Every touch point that frustrates your customer, adds hidden expenses and it reduces your chance of repeat business, which is really critical. This is BYFIQ. Wealth and success come from understanding how finance works in business, and together we'll explore the most important topics to 10x your financial results. My hope is that we can work together soon. Please share and enjoy. Your business is doing real revenue. You've built a team, signed customers and maybe even hit eight figures in sales.

But despite all the activity, there's one nagging question that won't go away Where's the profit? All right, I've been there before. If you feel like that in your business and you're wondering why am I not making a profit? In this episode I'm going to break down exactly why your company may be struggling to make a profit and even if you're generating millions in revenue, I'm going to share with you what you could do to fix it. If you're a founder leading a three to $20 million company, this episode is especially for you, because we're going to identify and address the most common profit blockers. All right, so check this out.

Number one, the first thing that I want to kick off with, is that you may be measuring the wrong things. Here's the deal Revenue, it's easy to track. So are expenses, but real profit drivers are more nuanced and if you're not measuring them, you can't manage them. Founders often operate without clear visibility into what's actually working inside their business. They review lagging indicators, like last month's income statement, but they miss the metrics that matter the most, the ones that will help them to predict and influence profitability. I see this all the time At Coltivar. What I do is, with my team, we teach founders to think in terms of value drivers, sales efficiency, operational efficiency and value creation efficiency Sales efficiency is about acquiring customers in a way that adds gross profit, not just top line revenue. Operational efficiency measures how effectively your people and systems convert resources into results. And then value creation efficiency that's about how well your profits are being reinvested to generate long-term returns. So if you're not evaluating these three levers, you might be growing the wrong parts of your business and leaving cash on the table. All right, so that's number one.

Number two you've outgrown your product market fit, so it's possible to hit a revenue milestone and still be operating with a product that no longer fits the market. In the early years you might've found a niche that responded really well, but now you're serving a broader audience and your offering hasn't kept pace, or maybe your original customers aren't as profitable as you thought. Here's the deal. Profit often dries up because your product pricing or positioning isn't aligned with current demand. If sales cycles are dragging, margins are shrinking or attention is weak, there's a chance you're no longer solving a meaningful problem or you're not solving it for the right customers. So if you take a hard look at who your best clients are, what they're paying and why they're staying, it may be really enlightening. So then you could build your offer around them, these core customers, not just what you've always done. The strongest businesses evolve their positioning as they scale. I've seen this over and over again, and the most profitable ones know when it's time to pivot.

Here's another thing to consider. If you're thinking about launching a new product because we're talking about product market fit maybe you're like, okay, our product isn't doing as well, there's not as much demand in the market anymore or there's disruption going on. One thing you could do is you could test new ideas, because this is what it's all about it's testing new ideas as cheaply as possible in a variety of ways. You could create a landing page and then create a wait list for a product you're considering or a service you're considering, and then reach out to, let's say, a thousand people and say hey, I'm launching this new product or the service. If you're interested, go ahead and sign up, put down 10 bucks, 50 bucks, a hundred bucks, whatever it may be, and then you can see whether or not that new product or service that you're considering has legs. So Elon Musk he did this really successfully with the launch of the model three and the Cybertruck. He created a wait list. So think about it.

Some people think the Cybertruck is so ugly. My son is like obsessed with the Cybertruck, he loves it. But some of them are like, yeah, I would never buy something like that. So if you're designing this and you're thinking about this concept, instead of just going out there, investing millions of dollars in a factory and supply chain and all the capabilities required to build this truck and then finding out that the market doesn't want it, like Segway back in the day, what you could do is you could create a wait list, and that's what Elon did. He was really smart in this approach and he got millions of people to put down a deposit. So then that validates the whole idea. So then if Elon goes to investors and says hey look, I have a million people who put $100 down for the Cybertruck. Of course people are going to invest. So that's just a quick little hack that I wanted to share with you.

If you're thinking about launching a new product or a new service, instead of going all in, it's really important to test the market first. So test it. Do it as cheaply as possible, as quickly as possible, to discover whether or not you have product market fit. So, whether you're launching a new product or whether your product is starting to lose steam, that could be a serious problem and it can significantly impact profitability. All right, the next reason why your company may not be profitable or earning profit is because your business model isn't built for margin.

