Transcript: The Magic of Margins

Let’s talk about margin In your creative business. You know what margin is? You ever heard that term? You probably heard the term profit margin, right? You may not know exactly what it is, but you’ve heard the term, okay? That’s one kind of margin in your business. But there are other kinds and there are specific ways for you to grow margins in your business. And the reason that’s important is because happiness lives in the margins. Prosperity lives in the margins. Mental health lives in the margins, paying your bills and being relaxed and having the creative business, you’ve always wanted to have lives in the margins. So I want to give you a couple of big ways you can grow margin in your business and run the business you’ve always dreamed of. But first, let me define what margin is. Margin is the difference between inflow and outflow of anything.

Money, time, whatever it happens to be with money. Margin is the difference between the money you take in and the money that goes out. And the higher the margin, the more you take in, the less that goes out. That’s a positive margin. If you take in less than goes out, that’s a negative margin and obviously that’s bad. We don’t like that. So there are two big ways in any business that you need to build margins and you need to start right now and today the two big ways to grow margins are in your time and in your money, and there are specific ways that you can do this incrementally over time to make sure you have cushion in both of those things. And then those two things lead to a bonus margin that I’ll explain here at the end. So let’s start with time margins in your time, tell me if this sounds familiar.

I just can’t keep up. I have no free time. I’m always doing something in my business. I never feel like I’m being productive. I’m just exhausted all the time. I can’t relax. I’m taking clients that I probably wouldn’t have otherwise because I don’t have time to think strategically about my business or how I’m going to grow or how I’m going to go into new markets or how I’m going to find new customers. I just don’t have time. Does that sound familiar? Okay. The problem is in most businesses is that especially starting businesses, small creative businesses like the one that you probably have, the one that I have is we have this myth that we have to do everything in our business ourselves. I’ve done this, I did this for 20 years and it just wore me out and I never made the money I wanted to make in my businesses.

Even though I had good ideas and I had good customers, I couldn’t grow because I didn’t have time margin. So how do you build extra time into your schedule with your creative business? The biggest way, and it might sound counterintuitive at first, is to partner with somebody. You can build margin in your time by partnering with somebody, a business partner you might be saying to yourself right now, but Kev, if I take on a business partner, won’t that person take a big chunk of the money? Yeah, they will, they will, but I’ll address that here just a minute. Having a good business partner can instantly build margin into your time. Wewa Films, my company is, I have a business partner, Courtney. She’s a 50% business partner of Wewa Films. She owns half the business, she gets half the money, she owns half of everything, but I’ve never had more free time to focus on my business and to be creative and to be strategic than I have.

Since I’ve partnered with Courtney, she takes entire chunks of this business away from me that she just goes and handles. The beauty of a business partnership is that you can specialize. I do the things that I’m good at in this business. She does the things that she’s good in this business and we don’t have to do each other’s things. That’s the key to a good partner. Because of that, I’ve been able to focus on the more entrepreneurial things, finding new markets and dealing with customers and finding new customers and all of that stuff. She hates that stuff and she’s not any good at it, but what she can do is make a genius video and she knows about all the gear and she knows all the techy stuff. I know none of that stuff and I don’t have to. So we can specialize by having more time in our business life to focus on the things that we’re good at.

A couple of keys when you’re looking for a good business partner. One, you need someone who shares the vision of your business. Do they have the same sensibilities as you? Do they see this business going the same place? Do they want to have the same goals? Do they want to make the same money? You have to come to terms on that stuff. The most important thing about a business partner though is you need somebody who is good at the stuff you suck at and you need to be good at the stuff they suck at. If you have two people who are good at the same things and suck at the same things, that business partnership will fail. You will not get along because you both do the same things. Also, who’s doing all the stuff that both of you suck at? The answer no on answer, your business will go out of business.

So a really great way is to partner with someone. Now, you might be saying, well, hey, wait a minute, I’m a painter. I do that alone. I’m a musician. I write songs alone. Okay, fair enough. But there’s a all kind of stuff in your business that I know you don’t like to do and know you’re not good at and you’re trying to do that yourself, aren’t you? Every minute you spend doing that is time you could be spending doing the things you’re good at. It will improve the quality of your business. It will increase the efficiency of your business. It will grow if you partner and specialize. However, if you don’t want a partner, it’s just not in you to have a business partner. You can’t find somebody, no problem because it’s another great way to build time margin into your business and it is called hiring out.

