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On being profitable

Being profitable is actually fairly easy.

You can technically be profitable with a single sale of a service, if you charge more than it costs you to develop it. That’s why services are easier to push into the black than products – they take less work to set up and start doing.

Let’s dive in…

Let’s say you know how to write author bios. It’s your jam, and you do it well. So well in fact, that you want to do it full time. Of course, you’ll need a roof over your head, food and necessities like power, internet, etc. Say rent is $1000/month, food is $600/month and other necessities are $600/month. With $2,200  in expenses, it takes 5 clients at $500 to be $300 in the black each month. Which, if it takes a day to research, communicate and write an author bio, is totally doable (since most months have 30 days). So you could work 5 days and spend 15 days doing outreach or rounding up leads (using the weekends to relax and eat vegan burritos). To build yourself a buffer (and save for taxes and invest some), aim for 10 clients and you’ll still have half your time to do outreach and find leads.

Easy(ish), right? As far as the math is concerned. Where things get tricky for many of us is when we assume more expenses are required to be more profitable.

For example, if you spend $5,000 on a custom website as part of your “marketing”, the next 10 projects don’t go towards rent or taxes or vegan burritos (a necessity). They go towards paying off the website. Or if you hire a business coach at $1000/month, then you have to get at least 2 extra projects a month to cover it. Or if you buy the shiniest new laptop for $3,000, then you need 6 projects to cover that. And so on. Your goal of 10 small projects a month to cover your needs and buffer has now doubled (or more).

Or, maybe you want to teach people how to write their own author bios (which is a great idea, in theory), so you spend three months building a course on bio writing. The course takes up the equivalent of 10 projects worth of time (prospecting and working) so now your course needs to bring in at least $5,000 to be profitable. Is that realistically doable? If yes, then go for it! But if your audience and reach isn’t at a point where a product and its development can more than likely cover the money you’d have made if you just did services, then maybe it’s ok to wait a little and continue growing your audience.

I was in the same position. I was doing services and moved into products. But I made sure I never spent too much time on products (which made zero dollars while I developed them), to ensure that services still covered my baseline needs and buffer. Each month I did my service work first, to hit the number I needed, and only then focused on products. Once my products started to bring in money, I began scaling down my services by the amount the products were bringing in. This took a few years for me.

The other problem people run into with trying to be profitable is that they scale expenses as revenue scales. You made $8,000 for the last 3 months, which is more than your $5,000 requirement? Spend more on rent or a car! You had one good month of $10,000? Buy a laptop or a new website! And suddenly, even though you’re making more revenue, your profit is either unchanged or in the red.

I’m not saying it’s a bad idea to spend money on your business or make products either. Both can be useful. But in order to become and stay profitable, you’ve got to be lean in your expenses and you have to resist the urge to scale up expenses at the same rate that your revenue is scaling.

Too often it’s assumed that profit is the result of more money earned. Not enough people work it from the opposite end, where profit is the result of less money spent. If two people both make $5,000 each in revenue a month, but one person spends $2,600 and the other spends $4,600, the first person is $2,000 more profitable, even though they made exactly the same amount of income.

That’s why I personally prefer to focus on the spending part of profits. I can work less, because making the same amount of money goes further if I spend less of it. And creativity thrives on constraint—like seeing what products can be created on a shoestring budget. It’s why outside of one experiment, I’ve never spent money on ads. And why I haven’t upgraded my work computer in years. And why I focus my efforts for the courses I sell on work I can do (like writing or design) and not on work I can buy (like ads or hiring loads of other freelancers—both can be great, but I only do either if it’s absolutely necessary).

You don’t have to work more to make an extra $2,000. If you can reduce your expenses or simply not buy things in your business, you can work the same amount and get paid the same amount too, but wind up with an extra $2,000 in your pocket. I like that math a lot.

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