Most people are SO close to living a lifestyle most people only dream of, but they’re stuck in the “average to above average” trap. In this episode I walk you through exactly how close you are by looking at your “breakeven point” and how you can actually 2-3x your personal income without even growing your business that much!
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Hey everyone, Jeremy Reeves here again with another episode of the sales funnel mastery podcast.
Today, I want to talk about money, right which we basically do every time in the podcast. So I just got back from New York city. I got invited to a yacht party up at New York city, so that was really fun you know, one of the cool perks of you know, owning your own business and knowing cool people that you get invited to stuff like that you know. It has been a lot of fun. I met a lot of really bad ass people. So I am kind of excited to you know, deepen the relationships of those people and you know, I got a lot of awesome pictures and having a great time.
So now I am back and swinging things and you know, one of the things that I was actually thinking of on my drive home was the breakeven point, right.
So this is something that you know, if you are listening to this you know that I talk about a lot and I want to kind of take the step further at this point because there are 2 you know, there are 2 kind of concepts that I have with breakeven and people do not realized how powerful it is you know.
So the first one is breaking even on your marketing and you know, I always say that that is like the big kind of (inaudible 1:29.5) that is the big turning point in a business is when you hit breakeven with paid traffic, I am talking about. Because then you can afford to buy paid traffic and you can scale it up and then get you know increase the business to the backend, right.
Very, very few businesses are profitable from first time customers you know what I mean. In 95 plus percent of businesses, most of the actual profit in that business and I am talking about revenue, I am talking about actual net profit that you actually you know, get to keep is made on the backend not on the first time purchase, right and that is why I talk about that all the time.
In this one, I am actually talking about more of your personal finances. So I am going to run you through a couple of things and I want to show you how powerful this is right.
Before I get into these numbers by the way, I made a little chart. I am going to try to make it very simple to follow. There is not too many numbers. So I am going to make a simple (inaudible 2:30.8) right.
So what I want to say before I get into this is, Yes! I realized this is not perfect, okay.
It is really hard doing spreadsheets like this taking into consideration like every little thing you know, taking this consideration marketing cost and which I kind of (inaudible 2:48.5) into COGS which I will get into in a sec and taxes and like you know, all that kind of stuff you know, having more employees as you grown and that kind of thing.
So that stuff is not included in this, but it is really you know, those are kind of small numbers you know with this anyway so they really would not add up to all that much.
So let me give (inaudible 3:10.2) right and basically what I am going to kind of show you is how close you are and this is for anybody that is you know, you kind of in that situation where your — you know, you are doing good, but in your head you know that you can do so much better, right.
I want to show you how close you are to that.
So if you are at that point where it is like you know, you pay yourself a decent salary you know, the business is doing well but it is not really growing as fast as you hoped.
And you are just like kind of sitting there and it is like, why the hell I am always kind of just in this phase where it is like I am little bit better than average you know what I mean. And I know a lot of entrepreneurs are in this phase you know.
First of all, I think the reason for this just you know, my own kind of theory on this, I think the reason is, it is a mindset thing, it is a mental thing.
I think you have an image of yourself of what you know, what can be possible and what is kind of possible for your own life and I think you kind of just create this like self-perpetuating loop that keeps you in that cycle of like kind of just above average or right at average or just below average or wherever you are right now.
If you are in that stage where you have been there a while, it is most likely a some sort of psychological thing you know, and I am not saying you are weird or anything like that. It is a conditioning thing you know, growing up maybe your parents you know, were kind of average — financially, I am talking about. That kind of thing, right.
So not to get into like the whole psychological thing, but I want to walk you through this and show you how easy it is to actually go way above that and give — and pay yourself way more money than you are making right now, right.
So and again, these are example numbers I know yours are going to be different. I know it is not perfect, right, but just take it as the example, right and you can create your own spreadsheet to do this.
So let us just say that you are gross profit every month is $20,000 okay. You are paying your employees — so all of your employees combined $10,000 a month, right. And your COGS like you know, cost of goods sold.
So this — what I am putting here is basically marketing plus whatever it costs you actually get the product out of the door you know, so if you are selling physical product, it is like the cost of the product and shipping and that kind of thing. If you are selling a service it is going to be mostly marketing you know, that kind of goes into this. So that is another $5,000 and then you are paying yourself $5,000 a month, okay.
At this point, you are breakeven. The business is breakeven because your you know, you are making $20,000 a month in actual revenue, right. You are giving $5,000 to yourself, $5,000 for you know, COGS and $10,000 to your employees. So you are breakeven, okay.
And that is kind of where you have been hovering you know. You are kind of just at that stage where you just kind of sit in there. You are not really growing that much you know, that kind of thing.
