“The only number that matters in business is profit,” a business book or two might say.
And if I were to impart a single, all-encompassing business rule into your thick skull it would be that.
But what should you do once you achieve profitability?
This depends on why you work.
If your goal is to spend less time at work, then here’s what you should be asking next: Which of my business processes are causing me to work more?
I was in a business lecture yesterday where the leader said, “Once transactions reach a certain dollar amount, we don’t allow credit cards.”
This is stupid.
Because the whole point of a credit card for me is to absorb headspace and time that would otherwise be wasted:
- checking the mailbox.
- depositing checks into the bank.
- following up with non-paying customers.
- worrying about when that check is going to make it to my mailbox in the first place.
Credit Card Transaction Fees Are Cheaper Than Doing the Work Myself!
I’ve spent more money on credit card transaction fees over the last 5 years than I’ve spent on my home’s mortgage.
But it’s also the same amount as I’d pay a low-wage, part-time worker to process all the checks that would have otherwise come to my mailbox.
Only I didn’t have to hire a freakin’ low-wage worker OR do the work!
My credit card processor does 99% of the work!
There are only 2 times I talk to customers about money:
- Pre-sales conversations.
- Up-sell conversations.
Credit Cards Have Changed My Business’ Products
Credit cards afford a couple of unique things that paper checks do not:
- They create headspace by absorbing business overhead. (no tracking down payments, no processing checks, no invoicing, etc.)
- They provide opportunities for recurring monthly billing.
Credit Cards gave me the freedom to:
- Switch to pre-paid hourly billing. Which, in-turn, helped me to get to pre-paid, recurring, monthly billing. “Set it and forget it.”
- Simplify my sales process.
- Exponentially speed up deal closings: I often collect money on the initial sales call!
Time Is Money
If you think processing checks is “free” or “better”, you are either block-headed or new to the game or you are working too hard.
Arguments For Using Checks
- I only collect a couple of checks per month, so it’s not a big deal.
This flawed thought process is a big deal.
What if I told you that you can continue doing that very same work, but that you would get paid 3x for it?
“Set it and forget it,” is a real thing, people! I do it. You do it. It’s as human as binge-watching Netflix!
Speaking of which, my family maintains a Hulu subscription that we never use.
Why? Because at $5.99/mo. the amount is trivial-enough, and my wife has an emotional connection to the color green.
I have a customer that is going on their 4th year on a recurring monthly product with me.
I have so far made 3x what I would have without recurring monthly billing, which is afforded by credit cards!
But the benefits aren’t simply explained by the numbers.
Think about this:
- What could you do with an extra hour a week that is currently spent processing checks?
- Or if you only process a few checks per month, how would your business change if your entire revenue was automatic?
- How many emails could you send to up-sell existing customers?
- Which of your service offerings could you convert to monthly recurring products?
- What would you do with the headspace afforded by freeing your time & tidying up your biz?
Ya know what I did when I created some headspace?
- I created products that people actually want to buy.
- I read marketing books & created sales opportunities for my biz.
- I spoke at meetups.
- I improved my sales pitch.
- I hired someone to do the day-to-day customer management.
- I freed my time so that I can be present at home with my family.
Metrics To Track With Credit Card Billing
As a business owner, your goal is creating a sustainable business.
Monthly recurring Credit Card billing makes all this possible.
You need to shift your thinking a bit with credit card billing.
The goal is lots of small transactions rather than a few big ones.
Today, about half of my business’ monthly income is recurring.
Metric 1: Number of Successful Payments
In a thriving business, your monthly successful payments is going up up up.
Metric 2: Average Revenue Per Customer
In the graphic above, you see a huge drop-off about 1/3 of the way through.
This drop-off represents two huge shifts in my business:
- I shrunk my team from 8 to 1.
- I switched selling recurring monthly memberships rather than pre-paid hourly billing.
Metric 3: Credit Card Transaction Fees
This might sound counter-intuitive, but you want your credit card transaction fees paid to increase every month.
Your credit card transaction fees will follow the exact same trendline as your monthly revenue. Pay more in fees, and you are making more money!
So why not track monthly revenue instead?
Because Monthly Revenue lies to the human brain. Our brains confuse “revenue” with “profit”.
Metric 4: Monthly Profit
Remember, revenue is not profit.
A realtor I know spent $1 million in advertising in a single year!
She was crushing it, closing deals left and right! And everyone assumed she was doing great.
Well, you can guess where this is going: She went bankcrupt!
She spent more than she brought in. Simple lesson, right?
(check out this book for further reading)
Metric 5: Billing and Cashflow-related Headaches
This was me 10 years ago:
Ya know what was likely in my backpack that day?
$10,000 in checks, that’s what!
I regularly carried months-worth of my own hard-earned check-based web-consulting WordPress-theme-building business revenue in my backpack.
Because I was stupid. And lazy. And hated going to the bank. And my kitten, Chewy, was dreadfully-needy.
Depositing checks was a headache. So was collecting them and following up with customers who never sent them.
Here’s the BEST METRIC TO TRACK HEADACHES as a FREELANCER: How long did it take to get paid?
How long does it take people to pay your invoices? I use Harvest for certain types of billing, and a quick glance shows me that most of my credit card invoices were paid in less than 1 day – that’s awesome!
Keep in mind that these are not automattic payments – for each of these payments, someone had to manually-enter a credit card. So yes I lost 3% of all the money, but I gained something more valuable: Zero headaches!!!
How many headaches are paper checks causing you?
How many lost opportunities are you giving up by running a paper check-based business?