Let me explain. Some business models are designed to scale, others they're not. If your company relies on too much customization, high labor intensity or large overhead to deliver value, then growth is not going to solve your problem. It will only amplify it. A surprising number of founders operate with structurally weak models high COGS, low pricing power or revenue streams that don't repeat, or they're really, really hard to scale. So if your margins shrink as you grow, you don't have a scale ready model. You need to take a step back instead and assess the economic engine of your business. Are you earning enough margin per sale? Are you recovering customer acquisition costs in a reasonable timeframe? Are you scaling complexity faster than revenue? These are all important questions to ask yourself, and having the data so you can look at the data and make database decisions is going to be really important. But maybe your business model just isn't designed for scaling and for profit and just for the modern world that we compete in, so it may need some reinvention and transformation.

The next reason why your company may not be profitable is because your pricing is off All right. So pricing is the best lever. There are four levers to profitability. There's pricing, volume, cost of goods sold and op-ex. So in other words, if you increase your prices, if you increase your volume, if you decrease your cost of delivery, your cost of goods sold or you reduce your overhead, all these things will impact your profit.

I have a course. It's free, completely free. It's on the Coltivar website. You can go to coltivar. com under resources and you'll find it there. It's called how to Make your Business More Valuable. I talk about these four value drivers in more detail if If you want to check it out.

That may be very helpful for you, but nonetheless, pricing is the most impactful lever on profitability. In fact, I did a study and just across the board, just generally speaking, okay, for just the average company, a 1% increase in pricing will have a 12.5% impact on the bottom line, compared to reducing your overhead, your OpEx. A 1% decrease in OpEx will have a 3.8% impact on the bottom line. So think about that. You go out there and you slash your overhead, which typically means cutting jobs, and people are crying. They're all sad, morale is down, like just you cut the fun out of the business by reducing overhead and sure as a 3.8% impact on your profit. But if you can increase your pricing by increasing the perceived value that you deliver to your customers, it will have a 12.5% impact About a 3x impact compared to just cutting your overhead. So pricing is one of the most under leveraged tools in a founder's toolkit.

Too often, companies price based on what competitors charge, what customers expect or what feels fair, rather than based on actual value delivered. That's what I'm talking about the perceived value. So as a result, they leave a ton of money on the table. Your pricing should be reverse engineered based on your cost structure, your profit goals and the economic outcomes you create for your clients. So remember, when a perceived value exceeds price, customers buy. When price exceeds perceived value, customers don't buy. So if people aren't buying your product, then the perceived value isn't there. Maybe your offer isn't strong enough, or it's compelling enough, or maybe just the packaging, maybe the delivery, whatever it may be something's off and customers may not see the value right.

So if you help your customers let me just share this example If you help your customers save time, increase revenue or reduce risk those three things that value needs to be reflected in the price you charge. So think about how you package, how you anchor value, how you tier your services, how you deliver your offer, present your offer All these things are really critical. So pricing isn't just a number, it's a strategy, and small changes here, like I said, can unlock significant margin without needing a single new customer. So that's one of the first things that I would look at. When it comes to profitability, if you can change prices, increase prices because you have the perceived value, that's gonna be the best way to maximize profitability. But if you're not delivering value to your customers and you increase prices, you may lose customers. So you have to focus on your strategy and how you enhance the customer experience, the quality of your products, just the overall value delivered, and that's going to be really critical.

All right, here's another reason why you may not be profitable. You're spending too much to win business. All right, here's another reason why you may not be profitable. You're spending too much to win business. All right, here's what I mean. Customer acquisition can be one of the most expensive functions inside a growing company, especially if your marketing and sales teams aren't tightly aligned with profitable outcomes. So if you don't know how much you're spending to acquire each new customer and how much profit each customer produces over time, you're operating blind.

I have companies come to me all the time. I'm like Steve we need to create a marketing budget. What do you recommend? In a certain percentage of our revenue, a certain dollar amount for our size? Like what do you think? Like we need to create a marketing budget. And I'm like you don't need to create a marketing budget because if your customer acquisition machine right and your ratio, your LTGP, your lifetime gross profit compared to your customer acquisition cost, if that spread is good enough and I always say it should be at least three to one, three LTGP to one CAC, at least that. If it's five to one, 10 to one, 20 to one, even better.

But if your spread isn't there, if your function isn't working, if you can't acquire a customer at a profitable rate, then you should limit your marketing. Right, because you're just losing money. But if it's working, why would you limit your marketing spend? The only reason why I'd limit marketing spend is if operations can't keep up and like the wheels are falling off the bus. But other than that, if I spend $1 and I get $10 in gross profit, heck, I just max out my credit cards and my line of credit and sell, you know whatever? Sell my bike at my house, whatever it is to dump that into my business because that return is so great. So here's the deal.

