The numbers game

Every business owner plays it

There are so many aspects for successfully running a one-person business.
Why do i start with numbers?
And what do i mean when i talk about the numbers game?

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This was the most significant shift for me, when transitioning from 1️⃣ a professional who was employed to do good work in businesses owned by others to → 2️⃣ a business owner, managing the P&L of my own business.

Playing the numbers game means paying attention to the dance between revenue and cost, making decisions and acting to improve the financial health of your business.

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Here is the shortest version of how i understand this game, after these 9 years of playing it:

Revenue = Volume x Price x Frequency x Modifiers*

Costs = Cost to acquire + Cost to serve + Research & Production costs + Back office costs

Note: Modifiers are the many other factors that affect total revenue, like retention period, up-sell or cross-sell probability and others - which i’ll cover in future editions.

As a solopreneur, you setup and stabilize revenue streams = money generating activities, each having its own specific numbers game.

The beauty of the game comes when you start playing with 2+ revenue streams, while having the same constraints (e.g. a limited time available for working each day and each week).

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Let’s see now a couple of concrete examples, connected to a possible revenue stream a solopreneur can have. Numbers are made up for illustrative purposes:

Example consulting numbers game

Revenue per month =

• Revenue generating consulting activities: 40% of bandwidth = 8 billable days x 1000$ = 8000$

Costs per month =

• Cost to acquire (sales + mk activities): 20% of bandwidth * 4000$ (equivalent of gross monthly salary) = 800$

• Cost to serve (preparation and follow-up related to client sessions, client interactions outside billable time, travel time to and from client offices, client-related admin): (30% of bandwidth non-billable + 40% of bandwidth billable)* 4000$ (equivalent of gross monthly salary) = 2800$

• Research and production costs (staying up to date, creating new resources to be used across projects): 5% (of bandwidth) * 4000$ (equivalent of gross monthly salary) = 200$

• Back office costs (software and professional memberships, gas, accounting, insurance, admin not related to a single client): 300$ + 500$ + 300$ + 200$ + (5% of bandwidth * 4000$ (equivalent of gross monthly salary) = 200$) = 1500$

So, in this example we have ±8000$ incoming, ±5300$ outgoing monthly = about 2700$ gross income (income before tax) each month = about 32400$ gross income / year.

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As you glance at these numbers, you can immediately see how you could play the consulting numbers game differently:

• Adjust number of billable days

• Adjust daily fees

• Adjust sales and marketing activities

• Adjust cost to serve elements: e.g. optimize preparation, follow-up, client interactions, travel time, client-related admin

• Adjust research and production activities

• Adjust back office costs with software, accounting, admin etc.

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Imagine that starting from the numbers above you could get in a few years to something like:

Revenue per month =

• Revenue generating consulting activities: 50% (of bandwidth) = 10 billable days x 2500$ = 25000$

Costs per month =

• Cost to acquire (sales + mk activities): 10% (of bandwidth) * 6000$ (equivalent of gross monthly salary) = 600$ + 300$ (premium events access) + 1000$ (targeted ads) = 1900$

• Cost to serve (preparation and follow-up related to client sessions, client interactions outside billable time, travel time to and from client offices, client-related admin): (20% of bandwidth non-billable + 50% of bandwidth billable)* 6000$ (equivalent of gross monthly salary) = 4200$

• Research and production costs (staying up to date, creating new resources to be used across projects): 15% (of bandwidth) * 6000$ (equivalent of gross monthly salary) = 900$

• Back office costs (software and professional memberships, gas, accounting, insurance, admin not related to a single client): 700$ + 300$ + 300$ + 200$ + (5% of bandwidth * 6000$ (equivalent of gross monthly salary) = 300$) = 1800$

So, in this updated example we have ±25000$ incoming, ±9000$ outgoing monthly = about 16000$ gross income (income before tax) each month = about 192000$ gross income / year.

Of course i tweaked the numbers in these two examples → to make a point:

Paying attention to the dance between revenue and cost, making decisions and acting to improve the financial health of your business matters a lot.

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I hope this was a helpful sneak peek into the numbers game. If you visit the Gym next time, you’ll get similar examples of other possible revenue streams like:

• the SaaS numbers game;

• the training numbers game;

• the info products numbers game;

• the contracting numbers game;

• the coaching numbers game;

• the paid newsletter numbers game;

• the community numbers game;

• the influencing numbers game;

• the book writing numbers game;

And templates for DYI exercises for clarifying your own numbers game, for existing or future revenue streams.

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I promise to come up with nice looking visuals in future editions 😅
Even though using visuals is one of my strong points in real life, somehow i get lost in pouring in text format everything that i want to share with you. This is a clear signal for me that i’m starting to love writing this newsletter, even ignoring my beloved visuals for the moment.

Stay healthy,
Bülent