How to Use Profits as a Vehicle for Growth
How to use profits as a vehicle for growth. So I've talked about this like an easy bit. I used my kit club, selling all of those kits. Now I could use that money to buy higher quantities of things, which allow me to get it at a cheaper rate. So, and it's kind of, I mean, it's not just a saying, the rich get richer, because they do, because when you have more resources to play with, you can do bigger things, right? Like, I'm not gonna start a car company 'cause I don't have a steel manufacturing plant, right? If you have bigger tools to play with, you can do bigger things. So identifying your key products and growing these products are gonna be really crucial to you getting bigger. So I just wanna talk about, we're back to the bags. Let's say before, you made one bag, okay? It took you two hours and you made $40. You could probably make four a day, sure, whatever. So 160 bucks, you're clearing. We're not even talking about materials and things like that. Okay, but now, oho, let's say yo...
u can make a bag, takes you zero hours because you have someone else doing the actual labor and you get 20 bucks for it. You can make unlimited a day, as long as you have enough employees. Now, some people are like (growling) you're making less per bag. Sure, you are, but now you can make thousands, as long as you have the infrastructure to make them. So this one huge way to scale up. And you can be saving some of that money for even a future investment. What's the next step for this unlimited-bag-making person? Maybe they wanna buy a printer that prints special fabric. Okay, so some people, I didn't actually mention the resources. Spoonflower is this great site where you can get fabric printed, custom fabric printed. And tons of people will get something custom printed, maybe their logo, and use that to sew items. Maybe you wanna do it for cheaper yourself because you can now afford a 10,000, $20,000, I don't know how much those machines cost, to do it on your own. And now you're now able to now lower your material costs and still keep producing things. So you could also upgrade to higher-end bags. It's not all about production. It's about getting this life that you want to have. So maybe you don't want 20 people working for you but you want to now move to leather bags, which you can sell at a higher margin. Or bags that are really organized on the insides so they take longer to make. It's about coming up with the things that are gonna work best for your life. Okay, so I say to treat these growing pains of, they're like a signal. It's like, people say pain is a signal that your body's telling you something. Growing pains are a signal that your business is telling you something. There's lots, it's telling you you need to to streamline something, or change something. So there's lots of growing pains. So, an inventory system. When you're getting thousands of things sitting around, it's no longer, you can't just be like, yeah, I'm pretty sure I have like 10 of them. (laughing) So you'll have to actually start keeping an inventory system. I remember when I first started doing, well, eyes are very small and you have lots and lots of them. When I first started doing, like, a Black Friday sale people would just buy me out and it really mattered if there was one left or zero left. Because, you know, back in the day, I never sold out, it never was really a big deal if there were only (laughing) like, a couple left. High overhead costs. Okay, so these are a studio space. If you're paying for a studio space, you need to make enough money to cover the studio space every month. And overhead cost includes your commitments to your employees. Right, so these are really big deals that you may even want to hire a financial planner to help you out with your budgeting. Storage space, not just physical storage space but digital storage space. So I know I have like a premium, I own a whatever Dropbox account now that stores all of this stuff. 'Cause the longer your business is going, the more back stuff you have to maintain. You have these seven-year-old tax records and you have just all this stuff now, legacy stuff you have to manage. Packaging restrictions. Maybe once upon a time you had six different sizes of boxes. Do you really wanna keep thousands of six different kinds of boxes? Or now are you gonna make the decision, you know what, I'm only making products that fit in this one kind of box and everyone's getting the one box. Especially if now you get custom-printed boxes because you think that's the best aesthetic for your brand and you need to order thousands and thousands at a time. Meeting zoning, safety, workplace restrictions. All of those things are things now you have to consider, you've never considered before. The cost of overhauling an outdated system. So setting up a brand new website isn't that hard. You can get a template, you put up a couple photos, ready to roll. The cost of migrating something from an old website and all of that stuff to a new website is really, really expensive. I know a lot of people who were blogging on one kind of software and now they wanna switch the whole other thing to that other kind of software and that is expensive to talk about. I know my, back to storage space, my server space has tripled from running a static website to now running a dynamic website with forums and things like that. Plus the history of nine years of blogging. So there's a lot of growing pains but all of these are opportunities to think about how can I streamline things. Maybe you are doing this awful, expensive, annoying website redesign, but now you know, I'm thinking about the next decade. What can I do to make it more painless for the whole decade coming up? This is hard for people. You're no longer going to be able to accommodate everyone. This is so hard for small business owners to accept. Like, once upon a time, Bobby could email you and said, oh, I love your thing, but could you just make it in green? Or, I'm two inches shorter, can you custom hem it for me? And you were probably super keen to do that 'cause you really wanted their business. And now you run this system where you can't. Like, I actually can't, you can't make custom sizes, maybe. So this is really hard. I always tell people, you know, you don't expect that from the big companies. You don't expect some of these customization things and you have to start thinking about yourself as a big company. So that's a really hard hurdle for a lot of small business owners to kinda get over. One really great growth mechanism that I want you to think about is subscriptions, clubs, and memberships. I have one, May has one, cool kids have one. No, just kidding. (laughing) All the cool kids have one. Have you noticed this recurring theme? So going back to capitalizing on your best items, now that you have infrastructure in place, you might be able to send something out on a regular schedule and get that consistent income. So like we talked about with photography, signing people up for a year of photography instead of just one-off, memberships. This is a really great way of growing your business but also steadying the flow. A lot of us have businesses that have some kind of peak, whether it's weddings in the summer or products around Christmas or whatever. We all have bumps and valleys and doing a continual kind of subscription club is a great way to even that out. And May has a class about subscription clubs. All right, here's the last little thing to think about. Managing excess. This doesn't sound like a big deal, but it's a huge deal. Especially if you're a product-based business. You start to just get all this extra, all around you. So these actually were leftovers from when I was winding yarn. I'd have little bits of yarn left over that I couldn't use. And so if you can sell this excess, this is great. So I put them all into rainbow balls. And I would sell these. This is my extra that was just hanging around that was about to go to the trash can, but I was able to sell it. I know someone who sells bags who sells the scraps just at a craft fair. She put them on a table, whatever it is a pound, she's selling the scrap fabric that she thinks is just, like, waste, basically but quilters want to use it. May sells seconds. So if there are charms, at a craft fair, she'll put out seconds. So they're not things she wants to sell as firsts because they're not perfect, but they're seconds. And so there's a way to keep making money. Space Cadet, there's a theme here, sells Poor Plutos, what she calls them. So they're skeins that just didn't turn out right. There's nothing wrong with the yarn, they just didn't adhere to one of the standard color weight options that she's offering and so she sells them. So I really encourage you to think about a closed-loop system that lets you manage waste somehow. Maybe for photographers, I mean, I don't know that much about photography, but did you take a great photo but no client wants to buy it? That could be a stock photo. Like, if you were just on location and you snapped and extra photo with a barn in it, you can sell it as a stock photo to a website. These are just all ways to manage that waste. I think it's super important.