If you are doing business in the online space or even adjacent to the online space, and you’re seeing these businesses that are volume-based or seeing strategies that are saying, “You need more volume. You need more volume. You need more volume in order to make money. I want to pull that back and talk about why we’re seeing that, why is that the strategy that people are preaching, why that’s not the strategy that I’m here to share and to talk about, but really help you understand that this is your biggest sales problem.
I keep finding that this is really missing among small-business owners who are looking to improve their business knowledge and their business education. What they wind up getting is a lot of tactics, but there are not a lot of people out there who are explaining what’s behind the tactic and why they do it, the actual strategy.
When you don’t understand what’s behind the tactic, you lose the agency to make the decision as to whether or not that is the best strategy for you, and you also lose the ability to problem solve in your own business. At some point, something’s not going to work, at some point something’s going to change, and you’re going to need to not necessarily fix it on your own, I always recommend that you go and seek advisement, support, and alternative perspectives, which is what I try and do here is provide an alternative perspective, but that you have an understanding of why it might not be working and to take those initial first steps and not just be completely dead in the water
We know that ever since The Biggest Loser, we now think that bigger things are better, that it doesn’t count unless it’s worthy of being on a reality show, more equals more, and more equals better. That’s not always true. Actually, it’s rarely true.
There are three types of businesses that you can run.
A high-margin business, which margin, in this case, means profit.
A high-profit business, typically defined as businesses that have differentiated themselves in the marketplace and have been able to raise the perceived value of their product or service over time, because they’ve invested in research, development, testing, efficacy, results, continuous improvement to streamline process.
You see these businesses have moderate or slower growth. Perhaps, they’re more high touch and there are fewer opportunities for scaling. I like to say these companies go deep, not necessarily wide when it comes to the target market.
A growth business; a company that is typically defined by lowering prices while trying to maintain perceived value.
Essentially going wide, but not deep, which allows them to sell to a higher volume of people and appeal to a larger audience.
These businesses are often high in revenue with little or no profit but are seen as having more scalability. Many times, these companies can’t even pay their operating costs. Some of the ones that we’ve seen in pop business culture are WeWork, Uber, and Lyft. Their trajectory for profitability is long so they’re sacrificing profit for a long period of time to go wide in their market, to pick up the volume, and to have high-revenue numbers.
The reason why these companies want these high-revenue numbers is that that’s what attracts venture capital in a lot of these cases. Then you have the option.
Both growth and high margin.
Having a business that both has growth and high margin, these businesses are able to balance both through really smart strategy, solid leadership, a keen eye for numbers and data, and their ability to tell a more compelling story. These are some of the reasons that allow them to do both.
However, over the past 10 years, it’s been the growth companies with high revenue and zero-to-no profit that have caught the eyes of these investors, and even the American public, as being the “it” thing to invest in. We all like these overnight-success stories. Their revenues are valued higher so they’re valuing their companies based on revenue and not profit, which we have now seen, in hindsight, is disastrous.
Because over the last six months, the Nasdaq is now down over 30%, which is where a lot of these companies reside if they’re publicly traded in the market, and they’re seeing the worst crash since the dot-com burst. We’re just seeing this all play out really, unfortunately, in my opinion, because that level of destruction is going to come and impact the people who work for them.
We know, if you’ve watched any of the WeWork documentaries or the docu-series on Apple TV, WeWork was so bad that by the time they got to the end, they couldn’t even pay out severance. If you think that this is sensationalized for TV, I will promise you that it is not, that I have seen this personally play out most recently as in the last few months with some of my colleagues. These businesses are, at best, morally reprehensible in the way that they treat their employees.
Somehow, in our culture where we grew up on, greed is good from the Wall Street movie. These businesses have really been seen as something to celebrate. Not so much, not so much. As a matter of fact, the venture capitalists who’ve been pouring millions and billions of dollars into these companies are now saying, “Best of luck, and we hope you have enough cash in hand to get you through 2025.”
Venture capital, the funding is down almost 70% since 2021. Nobody is buying into this anymore. Jim Cramer said this about six months ago, I just laughed when he said it because it just seems like common sense but he said, “Investors now want you to turn a profit.” Um, yeah, that’s how business has worked.
It’s funny, not funny, but this is really some of what’s driving and spilling over into what you might be seeing today in the online-business space because I find that those two spaces, tech startups and the online-business space, sometimes go hand in hand.
VCs are realizing that revenue for revenue’s sake is a race to the financial bottom. Why had they been pumping so much money into growth companies for so long? They’re desperately seeking the next unicorn. Why? Because they missed out on investing in Facebook, Amazon, or Apple in the early days. These are the games of the rich and ego driven.
Why we look to these companies and think we want to be like them is beyond me, but also what we don’t realize is how much money is being funneled into them on a regular basis to just keep them afloat. I don’t have that kind of money to be funneled in, nobody’s handing that over to me. When you start to really unpack some of these CEOs, one, they have a strong bend towards being a sociopath in my opinion—that is an opinion, that is not for sure—but they’re really privileged. Who else could get this kind of money right out of the gates, the funding to start it up?
How this impacts small business owners and their biggest sales problem.
This is why there are so many internet marketers preaching low-dollar, high-volume business models. They’re copying what they see in the big-business world of tech startups and venture capital, most likely without understanding how the money actually works.
