In this inspiring client spotlight episode, Annette Ferguson walks you through the incredible transformation of Sarah, a marketing consultant who went from zero profit to £4,000 a month. If you feel like you're working harder than ever but not seeing the financial rewards, this episode provides a repeatable roadmap for transforming your own business.
Key Takeaways:
• Profit is Hiding in Your Business: Learn how to uncover the hidden profit potential in your business by addressing the four key problem areas: cash flow, expenses, pricing, and systems.
• The Power of a Profit Plan: Discover the exact steps to stop money leaks, implement value-based pricing, and set up a cash management system that works for you.
• Scaling the Right Way: Understand why you must fix your business's foundations before you scale, or risk creating a "bigger monster to feed."
In This Episode, You'll Learn:
• Sarah's Starting Point: The emotional and financial reality of a business with good revenue but no profit, and the breaking point that led to change.
• The 5-Step Transformation Process: A detailed breakdown of the steps taken to transform Sarah's business, from an expenses audit to implementing Profit First.
• How to Increase Your Prices Without Losing Clients: Learn how Sarah increased her prices by 60% for new clients and retained 80% of her existing clients.
• The Importance of Operational Efficiencies: Discover how to free up your time and resources by documenting processes, creating templates, and delegating effectively.
Resources Mentioned:
• Money Leaks Exercise Video: https://youtu.be/tKDmRApyrww
• The Profit Plan Book by Annette Ferguson: https://www.annetteandco.co.uk/ppbook
• Book a Fitting Call with Annette & Co: https://annetteandco.co.uk/fitting
Episode 556 Transcript: From £0 to £4k Monthly Profit: A Business Transformation Story
Host: Annette Ferguson
Podcast: Financial and Lifestyle Freedom for UK Business Owners
Welcome to the Financial and Lifestyle Freedom Podcast with me, Annette Ferguson. You're about to listen to a client spotlight that I did over on YouTube and I discussed how Sarah, one of our clients, went from no profit at all to £4,000 a month profit. I go through the exact steps that we went through with Sarah in order to achieve this. So I really hope that you do enjoy this episode. And if you do enjoy it, if you can make sure you subscribe to our channel, whichever player you happen to be listening in, and also leave us a review, it would mean a huge amount. So let's get stuck in to the episode.
Hello. Hello, everyone. I hope you're well. Welcome to the UK Profit Show. I hope you're well today. For those of you that might be stumbling across this session, my name is Annette Ferguson. I'm CEO of Annette & Co, a UK-based accounting firm. I'm a Chartered Accountant, Certified Profit First Professional, and Small Business Financial Strategist. And fundamentally, what we do is help business owners take home more money from their business for them and their families to enjoy.
As I said, I hope you're well today on this Tuesday as we are recording. If you are catching up on the replay, hello, and thank you for doing that. Now, as we go along this session today, please feel free to ask any questions that you have. Please feel free to have conversations in the comments section if you would like. That's all good. Because today's session is a client spotlight. I am going to go through how Sarah went from basically zero profit a month to 4,000 pounds of profit a month, a complete transformation for her and her family in her business. And I'm going to talk you through the exact steps that we took together so that she could release this profit that was already hiding really in her business.
So make sure you write plenty of notes so that you have something that you can put in place in your business as well if you are in a similar position.
So first of all, I would love a quick show of hands, a quick yes, me in the comments. If you have been focusing on profit this week, if that is one of the key things that you are looking at in your business in order to take home more money and for your business to be more financially healthy, I'd love to know if that's you. So do let me know in the comments so that I can give you some high fives, some virtual high fives as we go along as well.
And by the end of this session, you're going to have a roadmap for transforming your own profit situation because this story that I'm going to tell you and this journey that I'm going to take you on today, it is repeatable by you in your business. It is not a one-off, it's not a unique situation. This happens all the time when business owners know the steps to take and are supported to make decisions and take steps in their business to become more profitable.
So ultimately, here's what I see at the beginning with most business owners. Many, many business owners know what their revenue number is because that's what you're focusing on. You're focusing on growing revenue, on revenue getting better and bigger and all the things. Not many business owners know really the nitty gritty of what their expenses are and therefore have little to no idea about the actual profit in the business as well. And that is exactly where Sarah was as well when she first came to us.
