How Profit Blindness Is Destroying Wealth
Creation For Online Business Owners.
Online entrepreneurs are too busy making money to make any profit.
They are distracted by manufacturing, distribution, competition, and marketing. They do not look up and ask the two most important questions:
- Are we profitable?
- Does this business have the potential to become highly profitable?
This is a problem I call Profit Blindness. Focusing on busy work and revenue generation. Instead of profit growth and wealth creation.
Most online entrepreneurs start their businesses to gain freedom through wealth creation. Wealth is purchased with cash.
But do not be fooled into thinking that you need a “cash generative business”. You need a cash-generative profitable business.
In this article, I want to share a few principles I use to help my clients build cash profit into their business.
Profit, or Nothing.
It is a waste of energy to operate a business that starts off unprofitable.
I believe that online businesses should be profitable from the first sale. And remain profitable every month after the first sale.
This is the profit or nothing attitude I have developed over 10 years in online businesses. Most online businesses that start off unprofitable, stay unprofitable. Which forces the founders to continually pump money into the project over years.
Resulting in negative growth in personal wealth.
Curing profit blindness starts with not accepting anything less than a profitable operation.
Thinking for Yourself is Highly Profitable
Learning to think for yourself is the most profitable thing you can do in your business.
Business success is more about decision-making than it is execution. Deciding WHAT to do, is more important than working for 12 hours per day.
10 years ago, I was creating Profit Systems at my job. I was 25 years old. I worked 12 hours per day. I earned $35,000 that year. The next year, I decided to consult clients with the same skills. I worked 6–7-hour days and made over $100,000 in the first year.
One good decision increased my take home by $65,000.
Making good decisions requires you to think. Preferably, for yourself. You do not need more information to make good decisions.
This is particularly difficult in the world of unlimited content. I have seen online business owners try to find answers. They would read 3 books, attend 2 webinars, hire 3 coaches, and watch uncountable hours of YouTube videos to help them make decisions.
You cannot find your decisions. You must make them.
Thinking for yourself has two elements: Firstly, it is your ability to take in information and make decisions without being overly influenced by the information. Secondly, it’s your ability to curate the information you consume and realise more information that doesn’t create better decisions.
When you think for yourself, you accomplish three things:
- Speed – You can move with speed. Overconsumption of information is slow.
- Confidence – You build confidence. You do not need more information to make good decisions. You need conviction.
- Differentiation – Being different is very profitable. When you have no competition, you automatically win. But you do not need to be Apple to be different. You can practice Micro Competitive Advantage which relies on your thinking.
Only you know and understand the intimate details of your situation. Any decision you make in your business will affect you more than the person advising you.
Building Profit Systems™ is Extremely Profitable
A profit system is a tool or process you can implement in your business to increase the profit potential of your business.
In the last 15 years, I have been lucky enough to have worked with businesses of all sizes across 10 industries.
Each industry has processes they are good at, and bad at. Online businesses are amazing at revenue generation and online marketing. They are poor at building profitable operations. They treat profit as a “later thing”.
In the last section, I mentioned that you should think for yourself. But that doesn’t mean you should re-create the rules of the game.
The game of business has only two rules:
- Create value for your customers, and
- Capture some of that value in the form of cash-profits
Profit is not optional.
There are two main benefits to building profit systems. Firstly, they enable you to catch issues so you can fix them before they become a problem.
Secondly, they are designed to provide accurate information about your business so you have the information you need to think for yourself and make decisions.
Throughout 2022, I will be creating multiple profit tools (free and paid) that you can use. You can register to get alerted when they go live.
Competition is not profitable.
If your business is in a competitive niche where customers have options. You need to work on ways to differentiate your brand, product, or business model.
Competition is not profitable. This is as true in e-commerce as it is for course creators.
The mistake people make is that they try to market their products more aggressively to beat their competition. I can assure you, that if you do not have the biggest bankroll, you will lose that fight.