When I said you're operating blind, it's really important to measure this one ratio, that is, your LTGP, your lifetime gross profit, versus your customer acquisition cost, your CAC, all right. So LTGP to CAC, like I said, a good threshold and this is like the minimum is three to one, all right. So if you're not there, something's broken and you're overspending. So start by analyzing each acquisition channel and trim the fat. So whatever's not working.

If you're spending a ton of money on the meta ads or on LinkedIn, or you have a sales team, whatever it may be and you're not earning that return and you've done enough reps, then start making some cuts. I've had founders in the past are like all right, steve, yeah, we need to make a change. You know we've sent out like a thousand emails and just cold emails not working for us. I'm like a thousand emails over what period of time? It was like three months. I'm like really you should be sending out like a thousand emails a week and you should be doing that for a year and then make a decision. Anyways, you have to put the reps in. You can't just go to the gym one day, do 10 curls and then walk out and be disappointed because your biceps aren't bulging. So the same thing is true when it comes to acquisition. But if you're doing stuff and you have the data and it's just not working, then you may need a pivot. So lean into your highest performing funnels, double down on retention and then explore ways to increase wallet share of each customer over time. So remember this profitable growth isn't just about more leads, it's about acquiring the right ones for less, all right.

The next reason why you may not be profitable is your team isn't aligned with profit. Labor is likely your biggest cost, yet many growing companies don't track the return they're getting on that investment. Teams expand quickly, roles become unclear and overhead grows faster than output. You may be overstaffed, misaligned and carrying roles that don't drive revenue or reduce cost. So start by calculating your return on labor. This is going to measure your operational efficiency, just like LTGP to CAC measures. Your sales efficiency return on labor is going to measure your operational efficiency. Just like LTGP to CAC measures, your sales efficiency return on labor is going to measure your operational efficiency. That's one of the levers I mentioned at the very beginning of this episode. If you take your net operating profit after taxes and you divide that by your total labor costs, you'll get your return on labor. So once you calculate this, then look at whether each team member is tied to a measurable outcome sales, client success, throughput or innovation. I call these success measures. So make sure your employees understand what their success measures are so they're very, very clear on how they drive value in their role. Profit comes not from just hiring great people, but from deploying them intentionally, and that's what success measures help you to do. So don't be afraid to restructure, retrain or refocus your team around financial performance. High performing cultures are built on clarity, accountability and aligned incentives right. So that's key, all right.

Moving on, the next reason why you may not be profitable is you're managing the past, not the future. Most founders rely on monthly reports, but those are just the financial equivalent of looking in the rear view mirror. If you want to make better decisions, you need to forecast at least 12 months ahead. I talk about this all the time. It needs to be rolling. It needs to be forward looking. Without a forward looking model, it's hard to manage cashflow, plan hiring, test strategies or anticipate risks. So if you build a simple, dynamic model that projects revenue, gross margin, fixed expenses and, most importantly, free cashflow, you're going to be on a really good path. So use it to run scenarios. What happens if sales slow down by 10%? What if you raise prices by 5% and you lose 3% of customers? Is that a good idea? What if you delay that higher for three months? What will that impact be on your return on labor or on your throughput? So forecasting isn't just for CFOs, it's a tool for every founder who wants to get ahead of their numbers, not be surprised by them.

So forecasting is different from budgets. I don't really subscribe to budgets because budgets follow, like this annual cycle. It's like, okay, we're going to get together and try to predict the next 12 months, the calendar year, and you create this budget for the year. And then it's this game of measuring variances and locking people into performance contracts, right, where you say, okay, if you do this, then I'll pay you that. And you're just always looking backwards measuring variances and it's like, okay, that could be good, I guess. But I'm more about creating this rolling forecast 36 months out, at least into the future, and I'm modeling different scenarios and I'm looking forward. Okay, so sure. I'm looking at relative performance month over month, so I may look at July and say, okay, how did we do last July? And then I move forward. I'm not trying to measure variances and wonder why we overspent $300 on office supplies While on the other side of the business we're burning through so much cash because our labor is inefficient, or we're spending all this money to acquire customers and our LTGP to CAC is like two to one. So so many companies just get into like variance measuring mode, while the rest of the business is like on fire. So you don't want to do that. Okay, so that's my take on forecasting. Just make sure you're not living in the past, you're focusing on the future and you have the tools to do that, like a forecast.

