Introduction
What is your business making?
Should you be measuring your revenue or your profit when launching the online course you painstakingly created?
A lot of times you’ll see people talking about how they had a 5 figure launch or a 6 figure launch, but that doesn’t tell the whole story.
It’s frustrating because when someone lists a number, you don’t know if they are talking about revenue or profit. And as we look for role models, strategies, and ideas to emulate in our own course launches, how do you know what to pay attention to and what to ignore?
You could end up choosing a strategy that has you losing money if you aren’t careful.
Today I’m going to share with you how to think about the numbers you see being reported on social media, in podcasts, on YouTube so that you can make decisions for your business and digital course that will lead to more profit, more reliably.
Revenue vs. Profit
We don’t talk openly and honestly about money often enough as business owners. I don’t know about you, but what I often see is a conversation about how many sales someone made with their digital course launch.
And don’t get me wrong, that is inspiring and exciting, right? You see that someone like you, an entrepreneur building a digital course, has created something that brought in 4, 5, and 6 figures multiple times a year gets you going.
That is until you realize that the revenue they generated from a course launch, whether that launch was big and fancy or a quiet email launch, has left them in debt. They’ve reported the revenue but not the cost of doing business. That number isn’t always so pretty or shiny.
The question of whether you should be looking at revenue or profit when launching a course is amplified when you look at the literature out there on making money as an entrepreneur.
One article, published by Entrepreneur.com even states that most people won’t have the massive financial success that we dream of, but that there is more than wealth to be found in entrepreneurship.
So today, let’s talk about looking at revenue vs. profit and how knowing your numbers will be key to bringing home a paycheck from your digital course that can actually pay the energy bill.
Revenue
Let’s talk about revenue first since that is what we often hear and see people talking about. Who doesn’t get excited when a course launch crosses the $1000 mark for the first time, and then the $10,000 and then the $100,000 mark.
Revenue reigns supreme in those moments. In fact, without revenue we wouldn’t have a business that can even edge toward being profitable, let alone a six figure profitable business.
But just looking at revenue doesn’t tell us the whole story.
Revenue is just one piece.
Think about it like this, if we just look at the laundry room in a house to understand the whole of the house we would be missing a lot of details. We wouldn’t know the layout, the space available, if there were enough bedrooms, the flooring material, if the walls were covered in an ugly wallpaper or paint color.
When we think about judging a house just by the laundry room or lack of laundry room, we can easily see that is a little silly. We want the whole picture. Same if we are looking at apartments. We wouldn’t judge the whole apartment by the color of the door.
Revenue is a piece that then needs to be broken down, especially if we are going to stay in business year after year. After all, one course creator mentioned that they were more profitable when they were bringing in less revenue. As we go, our expenses often grow and our growth strategies in particular become more expensive. So let’s talk about profit and then what we can do with this information to create a course creation business that is thriving.
Profit
Profit is that money that is left over after all of the bills have been paid, including your salary as an entrepreneur.
When you see someone say that they had a 6 figure launch, that is typically the number of sales that will run through Stripe or their payment processor, it doesn’t account for how much they have to pay out for ads, memberships, masterminds, website maintenance, course portals, etc.
It isn’t uncommon for an entrepreneur to take several years to get to the stage of business where they are profitable after paying themselves a salary.
Let me give you an example. There are many $2000 courses out there to teach you how to be an entrepreneur. Many of them have a VIP upgrade that takes the cost into the $10,000 range. With your first course launch you are able to sell $10,000 in courses and collect 100% of those sales, meaning there are no refunds and no one defaults on the payment plan. You are neutral in your business. Although you have $10,000 in revenue, you don’t have any profit because your expense is equal to what you brought in from that launch. Now remember that no business just buys a course and has zero other expenses. This means that a 5-figure revenue launch is actually still in the negative.
This is why we have to talk about profit and not just revenue. I feel like revenue conversations get us amped up to take action, but profit conversations are the ones that help us to stay grounded, realistic, and thoughtful in the decisions that we make.
So how does this information fit into our daily lives as course creators? Let’s talk about that.
