As StoryLearning grew, I got used to something that sucked:
Money coming in through the door.
And then flowing right back out again.
Now, this never used to happen.
In the early days, when I was a humble solo-man, I’d keep all of it.
But then somebody said:
“You have to hire a team!”
Wait – I do?
And so I did.
And it was the best thing I ever did.
(There’s a cult corner of the internet that glorifies solopreneurship, as if hiring is a dirty word. It’s not. They just haven’t learnt to do it properly.)
So I hired, and the business grew.
So did revenue.
So did profit.
And I was a happy bunny!
Fast-forward a few years, though, and inevitably growth slows down and plateaus.
Your team has grown again. But for the first time, your bottom line hasn’t.
Happens to every business eventually.
For the first time, you start looking at the year’s P&L…
Your eye skips right to the bottom…
(Ain’t nobody got time for all that stuff in the middle…)
And you realise that:
Oops, you spent most of the money you made!
And that’s business, I suppose.
No doubt — that is most business.
In fact, look outside your online bubble for just a minute, and you’ll realise that most of the business world operates with net margins that would give the average online indie builder a heart attack.
5% is normal.
15% is common.
25%+ is relatively rare.
But low margins don’t matter so much if you can continue to scale without eroding profitability.
5% of $1 billion turnover is a lot of money, after all.
The issue for online education businesses is that you most likely cannot continue to scale with your current model.
But the point here isn’t about scale.
The point is a different one:
If you knew that your business had a natural upper limit, then it makes a lot of sense to be asking:
“Do I really need to be spending all the money I’m making?”
Let’s say you’re doing $2m/yr AR.
But your expenses are $1.5m.
Leaving you with net profit of $500k.
Is that good or bad?
Answer: It depends. (Obviously)
I prefer a different question:
At what point did that level of spend become normal?
Because in all likelihood you could probably be operating that business at a 50% margin or higher — if you wanted to.
Yes, I know you needed to spend to grow…
But when did it become normal to spend $1.5m a year?
Is it still necessary to spend $1.5m a year to make $2m?
Unless you have a pure ad-based model, it hardly ever is.
We just get used to it.
- We get used to the team
- We get used to the subscriptions
- We get used to putting stuff on the credit card
But how often do you take the time to step back and ask:
“How much would it actually cost to run this business, if it came down to it?”
This might sound like fantasy land, but there are a lot of SEO-based businesses who have had to slash their entire cost base recently in order to stay afloat.
Really tough situation.
But you have to ask — wouldn’t it have been prudent to keep costs lower before hitting a crisis?
The point here is not to say “don’t spend any money”.
The point is to be intentional and disciplined about how you spend it.
(Entrepreneurs tend to be faaaar too loose with the chequebook, you see.)
For example:
When I started ollyrichards.co, I made one very specific decision:
Not build a team and to keep all the money I make.
Radical, right?
This is what enabled me to make just over $1 million last year, and keep almost all of it.
Except, this wasn’t done from a place of “I don’t like managing people”, it was done from a place of:
“I don’t want any more overhead to manage, because I don’t want to the pressure of having to maintain that.”
Most entrepreneurs aren’t intentional in this way.
Instead, they just sleepwalk into building
- overhead
- Team
- Infrastructure
Because that’s just what all the bros at their mastermind tell them they should be doing.
So this time, I decided not to do that.
And I intentionally built very lean.
Now…
None of this is to say that there’s a right or wrong.
But what this has taught me is that:
You have choices.
Everything you build is a choice.
The way you do it… well, it’s up to you, champ!
Most important:
You don’t have to follow the crowd (Spoiler: the crowd is usually dumb), and you are allowed to make choices that selfishly benefit you.
Including undoing years of stuff that’s somehow accumulated inside your business.
At the very least, it’s an interesting (and very useful) thought experiment:
How can I keep more of the money I’m making in my business?
Think on it.
You might be surprised what you discover.
Namaste,
Olly