Do You Know Your Profit Margin by Client?

Alan Pentz explains how growing revenues can mask growing problems.

Good Morning!

Here are today’s highlights:

• The Wall Street Journal makes sense of the 900,000 jobs that just disappeared.

• The Supreme Court has agreed to fast-track President Trump’s tariff appeal (meaning we could get a decision by the end of the year).

• The Hyundai raid may not encourage foreign businesses to invest in the U.S.

• Pay transparency laws are being challenged in federal court.

MANAGEMENT

Alan Pentz offers a reminder that success can create dangerous assumptions: “I spent two hours last week with a business owner who hasn't looked at client profitability in eight months. Revenue is up 35 percent. Team is growing. Clients are happy. But when we ran the numbers, two of her biggest clients were barely breaking even, and her fastest-growing service was operating at 8-percent margins. She was working harder to make less money.”

• “In my experience coaching business owners between $2-5 million: Success creates dangerous assumptions. At $1 million, I tell most owners to sell whatever they can. You just need throughput, but by $3 million, you’ve got to start focusing on gross margin and profit.”

• “Between $2-5 million, your business becomes financially complex: Multiple service lines with different cost structures. Team expenses that don't scale with revenue. Cash flow cycles that hide profit problems for months. The owners who break through develop systematic financial visibility. The ones who plateau keep flying blind until crisis forces them to look.”

• “Answer honestly: Do you know your profit margin by client? Could you rank your services from most to least profitable? When did you last make a decision based on profitability data? If you answered ‘I'm not sure’ to any of these, you've found exactly where to start.” READ MORE

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