This past summer when I was taking a business program with Marie Forleo – bestselling author and business coach – one of the first assignments she gave us addressed what she called “profit clarity.” For any entrepreneur who wants to succeed in business, knowing about profit clarity is vital.
As an artist, money coach, and financial consultant, it’s fairly easy for me to understand what profit clarity is, and how to practically crunch all the numbers towards profit instead of ruminating about all the different scenarios. However, to many creative entrepreneurs who aren’t necessarily financially savvy, I believe the topic of profit clarity can often be very confusing.
I love what Marie told us about it: profit clarity is vital knowledge if you want to make more money and stop wasting your time on an unprofitable income stream. This means that you need to design the right business model in order to reach your highest business potential.
Here are four steps I believe can help you achieve this:
Step 1: Vision
Confession: I’ve changed my business model a couple of times in last eight months. Yet, the more I work on profit clarity, the clearer my vision becomes for my business.
Essentially, to reap the most of profit out of your business, you need to develop your business model around your strengths and weaknesses. For instance I’m currently in the art and coaching businesses, and have more than 15 years experience in financial and accounting management. Hence, it seems to make perfect sense for me to teach creative entrepreneurs how to nurture their finances.
The fact is, without a clear vision of your business model, it will be difficult for you to achieve very much for your business. My suggestion is to sit down quietly and write out all of your strengths and skills, then develop your business model around these talents. I’ve discovered that one of the best ways to get a better view of your unique talents is to talk to your family and friends – those who know you well – about your ideas. And of course, you’ll also need to test these out – a lot.
Step 2: Creation
After you have a clearer vision of your business model, write it down! This is the fun part: now you have the opportunity to design the programs that you love to provide to your clients. Just remember that when you create them, you’re designing your business model around your strengths and skills in order to reach your highest profit potential.
Step 3: Crunch the numbers
I know that for some of you, this is the hard part. You might need some help, but I’m sure you can do it! I highly recommend using Microsoft Excel to record all the numbers.
You not only need to know how much you’re going to charge for each program, but also the cost of goods sold, and your overhead expenses.
It’s important for you to have this “clarity of profit” written down so that you can see, for instance, if you’re charging enough for your services and products, which programs and products you should sell more of to reach your highest profit, and if you need to cut any unnecessary marketing expenses. You can then use this profit clarity to strategically work on your marketing plan.
Step 4: Reality, and fine-tuning
After you’ve completed your business model and marketing plan, you’ll now need to test your plans. The reality of your profits will quickly tell you if your business model is working or not. If not, go back to Step 1 and fine-tune your business model again.
As creative entrepreneurs, we all want to do what we love. Yet, in order to help more people and achieve our dreams, it’s essential that we keep our finances healthy!
Yu-Fen Chang-Pett is a business financial coach and money coach at Money Wisdom Empowerment to help creative entrepreneurs reach their highest business potential. Visit her website at http://www.moneywisdomempowerment.com for her coaching programs.
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