When the reality is not all its cracked up to be!

When the reality is not all its cracked up to be!

When successful people aren’t what they seem!

One of the biggest reasons I see from other women when they are trying to build a business is a drop-in motivation and lack of energy and focus purely because they are comparing themselves to others and just don’t seem to be able to reach the dizzying heights of competitors that they seem constantly online.

Well, let me tell you something. Just this week I had an emergency call from the owner of a number of businesses. From the viewpoint of anybody looking in from the outside, this was a hugely successful person.  They had a couple of very high-profile businesses. They drove the latest top-of-the-range car. They were constantly away on holiday and being seen at all the best parties.

I met with them to find out what they needed and they showed me their cash flow statement. It takes quite a bit to shock me these days as I’ve seen just about it all but I have to admit on this occasion I was surprised. They certainly had me fooled. I knew the person (or at least thought I did) but the reality behind the facade of this high-flying business person with super successful businesses was that whilst they were turning over just short of £2 million the profits were just £15,000!   Yes, really!

I’ve written before about being very careful of believing the outside impression that can be created by others when the reality is a far cry from the truth.  This comparisonitis can be a killer.

Many women building their own businesses that I work with feel they are not successful whilst they are showing profits in excess of £15,000.  They would never even begin to compare their success with that of the business owners that I meet.  But in reality, there are just as successful.  What they don’t realise is that the cars, the holidays, the lifestyle etc are all being funded on credit.

Hopefully, I’ve given this particular business owner enough to work with to rectify the situation, but if you sit there at times wishing you could have the flash car when you pull up outside the school in your battered 13-year-old runaround, you wish you could have the holiday of a lifetime sitting on a beach sipping cocktails when all you get to do is take a long weekend on a camping trip, think again. Because you might just be in a better financial situation than that person you so aspire to be.

Remember, turnover is vanity, profit is sanity.

Stop.   Be thankful for what you have and keep building on that. Don’t compare yourself to others unless you have access to both your bank balance and theirs.

Turnover is vanity, profit is sanity

Turnover is vanity, profit is sanity

I have been catching up with the latest episodes of Dragon’s Den.  Whilst I appreciate the show is heavily edited, I am still amazed at the number of people who enter the Den without a clear understanding of their figures.

So many have no idea of the difference between turnover and profit.  The episode I have just finished showed a woman who was so proud of her £20,000 turnover but could not understand why the dragons were aghast when she said she had a negative figure for her gross profit.  She was questioned about her understanding of what gross profit was and she obviously did not have a clue.

Therefore, let’s clear up the key meaning of turnover, gross profit and net profit in case you are unsure.  And if after reading this you still don’t understand, please don’t bury your head and feel scared to ask for fear of looking stupid.  These figures are imperative to your business success so seek advice and explanation from your accountant.

Turnover:  This is simply the total amount of your sales income over a specified amount of time.  VAT is excluded from this figure if your business is VAT registered.

Turnover = income received from sales

Gross profit:  This is the money that is left from your turnover once you have deducted the direct cost of making your product or providing your service (such as raw materials) but not the general indirect running costs of the business (such as insurance, salaries etc).

Gross profit = turnover – direct costs

Net profit:  This is the money that is left once you deduct the indirect running costs of your business such as marketing, insurance, salaries etc from your gross profit.

Net profit = gross profit – indirect running costs


A simplified example:

Mary makes luxury cushions.  She sells her cushions at £50 each.  To make each cushion she needs to buy £7 worth of material, cotton, stuffing etc.  The running costs of her business for insurance, telephone, personal drawing, marketing etc are £1500 per month.

Over the last 12 months Mary sold 500 cushions.

Her turnover was £25,000 (500 x £50)

The direct cost of marking the cushions was £3,500 (500 x £7)

Her gross profit was £21,500 (£25,000 minus £3,500)

Her indirect costs were £18,000 (12 months x £1500)

Her net profit was £3,500 (£19,000 minus £18,000)

That’s it in a nutshell.  If you need any more help, pop on over to The Small Business Kit and drop me a line.