Using Profit and Revenue in Decision Making
The most common conversation I see about profit vs. revenue when course creators are chatting is to make sure that you ask a coach what their revenue is and what their profit is. I love this kind of transparency in business, but it does come with some caveats.
Every business owner has different goals. Think about the parent who is working limited hours, has built 6 figure businesses in the past or coached clients to do so, but they currently don’t bring in 6 figures in revenue because they are spending the bulk of their time with family. Should you judge a potential coach’s potential based on their revenue? Probably not.
Or what about a coach who has designed their business to be neutral and they are focused on giving back within their community. Again, asking what is your revenue or profit would be misleading. They would share that they don’t have profit and their revenue might be modest.
Does that discount their usefulness for your business? Only you can answer that.
But the reason I’m bringing this up today is two fold. We have to remember that every business has different goals and a different approach to revenue and profit.
And secondly, you have to be intimately aware of what your goals are for your revenue and profit. I strongly encourage you to sit down with your business once a quarter and examine your expenses and your income. What is necessary and what needs to be jettisoned to increase your profitability and make the most of the revenue that you have.
For example, I recently went through all of the memberships that I have, from software to backend course memberships and cut several. I wasn’t using them and they weren’t going to help me meet my goals for the quarter or the next year. In some cases, I had replaced that cost with something else that was working better or had a lifetime deal. In others, I had simply outgrown the resource and was ready for something else or to tackle things on my own.
I get attached to my recurring costs, but I’m ruthless when I sit down each quarter to determine what needs to go or stay and I have never regretted a decision. It is what first helped me get to neutral and now it is what helps me keep my 1:1 rates lower.
When we get to know our business more closely, we can start making better business decisions. And if you are listening and thinking that you don’t even know where to start, stick around for the Sixty-Second Solution where I share with you the quick and easy way to get an overview of your business’s financial situation.
Action Item
But before we do that, let’s talk about taking action in your business. If you’ve been around the podcast for any length of time, you know that I’m a stickler for taking action.
It is all fine and dandy to listen to podcasts, read books, and take courses, but it is the action that results that makes the true difference. This is why 2 entrepreneurs can read the same book and one brings in 6 figures in revenue and the other never launches. I hope, if you’ve gotten this far, that you are in the camp devoted to taking action.
I aim to make that action easy to take by giving you a couple of tactical ideas to choose from. Are you ready?
Let’s go!
- First up, make sure you know your revenue and your profit numbers. They are nothing to be embarrassed about. If you aren’t where you want to be yet, remember that this is a baseline and you can take action today to shift where you are.
- Second, see what you can cut from your budget to make the most of your revenue. Don’t keep around that membership or software that you might use in five years, but have yet to log into in the past 3 years.
- Finally, look in your Google Drive folders and see what assets you have that you could share with your audience today. It might be a cheat sheet, a checklist, and Google spreadsheet. You don’t always have to recreate the wheel. Get something out to your audience with a quick checkout page and a link to a PDF, or a Google Doc that they can copy and use for their own. People love shortcuts, easy answers, and time saving solutions. You probably have one on your computer right now. This will boost your revenue and your profitability simultaneously.
Sixty-Second Solution
Now, what if you got stuck with item one in the action items? You might be committed to understanding your revenue and profit numbers, but you have no idea how profitable you are because bookkeeping is something that you tend to do once a year or as tax season rolls around, our sixty-second solution is going to give you a simple trick that you can use.
Head to your payment processor and download your transactions. Be sure that the report includes sales, refunds, and fees.
Then go to the card that you use to purchase your business items with and do the same thing. Download the last 12 months of transactions. This is a great reason to have a business card because then everything is clustered together!
Now compare your income against the fees and purchases you made. This will give you a quick look at where you are in terms of profitability and you can scan your purchases list to see if you have forgotten about any recurring costs that you need to cancel ASAP.
Use this as a starting place for planning and making adjustments to hit not only your revenue goals but your profitability goals as well.
Where to Go Next?
The truth is that we need to have more open and honest conversations about money as entrepreneurs. This is what helps us to uncover the norms and then shift the norms so that more entrepreneurs get to profitability faster and easier.
This is what entrepreneurship is all about, coming together as a community and supporting one another – whether it is with a shout out or an honest conversation.
Until next time, happy creating!
