Where are you on “The U-Curve”?

Remember that first time you got paid by a client?

You stepped out on your own, got some work, delivered on it, and got paid. I know for me it felt like magic. People were just giving me money!

As my business grew I started adding some expenses, I built a website, I added a “business phone”, then bookkeeping help, and Admin help. By the time I got to hiring an associate team the feeling I was getting from cashing those checks went from “magic” to desperation! OK, now I can pay this month’s bills, whew! Where’s the next check coming from?

When we start out in our business that first check is pure joy; in part because it’s pure profit! But, as we grow our sales, expenses also have a way of creeping up on us. If we’re growing rapidly we’re also paying salaries while we’re waiting for clients to pay and managing cashflow becomes stressful! 

Business owners who are doing this for the first time can get confused at this point. Why are my money worries increasing as my sales are increasing. The more money I bring in, the less I get to keep? This is not right.

Welcome to “The U Curve”.

Profit as a % of sales declines from the start of your business for a while, but it does go back up.

Many of those early expenses, bookkeeping, phones, office rent, etc. are fixed expenses. You pay the same amount no matter what your sales are. They are painful in those early days because you are adding them for the first time. As your sales grow you will be able to spread those costs across more clients and sales, but you have to grow into that. 

Inexperienced business owners will get to the bottom of the U-curve and think, “This isn’t going in the right direction! I was making more money on a card table in my basement than I am now. Their instinct is to fire everyone, go back to the basement, and make some money! 

But if instead of shrinking back, you accelerate your growth you can get through the flat part of the U-curve and start making good money again. 

What’s important is to realize that you have to keep moving, stalling out in the flat part of the curve means you are camping out in hell! 

Where are you on this curve? How can you move quickly through the flat part and get back to growing your profits again?

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Growth assessment

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