Just the other day I was watching a great video by small business coach and financial expert Elizabeth Potts Weinstein. In Confessions of Unprofitability (posted below), Elizabeth talks about a dirty little secret that many small business people don’t talk about: not taking an income from your business.
Elizabeth talks about how she hasn’t taken an income from her business, and has actually invested much more into her business.
I loved that she talked about this because it’s a topic near and dear to my heart. I’ve not been taking much money out of my business and my family thinks I’m nuts. In fact, two years ago I was in a year-long coaching program that cost more than I earned that year.
When we talk about unprofitable businesses, we don’t mean undervaluing your services. In fact the opposite. I’m in business to earn money. My son needs braces next year and if he keeps going in the direction he’s in, I’ll be paying for tuition for several degrees. I need to make money.
On the other hand, I’m in this for the long term. I don’t intend to ever have another full time job. This business needs to pay off my mortgage, look after my son and fund my retirement. That means I had better be really good at what I do. And in order to be good, I need to learn – and keep learning.
As a result, over the past few years I’ve invested a significant portion of my income (and some of my husband’s income) back into my business – usually in the form of training. The big thing about that kind of investment is it keeps on paying you back, long after you’ve finished paying for the investment.
That expensive coaching program I was in still helps me today. I still refer back to the materials and I use what I learned daily. I wouldn’t be were I am today without it, and I wouldn’t be able to get to where I’m going without it. In fact, I probably would be heading in the wrong direction without it.
That’s what I mean by an investment that keeps paying.
This type of unprofitability is very different from the type I see from too many other businesses; the kind where the business owners undervalue their services.
When I first started my business I needed to work, so I took any client. As a result, I ended up with some clients who tried to nickel and dime me.
One client always tried to get me to cut my prices or do things for free or add services onto our original contract. At one point we’d agreed on my doing a project for $500. Later he tried to get me to do the same type of project for $250 because he was broke.
The next thing I knew he was spending thousands of dollars redesigning his website and thousands more on an unproven advertising campaign. It wasn’t that he was broke, it was because he wanted to get the best price possible for everything and if he could get $500 worth of work for $250, he’d do it.
If you aren’t profitable because you are giving away your services for free or discounting yourself too often, you need to stop. This is not a good thing and will harm your ability to survive in the long term.
However, if you are getting paid what your products or services are worth and then taking that money to invest in the future of your business, then you are enhancing your ability to earn even more.
Andrea J. Stenberg
