Tending Profit
SMH: if I hear the word "maximize" one more time...
As I gear up to publish the next zine series, The Radical Business Owner’s Guide to Profit (soon! soon!), what’s become clear is that we’re not all that clear about what we’re talking about when we talk about profit. Most often, we mean a substance that demands exploitation— something to maximize, a silky liner for owner pockets.
Instead, I’m interested in exploring non-exploitative profit, which begs the question, what does that even mean?
My thesis is that profit is a form of care. In other words a non-exploitative profit has concerns— maintenance, care, future sustainability— separate from the production of individual wealth and infinite growth. So, we need profit, but not because it’s important to just make (more and more) money.
Profit supports taking time off and providing paid leave. It is a key to paying yourself.
I pretty much experience the common call to “maximize profits” as sustained, incoherent yelling; like, on one level it’s just such an unhelpful, dumb strategy. More to the point, maximizing profits requires exploitation.
Unlike the maximizers, I really don’t want to give the impression that any of this is particularly easy, otherwise everyone would have easy breezy profitable businesses, and that’s just not the case.
Exploitation is easy.
While care is not difficult, care is against the grain of the larger system, which means friction and challenges.
I received notes from many of you in response to my writing about getting paid and taking time off and caring for your people; folks that are working on it and not there yet. This is far from exhaustive collection, but here’s a handful of ideas for tending to profit:
Almost 100% of the time the answer isn’t to work harder.
The answer is not adding a new offering or revenue stream, not piling on more clients, not making more Instagram reels.
Though sometimes it is more sales. Thoughtful business builders will go through periods of investing in foundation, operations, quality of service, and then move into a period of growing revenue or sales from there— the equivalent of a field put to a season of nutrient fixing cover crops to prepare for seeding future plants.
But again, more sales isn’t about hustling harder, instead it looks like clarifying positioning or implementing a sales system or doubling down on exquisite client care.
( Literally never is the answer “create passive revenue” or “just sell a workbook.” )
( Maybe ) the answer is to raise prices.
Raising prices, if expenses otherwise stay about the same, increases margin. Voila! Instant profit!
Lol, if only it were so simple.
Raising prices without also thinking about quality, operations, positioning, etc… is to design for extractive profits— this is how one builds an $18K life coach training that’s just a bunch of stale videos— in other words, while some of you are certainly undercharging for the value you are already delivering, raising prices just to make more without rigorously working on delivering a high quality of value is extractive by definition.
Shrinkflation doesn’t just pertain to lighter cereal boxes, it’s also something that happens with services if we’re not careful, where we keep increasing prices without attending to quality and value.
On the other hand, it’s good to check where you’re over-delivering. Trimming over-delivery can feel like removing value, when really, done thoughtfully, the result is increased effectiveness. I’m thinking about a recentish conversation with a coach friend about whether she needed to continue taking session notes for her clients. She’d been spending lots of time organizing and rewriting carefully taken notes as a deliverable. This was onerous and unsustainable, but she was worried that if she stopped that her clients would feel they weren’t receiving enough from her. When we talked it through, it became clear that nixing the deliverable would increase focus for deep listening and astute coaching, and give her a bunch of time back for other types of value creation. If clients wanted written documentation of their meeting, she could offer transcription.
Non-extractive profits come from being more effective not from just escalating prices till someone blinks.
Sometimes price increases are also about moving up into a different market: serving larger more complex businesses instead of solo-practioners, say.
wrote a fantastic 3 part series about raising prices in her own retail business. Must reads for brick and mortar folks, but also lots of wisdom for the rest of us: Part 1 on the head game of price increases, Part 2 on anchor pricing, Part 3 on charging for something that used to be free.She lays out the math of selling fewer things to make more money and it’s so helpful to see concrete examples of those numbers: a helpful antidote to the common fear that increasing price will suddenly dry up sales.
Replace before adding.
Adding more clients without tending to legacy clients squeezes profits over time. These are the folks that have been with you awhile that are on old rates, old structures and processes. You can keep legacy clients! Just make sure they’re not grandfathered forever. Moving into a revenue growth phase is a good inflection point for looking at your spread.
Face difficult decisions.
Hard truth time: The most consistent barrier in the businesses I see that chronically struggle with profit is one or a sequence of tough decisions that aren’t being made. Things like payroll costs that are too high, a beloved client that no longer aligns, a chaotic business partner that needs to be held accountable, or a whole location that needs to close.
Sometimes whatever that decision is will truly feel impossible, or require too much change, believe me, I. get. it. You’ll either experience a deus ex machina intervention (an employee quits, an illness, a pandemic), or the alternative is usually closure.
Access to capital.
Another hard truth: access to capital is the other consistent barrier, and access to capital is heavily influenced by proximity to social privilege.
Capitalism isn’t called capitalism because money, capital, exists; the -ism describes a system where capital is deployed to create more capital for individual gain. Capital itself— by which I mean a pile of resources that supports investment, outside the norm of day-to-day business flows— is closer to neutral with the ism removed, and often necessary. Capital still exists in a participatory economic system and in anarchist economics, it just flows counter to individual hoarding or lines of privilege.
In our current system access to capital moves along lines of power and privilege: it’s still white men who receive a disproportionate amount of investment. And so there are many, many businesses that are helmed by women, queers, BIPOC that are undercapitalized.
Debt is a hole that must be replaced with future profits; an undercapitalized business will often take on debt in the absence of other options, which will chronically squeeze profits.
You can’t move all the financial levers at once.
I know literally nothing about sound mixing or audio engineering, so if I accidentally fell through a portal one day and found myself plopped in front of a mixing board in a recording studio, I am certain my first impulse would be to gleefully push all those little levers up as high as possible at the same time because it would feel satisfying and fun to do so. Meanwhile, the person who actually understands sound design silently clenches behind me.
I’ve been recently witnessing some of our clients graduating from the “all the buttons!” impulse, to finely calibrating a little bass here, a little back up vocal there; in other words, considering the order and sequence of their decisions and adjustments. The skill is to realize that the intricate system of a business (a business is, among other things, a repeatable process which makes money), where myriad of choices influence the flow of resources, is served by knowledge and experience about which levers to move when.
Holy shit, witnessing this shift is one of my favorite parts of my job. Like any wisdom, there’s knowledge and principles to pick up, but the finesse comes from experience. It ain’t easy, but if you’re still in the “wonder what this button does” zone, know you can get there too.