In this solo episode, Colie discusses how to calculate your profit margin, find your industry standard, and what to do with that information for 2023.
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Hello. Hello. Why? Yes, it is another solo episode. And today, guys, I woke up inspired to talk about money, but more specifically I wanna talk about profit margins. So a question to you. Do you know your own profit margin? I am gonna be really transparent here and say, although I know how to calculate a profit margin, I had no idea what a good profit margin was for my photography business until I hired bookkeepers.
And during one of our conversations, where they were going back through the previous year in order to clean up my books and reorganize my expenses, and they came at me with, Hey Colie, your profit margin is right above 50%. And that's great. That's where we wanna see it. . And it wasn't until like that moment, I think that I felt some validation like, oh, I must be doing something right,
But like more importantly, why did it take me almost seven years of being in business to know what a good goal was for my profit margin of my photography business? My profit margin as a photographer is gonna be very different than the profit margin of like a brick and mortar store.
Like they have inventory, they have costs of good sold that are way higher than what I have as a photographer. So, Please understand that while I am saying 50% is considered an acceptable or a great, I mean, I don't know what kind of scale we wanna do it on, but that is a good profit margin for photographers, that may not be the same as your industry.
Now, not only did my bookkeepers tell me that 50% was a good goal, I also looked it up on the PPA website and they also agree that 50% is a good profit margin. Okay, so I know I just threw this number out, 50% . And for those of you that don't know how to calculate your profit margin, [00:02:00] you're like, okay, Colie, what does that mean?
So guys, let's just start with 2022, because you are either going to file your taxes soon, or if you're a real go-getter, you might have already actually done it. What I want you to do is calculate the total revenue that you had in your business in 2022 and write that number down. And then I want you to write down and of course, add up all of your expenses and your costs, and I want you to write that number down.
Your profit margin is nothing more than your revenue minus your cost and then divide that number by your revenue in order to get a percentage. Now, like I said, 50% is considered a good profit margin. I hit above a 50% profit margin in 2021. I unfortunately did not hit above a 50% profit margin in 2022.
But what I am gonna tell you is I joined a high ticket Mastermind near the end of the year for this year. And paying all of that in full is what lowered my profit margin from above 50% to below 50%. I mean, I was still in the forties, guys, so I wasn't that far off, but one of the things that I would like to focus on for 2023, I don't need to make more money guys.
I will actually be happy if I make the same amount of money that I did in either 2021 or 2022, but what I do want to do in 2023 is protect my profit margin. I do wanna make sure that I am back above 50% and I, I mean, I, I actually wanna get above 50%. You guys know I love my gold stars. and unfortunately my current spending habits are probably gonna prevent me from hitting that.
So let me just talk about a few things that I'm doing differently this year than I have in the past. My goal for this year is to get audience growth. My [00:04:00] newsletter has not really grown in the last few years, and while the podcast is getting more listeners, it's not exactly growing at the rate that I would like.
I know from a business perspective that in order to sustain my business at its current levels, I do need to bring new people into my business. And so increasing my newsletter audience and increasing my podcast audience is how I am choosing to do this for 2023. Now how I am actually facilitating that growth, is through Facebook and Instagram ads, which of course is increasing my costs for the year.
So I haven't quite looked at my numbers for Q1 yet. Um, But I'm sure it's nowhere near 50% . I'm sure it's nowhere near 50% profit margin. Guys, um, running these ads, I am basically dumping money so that I can test audiences, so that I can test creatives, and you don't tend to see an immediate return on investment for that.
I'm gonna calculate my Q1 numbers soon, but I expect them to be very low. Now, what I do expect is now that I've done all of this testing and I think that I have a handle on what my audience considers to be good creative, what's getting clicks, what's bringing people over to the podcast, I do think that when I average my Q1 values with my Q2 values, then I am gonna get much closer to that 50% and that as the year goes, the more clients that I book, the more I spend on ads, I will get back to that 50%.
If you have not calculated your profit margin, do that, do that today so that you have a benchmark from 2022 that you can now use as you go forward in 2023. All right. That's it for this episode. See you next time.