For example, over the last 8 years, I have managed over $5m in Facebook ad spending. A lot of that was spent on aggressive growth strategies.
It was easy to win the Facebook ads game when you have a great product, that people talk about, that gets results for the customer and generates a return for the business.
It’s much harder if you have a copycat (or similar) product that people can buy from 10 other suppliers. Nobody wants to admit that their business is built on copycat products. But internally, we know.
In 2018 I built a copycat coaching business. Could I deliver value? Yes. Could I build a good product? Yes. Was it profitable? Barely. There were 5-7 strong competitors selling a similar thing and looking the same to the customer. So, I made the decision to close it down.
Remember, thinking for yourself is profitable. That one decision was the spark I needed to find the work I was built to do. If I had listened to my advisors and friends at the time, I would be running an unprofitable business with fierce competition.
The good news is you do not have to create a revolutionary product to remove yourself from the competition. Instead, you can put yourself outside the competition by creating a Unique Mix and focusing on Micro Competitive Advantage.
If you want to learn more about micro-competitive advantage, I wrote an article about it here. For now, let’s focus on Unique Mix as a way of differentiation.
I will give you two examples of a Unique Mix:
E-commerce Unique Mix Example
Comme Avant is a soap brand from Belgium. When they started, they sold one product: A scentless bar of soap.
If you know anything about the beauty industry, you would know that products like soap are usually sold based on smell and colour.
So how did Comme Avant grow from $0 to multiple 7-figures in the space of 3 years with a scentless bar of soap?
Instead of trying to differentiate on product, colour, or smell (and be like everyone else). They focused on their Unique Mix.
Their Unique Mix was about parenthood, sustainability in the environment and skincare. At the time, they were the only soap brand talking about the intersection of these three things.
Their ads and marketing reflected it. And they stood out.
Consulting Business Unique Mix:
I will use my company here. The Profit Director.
I have a unique combination that almost nobody in the world can compete with. I am not saying that to sound big-headed. We all have a Unique Mix that we can leverage to remove ourselves from the competition.
Here is my mix:
- I spent 8 years consulting in large corporations on data management and building Profit Systems.
- I spent 10 Years building online businesses. Making all the mistakes in the book. And learning marketing deeply. Built a 7-figure business and multiple 6-figure businesses.
- I spent 4 years growing my marketing agency focused on email marketing and paid traffic.
Data Management + Profit Systems + Online Biz experience + Marketing experience + recorded evidence of results = The Profit Director.
Tell me, who are my competitors?
Find your unique mix. Integrate it into your business. Stand out.
Mindset training is an unprofitable distraction
Is it me, or does everyone who has no skills become mindset coaches?
That is harsh to say, but it’s a good question.
I received this message on Linkedin (which is common). This lady is a money mindset coach. She wanted to know if I was struggling with my money mindset. Nothing wrong with that.
I told her my current issue is building team culture, and hiring processes at my email marketing agency S2 Digital.
Then she did what all mindset coaches do, she tried to link company culture to money mindset (lol), so I can inquire about her services.
Please, hear me when I say this. You do not have a mindset issue. You have decision-making, business positioning, and profit-making issue. Your mindset is important, but you do not need to spend hours deep diving into mindset jargon or hiring mindset coaches to improve your mindset.
Imagine spending $10,000 on a mindset coach when your business isn’t working. Does it make sense?
Decision-making is more profitable than positive mindset jargon. Or any other kind of river dancing, tree-hugging or mindset process people sell. Focus on your business.
More importantly, mindset is developed through experience and good content. YouTube is free and has some brilliant mental food. Make sure you curate who you listen to.
Aggressive Growth Marketing is Not a Long-Term Strategy
This article is not targeted at short-term cash-grab entrepreneurs. There is nothing wrong with these kinds of businesses (I’ve built one in the past). But they operate differently because they are short-term.
