The E Hustle 36: Are you scaling or failing?

profit turnaround May 12, 2024

Read time: 2 mins

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As I’ve started speaking with more brands again, expanding my coaching program, ECOM100 (reply to this email if you want to learn more about that), it’s alarming how many business owners are making the same mistakes, and getting fed the wrong advice.

Trust your gut

If you’re 2-3 years into your business, and you’re paying yourself less than you would be earning in a decent job, then something is wrong.

If you’re 2-3 years into your business, and you haven’t built an asset that you could easily sell for a million dollars plus, then something is wrong.

If you’re 2-3 years into your business and you’re always short on cash, or borrowing and feeling stressed, then something is wrong.

Trust your gut. If it feels like your business only works when you’re on sale, or 2-3 times a year, then something is wrong.

If you need to spend 30% of your monthly sales on advertising, then something is wrong.

Misguided advice

You see, your coach or guru will tell you you’re scaling. You need to spend more to make more - but that’s not true. The fundamental definition of profitability is the difference between how much you make, and how much you spend - but why do we spend nearly as much as we make? It’s outrageous!

The root cause

People have a bias to work on what we like, or what we’re good at.

You know, when you go to the gym and work on your biceps but not your legs? Or when you do weights, but not cardio? It’s the same in ecommerce. Generally we like to work on buying lots of products, and spending lots of money on ads, because, well, that’s what we’re told to do.

But what if I told you that this is the wrong way to go about business?

I think 90% of brand owners I have spoken to this past few weeks are doing the same thing, and many of them are in denial.

They think that eventually their fortunes will change. Except that they won’t. You have to force the change, or be the change that you want to see in your business.

My job is easy - I look at your business and tell you where you’re going well, and where you aren’t going well, and that’s where you need to focus.

The simple fact comes back to my 50/30/20 rule

You should be aiming for a 20% net profit - at least! Why? Because as a business owner you want to be pulling at least $500k a year in profit. Otherwise seriously, is it worth all the effort? The average cost of living is increasing, house prices are booming, if you want to be wealthy, you actually need to be earning well over $500k, if you want to be rich, you need to be over $1m a year mark in terms of what you’re paying yourself.