I want to show you all you have to do to double and by the way when I am talking about your income, I am talking about like your actual personal income like what you actually pay yourself, okay, because that is — you know, a lot of people build their business you know, for revenue and it is like, why, you know.
I was just talking to a client of mine actually. I did a promotion for him last year. I made him I think it was $80,000 something like that. So he reached back out, we are going to do kind of a similar thing and he was you know, telling me, everything that has been going on over the last year.
And one of the things that he did was he was paying himself very, very, very, little right, and just plowing all the money back into his business and that is okay in certain instances — in his, it is because when he sell, he is a building a business to sell. When he sells it, his industry it sells for really high multiple of cash flow or revenue rather.
So for him, like his goal is just maximum revenue, right. So in that kind of thing and it is totally fine and it makes sense.
For a lot of people that I talked to, so if you are in the kind of lifestyle business, right. If you have a service business or you know, you are not — you are kind of like me, like my mine is more of a lifestyle business. I am not looking yet max revenue. I am looking at max personal income, right, and where I can find leverage points and things like that, okay.
So that is kind of who I am talking to. If you are building your business to sell it purposely you know, that is the whole goal of your business, then this would not really apply all that much, although, it is still a good exercise to really know your numbers.
So with that said, all you have to do to double your income right, so remember the gross profit was $20,000. All you have to do to double your personal income is get another $6, 700 a month. So that is like another 1/3 of your top line revenue, right.
Let me show you the numbers there.
So this one, you are getting, instead of $20,000, you are getting $26,700 in gross profit. You are paying yourself now $10,000 a month instead of $5,000. So you doubled your income right, still the same with your employees. Still the same — well COGS, I did is 25% by the way. So that stays true at 25% right, so that is now $6,675 and that is really the only one that even goes up right.
And now you are at let us see, now you are at gross profit of $26, 700 and your basically your, you know, your revenue now is $25. So you are you know, a couple of sandwiches above breakeven, but you are paying yourself $10,000 a month rather than $5.
So you just went from $60,000 a year to $120,000. Huge, huge increased right.
I can tell you from personal experience. Huge, huge, huge difference in your lifestyle right. Going from that like you know, once you get pass the $100,000 mark, you know, it makes a very, very, very big difference in how comfortable you are, you know what I mean. There is kind of like under $100,000 a year in most places, I mean everywhere is different you know, under $100,000 and you are really not living that great of lifestyle you know, it is kind of just average you know, whatever.
Once you get a $100,000 you know, you are at least starting to be able to do things more comfortably. You are not worried about money all the time that kind of thing. And then you know, once you get about like $150,000 or $200,000 then you can really start to get you know, like a more lavish type of lifestyle you know. Then you get above like $500,000 or $1,000,000 mark and you are renting yachts and things like that, right.
So anyway, and that is, by the way, that is kind of in the United States. I know that is going to be different based on the county you are at and all that kind of stuff and you know, your inflation rates and your you know, cost of living and like all that kind of stuff.
But anyway, so that is all you have to is basically add about 1/3 to your top line revenue and you double your own personal income and then if you do that again and you go from $26,000 to $33,300 you can then pay yourself let us see — you can then pay yourself $15,000 still have the same $10,000 in place and then your COGS go up from at the beginning at $20,000 they were $5,000 remember 25% off on top my revenue then you go to $8,325 but then and you come out your new net is -$25.
So basically, all you do is you know, if you want to — if you want to pay yourself more, if you are in that situation where it is like you know, I am working really hard and I need to pay myself more you know, so you can live a better lifestyle.
I want you to do this exercise and figure out what your breakpoint is, your breakeven point because you are going to kind of hit a thing and you can do this by the way with your personal — kind of your personal expenses and that kind of thing so like let us just say that you on average spend $5,000 a month, right.
Well if you pay yourself $5,000 a month you are kind of just at that stage every month where you like okay, well, I can you know, do my stuff, I can go out a couple of times a month or whatever you know, it is okay.
What you have to realize is that every dollar above $5,000 can go to whatever you want. So you can go.
Let us just say that a brand new Corvette is — I do not know, I do not even know how much they were. Let us just say that you want you know, whatever your car is right, you know, it is a $1,000 a month, right. I do not even know what that (inaudible 12:24.1) I am not really into cars. I actually used to want a Corvette until I can afford one and when I realized that I can actually afford one I did not want it anymore which is kind of funny. It is also kind of you know, because it is just totally impractical, I mean we have you know, 2 kids you know, that kind of thing and we live in Pennsylvania, so you know, you can only drive it for like half a year. So it is totally impractical. So we have a big you know nice Tahoe.
