One of the things that I love about the beginning of the year is the fact that I get to look at my clients’ profit and loss statements and balance sheets.
Why do I love that? Because I get to see just how much they’ve grown and how much they’ve expanded their business.
Now recently, I was looking at the numbers of a fairly new client.
Their gross revenue did not shift much compared to the previous year, and they seemed a little disappointed. And then I looked at their P&L and I got a little excited.
My client turns to me and asks “What are you so excited for?”
And I say “Because you grew!”
My client: “No I didn’t. I’m looking at it right now. It looks pretty much the same as the year before. It barely moved.”
And that’s when I tell them “Yeah but you’re looking at the wrong number”
See they were only looking at Gross Revenue. In terms of income, they only had a slight increase.
However, then we moved down to look at Net Profit, which is what got me excited.
Because of the work we did together, working on foundation and systems, optimizing their processes, the net profit doubled, almost tripled despite making the same revenue.
Looking at “Gross” is Money Anxiety
When you look at your numbers have you noticed that if you spend most of your time looking at the gross figures and avoid looking at the net.
This is a symptom of money anxiety.
If you are not paying attention to the net profit and focus only on the gross figures, basing all your decisions on that, you have money anxiety.
When you see that from one year to the next, your gross revenue does not change but your net profit increases, ultimately that is better. That is the more important figures we want to pay attention to.
See if there is room for your net profit to grow despite the same revenue, that means there is room for simplifying systems and optimizing processes.
Chaos in your business eats into your profits, and when you reduce that chaos, your profits grow.
My Challenge to You
Take a look at your numbers and really observe the trends since you started in business to where you are now. And if you haven’t been in business for more than a year and look at it from a month-to-month basis.
See how your net shifted from one month to another, one quarter to another, and pay attention to
your net profit versus your gross and if you cling onto your gross and take get that money anxiety piece handled.
