Don't Fall for False Profit Promises | Erin Armstrong's Business Blog

Don’t Fall for False Profit Promises

by | Jun 12, 2024 | Accounting & Logistics, Leading Your Business, Money Mindset, Small Business

Every week, I receive a few unsolicited marketing emails like this one. Maybe you do, too:

Dear Erin:

Is your brand identity keeping your business from being as profitable as it could be? 

Here’s how I can help. From redesigning your logo and sales materials to giving your website a more modern look and feel, I can provide a wide range of expert design services that can help you stand out from the competition, increase sales and dramatically boost your profits… 

At this point, I usually just hit the “send-to-spam” button. 

I don’t do this in anger. As a small-business owner, I can’t fault these entrepreneurs for doing whatever they can to generate leads. 

But I must admit, what irks me about these vendors is how casually they use “profits” as a buzzword in their pitches without fully understanding where they come from. And thereby create false profit promises.

Because, as anyone who reads my blog posts knows, sales and revenue and profits aren’t the same thing… and don’t necessarily align. 

In fact, companies can grow revenue and shrink profit margins at the same time.  There are plenty of firms that generate $1 million or more in annual revenue and still struggle to pay salaries and monthly bills. You don’t need a Harvard Business Review to figure out why. In fact, the problem can be summed up with a simple equation:

profit equation, profit equals sales minus expenses

It’s really not more complicated than that. If you don’t have a strong handle on the money you’re spending on salaries, supplies, utilities, rent, and other expenses there’s a good chance you’ll end up in the red, no matter how much revenue your business is generating. 

Over the years, many small business owners have hired me as Fractional CFO in part to solve their cash-flow issues. Many of them were operating at full capacity. Many were experiencing triple-digit increases in sales and revenue year over year. And, yet too many barely had enough money in the bank to cover their employees’ salaries. They often initially ask me to help them figure out how to generate more revenue. To which I usually respond with the following aphorism:

Remember our profit equation from above? Profits are what’s left over after expenses are paid. The key to growing profit margins is reducing overhead.

And it’s not just about cutting costs. It’s about enhancing productivity. Minimizing waste. Optimizing efficiency. Right-pricing your products and services. And taking advantage of available business tax deductions. 

If you do all of this correctly, your profit margins should increase, even if your revenue levels off or even drops a bit. 

And, as I’ve mentioned in other posts, efficiently run businesses not only leave owners with more money in their bank, but can also help reduce stress and anxiety and lead to greater professional and personal satisfaction. 

Best of all, you can accomplish this without spending a dime on a new logo or website design.😊 So, next time you’re presented a false profit promise, take a beatand remember the profit equation.

where sales pitch of more profit get it wrong, profit equation

Wishing you fulfillment & financial success,

Erin Armstrong

Erin Armstrong is a Business Advisor, Chief Financial Officer, Tax Strategist and licensed Enrolled Agent who’s on a mission to financially empower business owners. Her unique, comprehensive approach integrates all the financial aspects of your business (such as accounting practices, tax strategy, profitability, budgeting, & cash flow) with an emphasis on developing a positive money mindset so you can move forward in a confident, proactive and empowered way. Find out more about Erin here.

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