Anyway, you know, a lot of people they look at people with nice cars and they were like, “oh my God, oh my God” you know, but if your expenses are $5,000 and you are making $5,000 well you cannot afford that, right.
So let us just say, $2,000 car because that will probably buy you, I mean you could probably get like a Maserati for $2,000 right.
So all you have to do you know, is make $7,000 a month then you can then afford a Maserati and you can look like this big you know, hot shot, you have a giant ego and all that kind of stuff. Whereas, you are really not making that much more money than somebody else you know, but you can then afford it and that is the power of this, is when you hit that point, you know, when you hit that kind of like breakeven point, everything above that is so much more profitable you know, it goes to your lifestyle or it goes to your whatever it is or your you know, even if you are looking to this not as lifestyle like not like buying cars and houses and stuff, but investing right. Either back in your business or investing like for personal you know, the real estate or stock market or whatever.
There is always this like line right, where up until at that point, you are kind of just working to hit that line and then everything above that, like every dollar that you make is worth — is so much more valuable to whatever your goal you are trying to achieve right, and that is what I am trying to show you here is I want you to find that line, both personally and in your business by the way. I have my numbers from both personal and business right. It is going to change over time as you add employees, as you add expenses personally you know, whatever, but it is so liberating having that you know, having that line because then you know like okay, I have to make you know, I have to make whatever $15,000 a month right and that is my breakeven and then everything above that goes like you can save or you can reinvest or whatever you are doing with your extra money. You can reinvest you know 50% to 75% more in most cases after you get pass that line right.
It is very motivating knowing what that line is because then when you have month and you are looking at your you know, you are looking at your numbers for the month and you were like, Oh, you know, yes we got that passed that and that is you know, you can kind of celebrate and you are always just pushing towards that goal. You are pushing and pushing and trying to make sure that that is what your reaching you know, and then of course, you continually increase that goal you know, once you — are having months were they always above breakeven well then you know, then you start to try and you know change that goal and continue pushing and you know, just being the bad ass that you are.
So that is it for today, I just wanted to — I thought that was kind of a cool exercise to go through and I know that a lot of people have that you know, and a lot of people they do not really look at it that way you know, but I want you to — do not just listen to this you know, a lot of people maybe they are going (inaudible 15:53.7) in your car or whatever you are doing, taking a shower or something or you are in the toilet or whatever it is that you are doing, while you are listening to this. Hopefully it is not something too weird, slightly weird is okay.
You know, do not just listen to this and then you know, kind of go to the next podcast and just forget about it you know.
I want you to actually sit down and figure out what your breakeven point is, right. And feel free like if you want to you know, email me just shoot me at an email at [email protected] I can send you my calculator that I have, but basically, it is just you know a spreadsheet, there is gross profit, personal employees COGS, total expenses, and net profit and then you just figure out the calculations for each which hopefully anybody listening to this can do that fairly easily. It is not that hard. It is pretty simple arithmetic. Although, I guess if you are not familiar with the spreadsheet maybe that is different because you have to know how to work a spreadsheet.
But that is it. As always, if you are enjoying this you know, if you like the podcast make sure you are sharing it with your friends, like I have been saying in the last couple of times our you know, our downloads have been going way, way up, it has been continually increasing so if you guys are telling your friends, I would really appreciate it, it is showing in the numbers so that is awesome. I want to get you know as many people listening to this as I can obviously because then it makes it more worth me doing it, right.
I have a whole bunch of really cool interviews lined up for you. We just went and reached out to a whole bunch of new guest to have on here. I think we just booked like 8 of them something like that. So there is a whole bunch lined up for you. I am really excited about it.
Also, actually, I have something — I have some news for you but I am going to wait until maybe the next podcast to announce that.
Another thing is I am going to be working on a new product which is awesome. I kind of just came up with it. I realized that I am very, very, very good at a certain thing. I am not going to give it away yet, but I am at a certain — I am very, very good at a certain thing in you know, in funnels you know what I mean. Like there is a lot of different things you can do with funnels obviously, we (inaudible 18:08.2) copywriting and it has to do with that, but it is something that I, for some reason, have never thought of putting training together for and it is going to be really, really bad ass. I am going to spend the next couple of weeks or months putting it all together for you, but maybe next time, I will announce it, so you will know it is coming, something like that.
But anyway, I hope you have a good day. I hope this — I hope you enjoyed this. I hope it added value to your life and made you, you know, it kind of open your eyes up a little bit and more importantly, I hope you actually go and you know, figure these numbers out for yourself, right.
So yeah, that is it. If you are interested in working together with us you know, to help build your funnel, as always, shoot an email to [email protected] and we will talk to you soon, alright, bye.