Are You Making Money? Know Your Numbers

I have found that when I talk to people that are struggling to make money at their business and we look at the numbers around their pricing and their costs, there is a large discrepancy. In fact, what I often hear is, ‘I had no idea it was costing me money to run this!” Are you sure that your pricing is set to not only cover you costs but also make you a profit?

Let’s look at the numbers right now.

1. Costs

List all the items that cost you money to run your event, offer a service or sell a product.

  • room rentals
  • handout printing
  • employee’s time
  • props and resources
  • gifts
  • services (like phone, call-in centres, shopping carts, merchant accounts)
  • etc.

Some costs will be easy as they were created specifically for a service or event. Some costs, like your fixed costs, will be harder to determine as it is a cost associated with running your business. I pay $129 per month for my shopping cart program. If I divide that cost by the number of sales I make in a month I can figure out what my cost per sale is.

(Note – If you are a paid employee of your company then include the cost of your time)

2. Time

Determine the amount of time you (ONLY you – unless you are an employee of your company) put into that sale. As you notice, employee or contractor time is counted in your costs above.

  • Time to deliver
  • Set up and prep work
  • Take down
  • Follow up

Add up all your hours

At the bottom of your page summarize your finding like this…

COST = $X

TIME = Y hours

3. Price

Now write your price for the program, product or event as the third line of your summary.

COST = $X

TIME = Y hours

PRICE = $ per person

4. How Many

Is this a sale to a single person or a group sale? For instance, are you selling a coaching program that is one-to-one or a group program that fills a room with people? Let’s look at the group pricing because the numbers are more impactful and it is more difficult to determine.

Ask yourself, what is the minimum number of people you would run the group event for? Let’s say it was 10 and you have been able to always have 10 or more clients in that room. Great!

10 clients x PRICE = Event Income (EI)

If your event income is the same as your COST or less, you have broke even on the costs and you are working for FREE.

If your event income (EI) is greater than your costs then next figure out how much you are making per hour.

EI / TIME = $ per hour (YOUR PAY per hour)

Are you satisfied with this number? Are you making more per hour than if someone was paying you to do this in their business, because you still have the costs of running your business, networking and other general marketing investments to cover. If not determine what the number is you feel you need to be making per hour and work backwards. Either decide if you need to increase the number of people in the event or the amount you are charging them.

If you have a product or service that is costing you money or you are just breaking even then chalk it up to learning, write it off as a marketing investment, and don’t beat yourself up. Now that you know you can make it right. After all, working in a business that does not pay you is a very expensive hobby.

please let me know if going through your own numbers uncovered something unexpected for you. Post to the comments below or send me an email.

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