How does that money actually work? How and where does the money go? It’s sexy and we see this all the time in the online business space. I have fallen prey to this myself where you see the cool kids are hanging out together. They look like they’re internet famous. You wonder if you need to be in this bigwig web celeb’s mastermind in order to finally “make it” in your business. There’s just a lot of noise and distraction taking us away from what actually really matters as small-business owners which is profit, which is getting paid.
Also appealing about these kinds of models, especially to women, is that sales strategies for growth businesses tend to be, believe it or not, more passive. We’re talking about funnels and potentially automating funnels and ads, I’m just going to send emails and people are going to click and buy. Whereas you actually need sales skills to sell profitable services.
For the majority of people who are looking to avoid developing sales skills, they don’t feel confident, growth businesses where you’re selling lower-priced offers are really appealing; also for women who might be struggling with getting their pricing up and believing that they deserve to make a significant amount of money or do you have a lucrative salary from their business.
That’s not necessarily your fault, but at some point, you need to decide if you’re going to do the uncomfortable thing and get good at selling or if you’re going to continue to not be as profitable as you can be. When I say not be as profitable as I can be, I want you all keeping more of the money you make. That’s what I mean when I say profit, I want you to keeping more of the money you make.
We’re all motivated by different things. If you’re motivated by volume, and that’s really exciting to you and maybe you’re really an extrovert and you just want to people with all the people, or if you have income coming in from other sources and this is really something that just feels like fun and easy to you, I totally get it. That’s not what this is about. This isn’t about one being bad and one being good. Whatever works for you is good.
If you’re like 80% of the business owners I know, this is not a strategy that’s going to work for you. You are looking to run a service-based business built around your expertise, your therapist, your consultant, you have corporate skills that can be leveraged, you want to sell B2B, that’s another reason that you might not want to try high volume is if you want to be selling to larger businesses. Anyway, I’m here for the 80% who are like, “I don’t understand, I feel like a fish out of water. I feel like an awkward giraffe. I feel like I don’t fit in anywhere. I need an alternate perspective.” That is what I am here for.
Having this understanding will empower you to make better decisions and to question what you’re seeing around you. I want you to question what you’re seeing around you so you can make better decisions.
When do you want to choose high profitability over, growth?
If you’re bootstrapping because it’s going to take a metric ton of money to get some of these growth strategies, these high-volume growth strategies off the ground. To be honest, some of them were a lot cheaper eight years ago when I started out. Facebook ads eight years ago were super cheap. They’re not that cheap anymore and they’re not as effective as they had once been.
If you’re bootstrapping, you really have to think about how you’re using your dollars. If you’re someone who needs to collect a paycheck, any kind of paycheck from your business, it doesn’t matter how even much at this point, but at some point, I didn’t take a paycheck in my business for two years.
My first year, I was working still full time so this was a side hustle. Then in year two, I did not take any pay and reinvested it into the business. By year three, I started paying myself, and I’ve been paying myself a very healthy six-figure salary ever since. I’m really, really proud of that. I’ve been at a corporate for seven years come August, and I have been able to work less and earn more than I ever would have been able to do with a lot less stress.Still, hard work but I’m in control, I have autonomy, I have agency over my schedule, and I can choose how effective the actions are that I’m taking.
If you need a paycheck, if you need to pay yourself, if you’re somebody who is interested in building a stable financial future, and you don’t have access to VC capital, you’re going to want to go with a high profit, high-margin business, or a business that can balance growth and margin.
If you’re someone who enjoys depth work, I do hear this from the women in The Bold Profit Academy a lot, they are people who enjoy the depth work of their expertise, they enjoy providing transformational experiences, and are more relational in nature, they just lend themselves really well to high-profit businesses that are easy on their energy; someone who wants to have a simple business where you can enjoy your life, if you want to have a simple business, where you enjoy your life, where you have a better quality of life than you did maybe in a corporate job, then you’re going to want to look at how your business is designed for high profitability.
If you’re someone who has chronic illness, family obligations like me, you’re in the sandwich generation, you are going to want a business that is designed for high profitability. Those are just some of the reasons why you’re going to want to see that be highly profitable.
Why you don’t need a million-dollar business to be a millionaire, you don’t need a million dollars in revenue to be a millionaire.
If you have a million dollars in revenue, it might even be harder as a small business owner to be a millionaire, but you want to take the profit from your business or what you’re paying yourself in your CEO pay and you want to take that and invest that in other cash-generating assets.
You want to invest that—and this is not advice, this is just a simple example because people are like, “What do you mean when you say other cash-generating assets?”—you might want to invest in real estate renting or Airbnb, or you might invest more in the market beyond your retirement. I’m personally a huge fan of dividends, like investing for income. Having those dividends start to pay me income over time.
That’s really one of the things that I’m working on setting myself up for is having this really robust dividend portfolio. This allows me, when I take my money and I invest it in other income-producing assets, it allows me to not work so hard. I actually don’t need the volume because I have money coming in from other sources.
How can we work financially smarter, instead of operationally harder?
If you’re like, “I still don’t believe you, Tara. I don’t believe you,” book a call with me and we’ll have this conversation on what are all the ways that we can plug the leaky buckets in your business so you can find those leads, so you can convert them more easily to sales, and so you can have more consistency with higher-quality leads in your business.
Those are the two things that everybody wants when they come to me: more than enough high-quality leads, and more-predictable revenue. If that’s you, be sure to join The Bold Profit Academy for our Q3 sales curriculum.