So she knew what was happening with her revenue because that is where her focus was. It was on growing the revenue, but the rest she kind of hoped would take care of itself as many people do. Because on paper, she had a great business. Sarah is running a marketing consultancy business and on paper, she thought that everything seemed good. But she was working 60 hours a week and she was constantly stressed about money and she was waking up in the night worried about finances and she really didn't have a clue what was going on with her profit, which again is so familiar for many, many business owners that we see.
Outwardly, that's the thing on social media, etc. People think, oh, this person's doing brilliantly. They must be really successful. But there's a big story underneath all of that with many, many businesses that we don't see and is never really talked about or shared. And I understand why, because there's a lot of shame associated with this kind of thing. But it is therefore hidden under the carpet and put away. And people don't really realize that the struggles that they're going through and the difficult times that they're experiencing, others are experiencing too. But there are also people that have experienced that and have managed to get around it, get ways of working that are better for them, their business and their families and can get better as a result.
And you don't have to be waking up in the middle of the night in a cold sweat worrying about how you're going to pay your next VAT bill or how you're going to make payroll at the end of the month because you're 15 grand short at this point in time. That does not have to be the situation.
Sarah's Starting Point
So I'm going to talk you through exactly what we did with Sarah. So let's start with her starting point. So the starting point for Sarah was that she had monthly revenue of something between $12,000 and $15,000 a month, but she had monthly expenses of somewhere around $11,500 to about $14,000 a month. So the reality was that her profit was at best $800 to $1,000 a month, and at worst about $200 a month. And her take home was whatever happened to be there, but more often than not was not enough. Very little didn't cover what it needed to at home.
But that's not the whole picture because there's also the emotional reality of the situation. Constantly stressed about cash flow, working weekends to try and catch up, avoiding looking at the bank account and the bank balance, making decisions based on fear, feeling like a failure despite good revenue, and not opening envelopes as they come through the post for fear of what they might actually contain.
And Sarah told me that she felt like she was running on a hamster wheel with her business, that she was running faster and faster, but all that was happening was she was getting more and more exhausted and not actually getting to where she wanted and needed to be with her business and her business's finances.
So Sarah had a breaking point, as we all do, where she realised that she couldn't afford to take a week off during her daughter's school holidays. And here she was running what people thought her friends and family and connections all thought was a successful business, but she was more financially trapped than she had ever been in any other job in any corporate role, or any work she had had previously. And that's when she got in touch with us because something needed to change. She had reached her rock bottom with the situation, and she realised that she could not keep going on this way.
The Initial Assessment: Four Problem Areas
So we did an initial assessment when Sarah came on board, and here is what we discovered. We discovered cash flow issues, which of course she knew she had, because there was no cash flow forecasting, there was irregular client payment terms, there was no cash reserves for emergencies. And in some months, the personal and the business finances was pretty mixed because she wasn't taking enough home, so there wasn't enough in her personal bank account to pay for stuff that she needed personally. So every so often, the Sainsbury's shop would go through her business account because the funds just weren't there in her personal account. And it got muddied, it got very muddied.
We found that there were, of course, expense problems. The bookkeeping side of things, so expense categorisation and tracking was weak. There was somebody in-house doing that role, somebody that was not qualified to do that role. They were not a qualified bookkeeper, they were not a qualified accountant, and therefore the reports on these things that were being pulled out were nonsensical. They made no sense, and they could not be used for data-driven decisions.
There was no negotiation with suppliers happening at all, even for big contracts in big situations. And there was emotional spending decisions, so decisions based on emotions rather than whether the cash actually existed.
There was also some pricing issues in the business. She was massively, massively undercharging for her services based on the amazing results that she was getting for her clients. That meant that the profit margins were terrible, and they weren't built into pricing. She was competing then on price with a myriad of other providers that were not as experienced as her and didn't deliver what she delivered. She wasn't competing on value, and therefore she also had no understanding of the true cost of her services either.
There were also system problems, so very little in the way of financial systems and processes. As I said, they had somebody unqualified running the finances in the background. They were also very reactive rather than proactive with their finances, no regular financial reviews as a result, and no profit planning or forecasting either.
These four areas is what was driving the problems that Sarah was experiencing in her business.