Most online entrepreneurs have longer-term plans for their businesses. But many of them act like they are short-term. Let’s look at an example: A dropshipping business.
Dropshipping is when people sell products held in warehouses in Asia or other industrial countries. Long delivery times and poor customer service are common.
Dropshipping is a bad business model if you want to create long-term value. But they are very good at running paid traffic profitably. They have no choice. It’s the only way they make money. They are in the “marketing business”. They have no warehouse, no logistics and no team. Just one or two people managing the marketing.
As you can imagine, they get very good at marketing. And eventually, find a way to get a 4x return on advertising spend.
They have an advantage. Outside of paid traffic, all their costs are fixed.
But if you have an econ business where you might manufacture, distribute, store products, and manage customer service. Your costs are moved from month to month. Team members come and go. Logistics can be unpredictable, and you might launch new products or take new photography.
When this person tries to copy the paid traffic strategies of the drop shipper, they often get negative results. Not because their marketing is crap. But business the business economics are different.
Ask yourself: “Given my business economics, pricing, and variable costs. What is the best way to grow my business over the short and long term?”
The message here is to build a long-term marketing strategy that works for your business.
One thing I would advise you to implement early is Email Marketing.
Email Marketing Makes Paid Traffic Super Profitable
Many brands know that to grow their revenue, paid traffic is a viable strategy. Paid traffic starts the revenue train. Most importantly, it is fast. You can start a paid traffic campaign today and see immediate revenue increases tomorrow.
But, after overseeing millions of dollars in paid traffic campaigns, it’s my observation that paid traffic is just one small part of creating a profitable business. Sadly, more sales don’t equal more profit (Ask me how I know…).
The most important marketing strategy in business a profitable online business is leveraging your assets. These assets take many forms. Email lists, SMS lists, Messenger lists or social communities.
Based on my experience, starting with email will give you the biggest return on time invested.
Many brands ignore email (or they do email inconsistently) and, as a result, leave 10-30% profitable revenue on the table.
I believe that the best way to make your paid traffic more profitable (and by extension, make your business more profitable), is to leverage your greatest asset: your email list.
Quick story: in 2014 I started building businesses online with Facebook ads. Back then, paid traffic was cheap. Nobody was using it. I made huge mistakes. But, despite the mistakes, I was still profitable. (In hindsight, they were not mistakes, they were train wreaks.)
Today, paid traffic costs have increased by 341% since 2014. You can do everything right, and still be in the red no-profit zone. Having said that, if you leverage email properly, you will be in the green profit zone.
Here, my friends, is the greatest contradiction in online business growth: Grow revenue now or grow profit later? Which do you choose? With email in your corner, you can have both.
Email marketing is a relationship-building tool. You can use it to have one-on-one conversations with your leads and customers at scale. And by focusing on building these relationships, you can add a consistent stream of profit to your business.
Here is an example of my client. We added $5,000 per email, 2 times per week to her revenue. Zero marketing costs.
Profit, or Nothing Conclusion
Do not settle for a business that doesn’t or cannot generate profitable cash for you. Close the business down and build a different business.
Online entrepreneurs who fall in love with unprofitable businesses are in prison. They cannot let it go. Their personal wealth suffers from it.
There are 5 principles I use with my clients to ensure they build profitable online businesses:
- Thinking for yourself is highly profitable. It will give you the skills to look at your situation and make good decisions.
- Build Profit Systems. Build the financial systems you need to inform your decision-making.
- Remove yourself from competitive fights. Competition reduces profit for everyone. Build a Unique Mix and Micro Competitive Advantage to stage out.
- Mindset coaching will not increase your revenue or profits. Ignore these coaches.
- Aggressive paid traffic is not a long-term strategy. If you want to do paid traffic, marry it with good email marketing.
- Email marketing is the most profitable marketing on the planet. Email is a Profit System we put in place for our clients at S2 Digital.
Build profit or nothing.