My Business Is Losing Money—Do I Just Need More Sales?

Scott Todd (00:00)

Welcome to Fix My Business, the show that helps you get your business unstuck so that you can keep it growing. I’m Scott Todd and I diagnose business owners who have problems. I identify what’s wrong. I give you the solution so that you can keep growing your business. Today’s question comes from David and David says, I started my business 11 months ago and it’s still losing money. I’m sure it’s just the startup stage.

My sales haven’t caught up to my expenses yet. I feel like I just need more sales, but I’m bleeding cash while trying to keep the marketing building. I think I’m lean. You will probably tell me to cut expenses, but I don’t want to cut anything else because what’s left is marketing, VAs and technology. If I cut those, I’ve wasted my time.

David, ⁓ you’re right. I’m gonna tell you that you only have two options. Option one is you need more revenue or option two is, well, cut your expenses. And my rule of thumb for these situations is always to attack the expenses unless, and there’s a big asterisk here, unless you have some line of sight,

as to when you’re going to have the sales in order to replace the expenses. Core value number one in the book that I wrote, Fix This Next for Real Estate Investors talks about that. How many sales, what’s your freedom number? How many sales do you need in order to gain freedom to build the life or live the life that you want? It’s a very simple number. It’s a very simple calculation. You can go to the website and calculate it. But,

If you don’t know that number and you don’t have any insight into when you’re going to be there to be profitable, then your only other option is to cut expenses. And I see this all the time when it comes to bootstrap businesses. There’s this hesitancy to, well, cut expenses. And what happens is when we get going in a bootstrap business, oftentimes we will go out and we will just invest in everything.

Every tool that everybody else is using, we have to use it too. VAs? No problem. Let’s just add them. Let’s just add, add, add, add, because it will all catch up, right? Well, in a bootstrap business, every month that you’re losing money, that money is coming from somewhere. It’s coming from your life savings. It’s coming from a credit card. It’s mounting up. And it’s a very simple math problem. What you have coming at the top, the sales,

Well, it needs to be greater than what goes out the door. And if it’s not, then you’re writing a check every single month, which is in, well, direct competition to why you even started the business in the first place. You expected that the business would give you money, but yet every single month it’s taking money out of it. When I started my business, for literally the first year, I didn’t have a ⁓ CRM. I had an accounting system.

And ⁓ that’s really about it. I think I had one other software. My software expenses were extremely low. Now this was 10 years ago. And I managed all of my leads through index cards. Okay, so somebody comes in as a lead, I wrote it down on index card. I wrote down the next action, what to do next. I put it into like a tickler file. And that’s how I followed up on the leads. And that’s when I was in sales back in the 90s, before we had all the fancy technology, that’s how we did it.

We were lean, that is lean. And in fact, when I hired my first sales rep, she said to me like, well, what CRM are we using now? I said, we don’t have one. Here’s the index cards. And she’s like, we can’t manage all these leads with index cards. And I said, okay, no worries. And we paid, I think 25 bucks for a CRM. We got one license. She’s the only one that needed it. I didn’t need it. I wasn’t making sales calls. So she got that. And we didn’t worry about the fancy automations. We didn’t worry about all the stuff that people were doing today.

So the only way to fix this problem is to cut the expenses. And that also means that you have to cut out the things that you’re telling me you don’t want to cut. Now, when it comes to marketing, I see marketing as an investment because when I’m marketing my business, the goal is that I put in a dollar and then in some timeframe, whatever that is, depending on your sales cycle and lead time, et cetera, I put in a dollar, it brings me back $3.

I saw this ad the other day for Google. said, Hey, did you know that when you advertise on Google for every dollar you put in, brings you back to, okay, that’s cool. I don’t know if that’s true or not. I think it is. Okay. I’d like it to bring me back five. It used to bring back 10. Okay. It doubles your money. according to Google, but that’s the thing is about marketing is about an investment. Okay. When we’re talking about VA’s, that is somewhat an investment because

Well, if I have VAs that are doing work for me, well then it should replace my time, which would allow me to go get the one thing that I need as sales. You see, if I generated, because I have a VA doing work, if I generated two more hours a week of time, then that two hours a week should be spent giving the business what it needs. And it doesn’t need, I don’t know, more fluff, a better website. It needs somebody on the phone calling customers.

to convert them, to convert them from leads into customers, that’s what it needs, or customers into repeat buyers, that’s what the business needs, so that’s what we have to give it. So we have to give the business what it needs when it needs it. And on the topic of VAs, when we’re talking about VAs, I think the one thing that we want to remember too is that ideally, you’re not paying a VA by the hour, you’re not paying them, especially in the beginning, you’re not paying them by the month. Okay, I know there’s VA companies out there that say, well, you buy,

For $1,900, you get this. I hope that you’re not doing that because really at the end of the day, the VA should be providing, especially in the beginning, it should be providing work on a per task basis because you can hire someone, I don’t know, $2,000 a month, but you may not have $2,000 worth of work to do. So we have to go through this and look at this and say, wait.

If it’s not producing revenue today, we got to get rid of it. If it’s not going to produce revenue in the future, we got to get rid of it. And the concern that you have, and you say it in the last sentence here, David, you said, you’re concerned that you’ve wasted your time. And so whenever I hear that, I always think about people who are thinking, well, if I don’t cut this expense,

then, you know, or if I cut this expense, then what’s going to happen is, you know, all the automations I built are gone or the time that I spent training the VA is all gone. You have to decide whether or not you want to lose your business or whether or not you want to lose the automations slash time that you invested in people. Because if you don’t get your expenses under control and you don’t get this thing starting to write you a check every single month,

or quarter. If that’s not going to happen, then you’re going to lose it all anyway. You’re going to lose all the time and you’re going to keep losing money. So I’d rather you lose the investment of time and technology as opposed to losing the dream and the business. That’s the way that I’ve, I walked through this and that’s the way I think about it. So it’s simple math, David. You have to decide what’s

the more valuable thing to lose your time or your business. To me, it’s a no brainer. I’m losing the time and the people and the software before I’m losing the business and the dream. So that’s what you got to do. If you have a business question, if you’re stuck in something, head over to scotttodd.net/ask. I’m happy to help guide you and get you unstuck. And I will see you in our next episode.