The 5-Step Transformation Process
Step 1: Stop the Money Leaks
The very first thing that we had to do was stop the bleed, stop the money leaks, as I like to call them, stop the money just disappearing out of the business, because we can't stop profit until we stop the leaks that are happening.
The very first thing that we did was basically an expenses audit. We went through every single cost that had happened in the business over the last 12 months. We categorized those, and we assessed them as to whether they were 100% necessary to keep the proverbial lights on, or whether they were nice to have. Now I have a video on my YouTube channel on how you can do this exercise. I will link to that, so do keep an eye out for that coming in the links, and I'll get that to you as well, because doing this money leaks exercise, this expenses audit is really key, because straight away, we were able to identify £340 a month of subscriptions that could be cancelled that she was spending unnecessarily. So we freed up £340 a month straight away with this exercise, and you can do that too. So I will get that link to you.
The other thing we looked at was supplier reviews. So renegotiating key supplier terms also really, really helped Sarah in this situation. And the third thing we did straight away, we started looking at cash flow mapping, what I call a profit plan. And again, I have a book by the same name, The Profit Plan, I will put a link to that for you guys as well, because this is how you can start planning for profit and looking ahead and understanding how you can get profit and manage the cash in your business.
So as I said, the subscription cleanup alone saved £340 a month. And that was an immediate savings. Now it might be that you identify some costs that you can get rid of or cancel, but you're in contract just now. So it was worth asking the supplier if you can get out of the contract early. But if you can't, make sure you diarise a point in time when you can then cancel it so it doesn't auto renew again. And you don't end up with another here when you don't actually want that service.
Step 2: Pricing Strategy Overhaul
So after we've done that money leaks, we then looked at pricing. Value based pricing is where you charge based on value for your services rather than based on costs. But you do still need to understand what the costs are to make sure that you are going to be profitable as well.
The thing is that Sarah had a, when we looked at it, an hourly rate of about £45 an hour, whereas the market rate was about £85 to £120. And this again is really common for owner managed businesses where the business owner is still doing a lot of the delivery, is that we tend to undercharge for our expertise and service if we look at that hourly rate calculation.
And the thing is that Sarah was delivering incredible value to her clients, massive ROIs they were receiving, and therefore there was the ability to move her pricing up. So understanding the real cost of delivering services, as I've said, is really important. But then you have to compare that to the value you provide as well. And underlining the two so that both work in your favour is really important.
So we put together a new pricing strategy for Sarah with planned increases for her existing clients and a new implementation strategy for new clients so that when new people came to her they were already on the new rate. And so this again helped increase the profitability of the business and there was no additional costs for this. So Sarah's prices actually increased by 60% for new clients. And that had a massive difference to her profit, to her bottom line straight away because she was bringing in new clients at that point in time.
But next comes the scary bit because that is the pricing discussions with the current clients. And that can be really, really hard because you turn around and you say, okay, well, what's going to happen with my new, my current clients? Are they going to accept the price rise? And the answer is they won't all accept it. But you will have a big chunk of clients who are likely thinking they are paying too little for what they receive from you right now because there will be, they will realize that they are getting massive value and they're not paying very much and they will be willing to pay more for what you give.
And the thing that we found was Sarah's 80% of those clients, they accepted the new rate without question. Now 5% left, they did, they left, but she was able to start replacing those with higher value clients. And then some clients stayed and negotiated pricing and they kind of met in the middle and that worked as well. But that meant that the average client value increased by about 35% for Sarah. So no more of her time, yet she was getting paid more money for it.
Step 3: Profit First Implementation
And then after that, we moved to getting Profit First implemented in her business. Now many of you will be tuning in here today because you know about Profit First and that's how you found me. Now Profit First, for those of you that don't know, is a cash management strategy for businesses. It is based on a book by the same name by Mike Michalowicz and we are certified Profit First professionals and have been for 10 years. And Profit First basically says, let's take control of the cash and let's manage the cash in your business. Let's make sure that we have money for profit, owner's pay, tax, and all the good things that we need.
So we did this implementation with Sarah for implementing Profit First and we had transfers starting to go into profit, we had transfers to owner's pay, and we had transfers for tax. And Sarah really loved this part of the process because all of a sudden, she was starting to see money building up for her and building up for profit, which she had really never seen before. And so that was massive. So within the first month to six weeks, Sarah had moved £1,800 into her profit account, which had never been there before. And so that was really important in helping keep this process live and really see the tangible effects of it as well.
