It's was like looking at her bloodwork
This Financial Deep Dive was different. I had never met the client, and didn’t know a single thing about her business.
All I had was her financials.
And DAMN. I knew the whole story before she stepped foot onto that zoom screen.
Here were my predictions:
She had huge demand for her services in the past, so she responded by adding a ton of capacity (capital intensive) and now although she has way higher sales, her profit has plummeted.
Now her overhead has gone up with non billable staff to support the growth.
She pays everyone else more than she does, even though she is technically still billable.
She is more generous than the market average with her commission split/wages and its not enough to cover the overhead. (THIS IS SO COMMON WITH FEMALE FOUNDERS!!)
She is burning out and can’t afford to live on such little salary for much longer.
While everything is going “great” on the outside, she is barely making it personally.
She had moved from one Sweet Spot and was currently in a Valley of Death trying to get to the next Profitable Plateau.
Unfortunately ALL of my predictions were true. And unfortunately this phenomenon plays out over and over and over again with small business. So she is not alone.
And that was validating. It was also validating that I was able to diagnose her problems. All she was seeing was a sinking profit. She was too close to the numbers to know why.
And I am hopeful for her! There are many ways out of this situation.
She can increase her prices.
She can increase capacity even more to get to her “Sweet Spot” (which is the ideal ratio of sales to overhead. I am obsessed with helping people find this, because it doesn’t necessarily mean massive growth.)
She can renegotiate the staff’s compensation plan and be honest about how it’s not financially sustainable.
She can decrease overhead expenses by systematizing or streamlining processes to be not as human driven.
The beauty of getting bloodwork done, is that you get to stop wondering and start having some answers. You can take ACTION. You can take supplements, change your diet, or look into specific issues. You move from a passive participant to an active role in your health!
And this is the exact same with your financials. SO many women entrepreneurs ignore their financials, or are not committed to listening to the story they are telling. They think they are “bad at math” or don’t understand how to read their statements.
But when we rip the bandaid off, and get CURIOUS (there is absolutely no judgement!!) they can start to feel empowered and take ACTION!
