As your business grows, so do your budgets.
How I'm managing our growing budgets (both tactically and emotionally).
Fast Value: Understanding margins makes business so much clearer. Stop making decisions based on gut feelings and make decisions based on math. As revenue goes, so do your budgets.
Nobody likes talking about expenses.
But, it's the make-or-break for you running a profitable business.
I have a quick story to share why this is top of mind.
Implementing everything I've learned, my business has grown a lot. From $2m to $6m revenue in less than 3 years. Adding that much revenue is great, but it also comes with bigger expenses. It feels weird to get used to spending a lot more than I was just last year.
So to get rid of the "feeling" of it being a lot of money, I go back to my expense budget...
Let's start by breaking down expenses into 3 different categories.
- People (aka payroll)
- Marketing
- Overhead (everything else)
Once you figure out your margins, you can assign a budget for each of these categories. This tells you how much you are allowed to spend in each.
Here are examples from my team:
Cost of Goods Sold = 63%
Profit Margin goal = 10%
That leaves 27% for operating expenses between the three categories.
- People = 9%
- Marketing = 10%
- Operations = 8%
Why is this important?
Because every $1m in revenue we add to the business, we can increase our budgets accordingly.
- People = 9% X $1m = $90k or $7,500/mo
- Marketing = 10% X $1m = $100k or $8,400/mo
- Operations = 8% X $1m = $80k or $6,700/mo
Pro-Tip: Increasing the budgets by this keeps us on pace to hit our profit margin goals.
This is something that I wish I understood when I started my business.
Want to hear a crazy fact?
We had higher expenses when our business was doing $2m in revenue than we do right when (on pace to do $6m revenue in 2025).
Because I didn't understand this, I was spending 3X (yes, three times) too much money on expenses.
I told myself I was "re-investing into my business" to make myself feel better.
The truth was, I was running a business that didn't make any money.
Lessons like that hurt a lot. They hurt really bad financially, but it hurts just as bad emotionally. That is the exact reason I'm launching this community for team leaders. To help you learn from the lessons of others so that you can grow faster and with more profit.
We haven't launched it yet, but if you want the details as they come out, join the waitlist.
In the meantime... Happy selling,