Next, your customer experience is costing you. You can't afford to overlook the post-sale experience. Poor onboarding, slow delivery, reactive service or unclear expectations lead to churn, complaints and costly rework. You don't want that to happen. Complaints and costly rework you don't want that to happen. Every touch point that frustrates your customer adds hidden expenses and it reduces your chance of repeat business, which is really critical. In my most recent book, cashflow, I talk about this flywheel and retention and then getting referrals off those retained customers is a critical part of the flywheel, and if that's broken, if you're not retaining customers and they're not referring other people because you're delivering an exceptional customer experience, you may be missing out so much in your business and this may be hurting your profitability. So, instead of pouring more money into acquisition, focus on maximizing the value of each customer you already have. Make onboarding effortless. Increase speed to value Like you, bring on a new customer. Figure out how to shorten the time delay between when they come on as a customer and when you deliver that first piece of value. If it takes you three days, reduce it down to one right, whatever it may be All right. So create repeatable service systems, listen to customer feedback and track net promoter scores. When your delivery system runs smoothly, customer lifetime value goes up. That LTGP that's your lifetime of your customer complaints go down and then your profit margins expand. All right.

Moving on, you don't know what success actually looks like. This may be another problem why your business is not profitable. We want to be more profitable isn't a strategy, it's a wish, and if your team doesn't know what winning looks like, they won't know how to help you get there. That's why you need to find success measures I was talking about that before with each employee Specific, measurable and actionable targets that tie directly to financial outcomes. So every single employee needs to know what their part is in delivering and executing on the company's overall strategy. So if you set a clear financial goal maybe it's 15% net income, maybe it's $1 million in free cashflow, maybe it's return on invested capital of 22%, whatever it may be then break down that goal into department level targets and initiatives right. This is what we call IARs at Coltivar initiatives, actions and results, and we use IARs to turn a strategy into execution. So when your goals are visible, aligned and regularly reviewed, profitability becomes a team sport, not just a finance department issue.

All right, the next thing your capital structure may be the problem. Sometimes, the issue isn't how much money you're making, it's how much is going out the door to service debt or fund the wrong kind of growth. So if your business is over leveraged, undercapitalized or you're using short-term funding to finance long-term investments, guess what? Profit will stay elusive. Take a close look at your balance sheet. Are you carrying high interest loans that need to be refinanced? Are you taking on projects without a clear ROI? Are you holding off on hiring or upgrading systems because of cash strain? Smart capital strategy and this is where strategic finance comes in aligns your financial structure with your growth goals and gives you the flexibility to invest when it matters the most. All right, all that being said, here's a final word profit. Really, it's not a mystery, it's a system. So if you're wondering why your business isn't making a profit, trust me, you're not alone, but you're also not stuck.

Profitability is not just for massive companies or venture-backed startups. It's for any founder who's willing to stop guessing and start leading with intention. That's the key need to rebuild your company from scratch. Okay, you don't need to start over. In most cases, the answers are right in front of you A few key insights, a few aligned actions, a few systems that turn vision and your strategy into measurable results. Right, that's what we do at Coltivar. We go into companies and we take them, especially when they're struggling with profitability and cashflow, and we turn them around. And these are the things that I look at and it works right. I've seen it over and over and over again.

I was meeting with the founder the other day and I was showing him his KPIs. We're reviewing the KPIs in our dashboard because at Coltivar, we have our own proprietary software and we have our KPI dashboards that we share with our clients. And I opened up EBITDA and I was like look, two years ago, this is when we started on this date Look at where EBITDA was. And then now look at where it is. It's a $950,000 improvement. And I don't say that to brag, it's not like I'm like oh yeah, I did it all. I made EBITDA go up by some magic power. Instead, I was saying it to him so we could celebrate because it has been an incredible journey, a lot of hard work, but we put in place a system. That's what I'm talking about here A system to ensure the company has a strategy, they're measuring the right things, they have a forecast, there are success measures, all this stuff and it works as a team effort to make EBITDA improved by that much, and it's just really cool and really rewarding to see and I've seen this over and over again that's the thing.

We can't hide behind our numbers, right, the numbers are visible. Right to our client, it's like look at the graph. This is when you hired us, this is where profit was, this is where it is now. There are the results, right, there's no hiding. So I I know the system works and I know you could be successful in your business. So if you're struggling with profitability, if you follow some of these key principles that I shared with you today, you're going to be on your way to turning your business around and increasing that bottom line. All right, all the best. That's all I have for you. Until next time, take care of yourself, cheers.