Your Revenue-Centered Brain Is Killing Your Branding Business
Have you ever made a $250,000 mistake?
I did—and even though it’s embarrassing, I’m glad I did. Because that expensive mistake was the wake-up call my business needed to get on a different (read: better) track.
When Steve and I first started working for ourselves,
our only goal was to stay afloat. Just being able to support ourselves without answering to a boss was our ultimate dream. We had been piecing our income together with $20-30/hour gigs, thinking that as long as we could find clients that would pay this much, we would be successful!
And it worked—a $300 logo project, a $1,500 logo and website, a $400 rack card… you get the idea.
I continued to hustle, usually seven days a week. In my third year, I brought in almost $250,000 in business!
That sounds really impressive until you hear this: I was so focused on the revenue, assuming that money would eventually solve all my problems, that I completely ignored the bottom line. Although we made $250,000 that year, we were still working seven days a week. There was no time freedom and very little room to grow. And at the end of those 12 months, we didn’t have any money in the bank. In fact, we owed $40,000!
How did this happen?
It’s what I now call my $250,000 mistake: I confused sales with profitability, and it drove my business into the ground.
I want to make sure you don’t make the same mistake.
How I Got Profitability SO WRONG
When we first started working for ourselves, my focus was on cash flow. I had rent to pay, I needed money to eat, we had to pay for health insurance, and I needed cash by a certain day of the month to cover those costs. Focusing on revenue really helps achieve these monthly milestones.
But my time? My time was the most valuable resource I had to give! I didn’t feel I had anything BUT time to trade for this money, so whatever I had to do to make my income goals each month, I did it.
When you’re learning the ropes of your business and figuring out everything from how and where to find clients to how to pitch them, charge them, manage projects, finish projects, etc., it’s understandable that you would freely dedicate your time to doing whatever it takes to make your business work.
Spoiler alert: This will not sustain a business in the long run.
I never made the switch to focus on my time. Instead, I was raising my prices, but I was also growing the scope of the projects. To prove that this project was worth $20,000, I had to prove it with a 6-month timeline and a 4-person team delivering work every week with meetings and presentations. I was thinking about the time and how much of it I had to give to the client to prove that we were worthy of these higher prices.
And I didn’t even notice because I was still stuck in my “beginning business owner” mindset that focused on REVENUE. Honestly, $20,000 IS a lot of money, and I was so happy to get it that closing the deal was all that mattered.
But that was me confusing revenue with profit, and it’s the reason that after three years in business, I ended up in debt.
What Turned It All Around?
Who would’ve thought that making $250,000 could be so disappointing? With no more credit available, no cash in the bank, and outstanding proposals that weren’t closing, I had to do something drastic.
That’s when my profitability epiphany came.
I had a small product I had sold a few times called a Brandup. It was a 1-day design intensive with us in our office where the client would get all the work we could do for them in a day. We had done this on the side for a few colleagues who needed our help but didn’t have the budget for the $30,000 projects I was after
Now, facing the demise of our business, we looked at that Brandup and saw it as a quick way to bring in desperately needed cash.
And I started to get excited because $3,000 1-day intensive Brandups were so easy to sell. I knew loads of people who would hire us for $3,000, and I had been writing them off because I was after the high-dollar projects instead (gotta chase that revenue!).
Not only that—they were so much easier to deliver. One day of our time, and that was it—$3k in the bank!
Then I compared the two: making $30k selling 1-day intensives would take ten days of our time. But those $30k projects I was pitching for? They were taking 2-3 times that amount of time.
We could make much more money in much less time and much more easily selling our small $3k intensive than the gigantic $30k projects I had been after.
Because $3k is a lot less than $30k, my revenue-centered brain had missed the fact that a $3k 1-day intensive was way more PROFITABLE than a $30k project that took forever to complete.
What’s in It for You? (Everything.)
The problem was, as we continued to grow our business, my mentality about money didn’t change. I thought if I wanted to be more successful and make more money, I needed to sell more projects, or higher-priced projects, or both. So that’s what I did. I went after bigger projects and bigger clients with bigger budgets, and I raised my prices. I hired two employees and got an office so we looked worthy of the bigger projects we were pitching for (because nobody is going to pay $10,000 to a couple working out of their apartment, right?).
Unless you have gone through the same trajectory that I have, you are likely revenue-focused, too. Here’s a simple test:
If I gave you a chance to choose between a $50k project and a $1k project, which would you choose?
If you unequivocally said the $50k project, you are still thinking with your revenue-centered brain.
It’s a trick question because the correct, profit-centered response is to ask, “How much of my time will be required for each?”
What if I told you that the $50,000 project would take 80 hours of your time for the next 52 weeks, and the $1,000 project would require no more than 10 minutes of your advice?
Now, which one do you want?
Yes, those numbers are extreme to prove a point because when it isn’t so obvious, you will trick yourself into thinking the $50k project must be better somehow since the dollar amount is higher. But the hidden costs of a project can sink your profits and your time—time that could have been better spent on another client. I will take a more profitable $1,000 all day any day because it will free me up to find more $1,000 profitable projects (and much higher-priced ones as well).
Moral of the story: Don’t let your revenue-centered brain fool you. If you want a thriving branding business, you need a profit-centered brain that is always asking about the time-cost of a project and not just the money it will generate.