competing campaigns, sometimes there's incidents in the market, you wanna make sure that you are keeping on top of that information. Team performance, there's different things that we can do with our teams based on a weekly, monthly and quarterly basis. I like to think of as weekly, you're gonna

be doing scrums with the team, you're going to be course correcting anything that's happening and troubleshooting any performance, we want monthly scorecards and we want quarterly performance reviews. Now, all of this information is going to be both quantitative and qualitative and we wanna make sure that we are treating our talent just as important as we're treating our clients and that we've got a journey for them as

well that we're really holding them accountable, dependable, but we are also developing them, right? And one of the things that you wanna know is how are your people doing, right? Like how is this individual doing? And if you have a business that has less than 50 people, you should know as the owner of the business, you should be able to know and at minimum, your business manager

should know and we're gonna get into that in just a second. Now, the P&L, the trusty, handy profit and loss statement. So if you're looking at nothing else in your business, please, please, please, please, please, be looking at your profit and loss statement at least monthly, right? Your bank account will appreciate it and it's very, very, very easy to hire a bookkeeper and then never look at

your P&L again. It's like once you've offloaded that wonderful thing that we love to hate called reconciling the books, you're just like done, but it is very, very important. And if you have a relationship with your bookkeeper or if you're using an online application, make sure that they are either sending you monthly reports for your P&L statement or they are, or you're able to go in and

look at that. Now, with the P&L, it is also a great way to check if something is completely out of whack, right? It's also a really, really good threshold for saying like, wow, why do I have $4,000 in miscellaneous? Like that shouldn't be, right? So it's a good checks and balances for what's happening with the rest of the business and it's gonna keep you up to date.

All right, hiring a business manager. We have come to the impetus of the business manager. It is huge to hire someone to take care of all of those resources that we have been talking about in this module. Now, a couple of things to keep in mind in terms of hiring a business manager. There is always a trade-off between experience and money no matter what hiring you are

making. And that includes someone who's gonna be managing your business, so if you have someone who is highly experienced, chances are you're gonna be paying a whole lot more money. Now, if you have someone who's more junior that you can train up, then you can get someone who's a little bit more affordable. Now, no matter what, I always love to tell people that people who step into

positions are stepping in to manage the existing resources. They're usually not stepping in to create them, which is why in the last module that we went through, we really talked about setting up those systems, right? Now, when you get someone who's in there who can help you optimize them, that's amazing. But we really want to give someone a starting point to manage. And as I always say,

the people that you hire, they're not a wizard, you cannot hire a wizard. Now, and if you can't, they are extremely, extremely expensive. So to just go again with the whole profitability module and thinking about how do we keep our profits as high as possible, if you have systems in place that someone can come in and manage and also optimize, awesome. It's very rare to find someone

who's going to create them. But if you do find a partner in crime to do that, that is amazing. The other piece of this is really finding someone with the skill sets, we're gonna be able to fly that plane, right? You want someone who is a person who is going to be resourceful, who is going to be decisive, who will be innovative, and yet at the same

time, understand that as the owner of the business, you have the last say, right? Now, you want to look for skill set as well as fit and alignment for your culture that you're trying to create because your business manager is going to help you shape the culture of the business. And this is something that happens either intentionally or by default. So it's really important to get someone

whose values are completely aligned, who has the fundamental skill sets that you want and the rest you can train, right? Just know that even if you're like, I have no idea what I'm doing, we are here for you and we promise you that you can train them. So really getting someone with fundamental skill sets and values is going to be huge. Now, setting expectations, hiring slow, allowing

failure and correcting quickly might seem a little bit of a mishmosh, but they all really, really go together. One of the worst things that we can do is set up someone to fail and then we really, really pissed off at them that they did, right? So we want to be able to set as many expectations as you can, hire slow and not like super, super slow, but

slow enough that you know that your values are aligned, that they're going to be able to get shit done, that they've got your back, that you've got their back. And you want to allow failure, but quick failure, right? Because all the failures and all the mistakes are going to cost you money. But you want to be able to have someone who's not afraid to take a risk,

especially in your type of business, right? Because if you're going to be taking risks, you want someone who's going to be able to take risk and deal with failure. However, you want to correct as quickly as possible and make sure that they are going up that learning curve, that they're not recommitting to those failures. And lastly, metrics. We want to have metrics for our business manager in

terms of their performance, just the same way that we have for all the other parts of our business, because we want to make sure that they can handle the metrics of the business and that we are able to measure the effectiveness of the business through them and that the quality that's being produced is absolutely kick-ass, right? As you scale, you don't want to make sure that your

quality is declining. We want to make sure that it's increasing and the best thing that we can find is someone who does a better job than we do. That is the most amazing thing when you're training someone up that way. All right, guys, here's your action items. All right, I want you to pull a report of your past, profit and loss, your P&O statement for the last

six months. Here's the test. If you can't pull a report quickly, you need to go in and hire a bookkeeper or work on your books or figure it out to see what's happening, because this is a task that should be able to be done in relatively about three minutes. If you can't do it for three minutes, if you can't find the password, if the thing hasn't been

updated, if it hasn't been done, then that is a system that needs to be worked on sooner rather than later. All right, let's get on that ASAP. Then calculate your profit margin. Now, one of the easiest ways to do this is just take your revenues, take the average for the last six months and take your costs, take the average for the last six months and then you're

gonna use the handy-dandy formula that we have in the slides and then minus the two. Then, well, divide it and then times 100. Then I want you to calculate your profit margin per client. Now, if you've got more than 30 clients, if you're one of those, then calculate it per service, because sometimes what we find is that we're finding inefficiencies and lack of profitability if you have

a crap load of services, you end up seeing that you're spending 80% of your efforts on the 20% of the services that you are actually producing. So it's a really, really great eye-opener for most agencies. And then the last thing that I want you guys to do is create a job post for business manager. Woo-hoo! All right, now onto our next modules where you get to figure

out the fuck you wanna do. All right, and that is going to be awesome because you're gonna have your systems, your metrics, your business manager, and now you get to figure out what is next for you.