Step 4: Operational Efficiencies
So next, we had discussions with Sarah about the operational efficiencies of the business. So how she could start delivering the same results to her clients, but with less time and perhaps less money on resources as well. So Sarah went away and did this. She looked up process documentation, template creation, automation setups, delegation, all those things are really important to start optimising and making your business more efficient with the time you have as well. So that freed up a lot of Sarah's time once she got all of these bits in place.
Step 5: Strategic Scaling
And then, and only then, was it actually about scaling the profitability, because the problem is that many, many business owners look at scaling in their business, but they look way too early, because they look at scaling before they've got these foundations in place. And all you do when you scale, when you have cash flow issues, operational issues, time management issues, all you do when you scale is you end up with a bigger monster to feed. You end up with a bigger problem. You end up going out of business faster, because you run out of cash faster.
So we had to get all these foundations in place first before we could even consider scaling. And that is what we did. And that is what you need to do too. You need to make sure that you have got the foundations of your business sorted before you even consider scaling.
The Results
So the results for Sarah were that she went from £0 to £1,000 a month profit to £4,000 a month profit. She reduced her working hours from 60 hours a week to 40 hours a week. She built up a cash reserve of £10,000 in her business. She had a clear financial plan and she had confidence in her business's finances. And she was able to take that week off with her daughter during the school holidays without any financial stress at all.
And that is the power of getting these foundations in place in your business. It is not about just growing revenue. It is about making sure that you have a profitable business that can support you and your family.
Key Lessons
So what are the key lessons from Sarah's story that you can take away and implement in your business? Well, the first one is to get that money leaks sorted. You can't go anywhere when you've got money leaks in your business. So that's the real, real key and the springboard to all of this. As I said, I will put the link to that video in the comments. So you've got that afterwards as well.
Now, I would love to know if you guys have any questions on this as I've gone through what Sarah's journey is. I would love to answer any questions that you may have on this. I'm going to check the comments as well to see what we've got coming through as well.
Annie's saying, I will be relocating from a lease premises to my home address. How do I include the cost of installing a home studio in my accounting around 16,000? Annie, that depends on a lot of things. There's a lot of variables there, whether you own the home, whether it's rented, what the setup for your home studio will be. But typically, if you are building something in the garden, say, typically you can't claim that because it's in your home and therefore adds value to your home and you would end up with capital gains tax issues. But that would be a discussion that you would need to have with your accountant as to how to claim that because there's just too many what ifs for me to give you a yes, no answer on a live session. But so I recommend that you have a sit down with your accountant and you go through the structure of your business, the type of thing that you're looking to get installed and do. And there's just a lot of bits there, which is maybe why you haven't found anything Googling that's very solid either, because there's lots of permutations there that I just wouldn't be able to answer in a session without knowing all those details about your business. So, yeah, that's what I recommend with that.
Does anyone have any other questions? Is there anything else that you're wondering about Profit First or how you might do some of these stages in your business? I'm happy to I'm happy to answer those as well.
If this is something that you think you might want to get in place in your business, then do head over to Annette and co.co.uk slash fitting and you can book a fitting call with me to discuss how we might be able to support you and whether we are the right people to do that. As I said, my name is Annette Ferguson from Annette and Co and we are live every Tuesday around about midday is when we start on whatever platform you are watching on today is where you will find me in the future as well.
So I will be doing another session now next week. We are going to be slightly later. We're going to be a 1 p.m. start next week because I have other stuff in the diary. But next week's topic is Advanced Profit First Scaling Beyond 500,000 Pound Revenue. So that is what we've got in for our topic for next week. And I hope that you can join me as well after that. It will be 12 o'clock again. It will be back to after next week. So you can mark that forward in your diaries as well.
So I hope that this session has been useful. I hope it's giving you some things to take away and implement in your business so that you can become more profitable, take more money home and ultimately have a business that serves you and your family.
Thank you, everyone, for tuning in and joining me. I don't think I've got any more questions, so I am going to sign off now. But it was lovely to see you all here. I know your time is incredibly precious. So thank you so much for spending some of that with me today. And I hope to see you all again next week. Take care, everyone.