Hiring out. I want you to take parts of your business that you suck at, that you hate, that you don’t want to do. Think about accounting, paperwork, contracting, taxes, all these things, web design, ss, e o, on your website. You probably aren’t any good at these things and even if you are, it’s not what you started your business to do. So think of all the things that you started your business to do. Focus on those. All the stuff you do not want to do in your business. There are people who are better than you that you can hire hourly. I’m not talking about bringing people on full time, I understand you’re just starting a business. You don’t have to do that. We all films, Courtney and I are the only ones who work on this all the time. We have, however, we have a bookkeeper, we have a tax professional.

Those are two different people, so we essentially have two bookkeeping people. I have someone who does graphic design for us and manages our website, does all the ss e o. I have a person working with me on business development. We have a post-production person. I have a whole team of people that we have grown over time and every one of those people just works for us based on the project, based on what we need. I don’t pay them full time. I pay them when I need them and because I do that, there are whole pieces of the business that I don’t have to think about and Courtney doesn’t have to think about. We’re delegating out those tasks and you’re saying, Kevin, I can’t afford an accountant. I can’t afford this. Okay, I understand when you’re first starting in that first year or so and you just are trying to get off the ground, you’re just trying to survive, okay, I’ll give you a little break, do a lot of that stuff yourself, but as soon as you can, you start getting that stuff to other people.

It’s never been easier with the gig economy and with people online. You can find anywhere. I’ve never met my bookkeeper in person ever. His name is Rob. He’s awesome. We love him, but I’ve never even, I don’t even know what he looks like with the internet. You have the entire globe full of experts out there that you can hire in little bits as you grow your business. That is time margin. See, here’s the thing though. When you say, I can’t pay for an accountant or a tax person or whatever and you do it on TurboTax, how much time do you do TurboTax every year? How much time does that take out of you? A lot is the answer. What if you had that time back to make another painting, to decorate another cake, to work on an interior design, to

Work on a video, a script to amazing? You do those things that you’re really good at. All that stuff is going to make you more money that then you can further farm out the stuff you don’t want to do. You got to build time margin. The second kind of margin, the one that everybody really wants to know about is money margin, having more money in the bank than you spend every month, okay, same sort of thing. Tell me if this sound familiar. I’m living paycheck to paycheck. I can’t find customers who will pay me enough for what I’m worth. I can’t accumulate money. I can’t build up my bank account. I can’t buy that new piece of gear because I don’t have the money. These are all valid concerns. I’ve been there for very long periods of time and so here’s how you do it.

The first thing is when you are looking for new customers or bigger customers is you have to raise your prices, right? You have to raise your prices so you have more margin on every job. You have more money left over at the end of every job than you do right now and you might’ve experienced, you go, I hear this a lot from creatives. Oh, well, the market I’m in right now, my customers barely want to pay what I’m charging right now. They’re certainly not going to pay me more, and that’s a fair point, but here’s the thing. When you keep bumping up against that, there are only two options for making more money in those situations. First, you might be in the wrong market. You might need completely different customers. Just because the customers you have right now won’t pay you doesn’t mean there are no customers that will pay you the extra money that your work is worth.

So you can build margin, you just have to go find them. That means you have to start working your social media differently. You have to go to different meetings. You have to just shake things up and meet different people that you don’t have right now, and that might even mean going completely out of the market and leaving the current one you have in the dust. It’s just not for you. You can’t build enough margin. The other thing is if you can’t build margin into your projects, you won’t do your best work. You’re actually not serving clients. You’re doing them a favor by pricing your work where you have enough margin to relax and do that extra round of edits and really pay close attention and put your heart and soul into it making the money you need. The other option is if you’re not making the money you want per job, and this one you might not want to hear, but you might need to increase the quality of your work.

Your work might not be at the level that can command the prices you need to run your business. Now, I’m not saying you should go out of business, you definitely should not quit, but I’m saying you should constant, don’t always blame the customer. Don’t always say, oh, well, they just don’t understand how great I am. That’s a bad habit. You should always be trying to increase your quality of your work and your skills that way you can be confident when you in and go, I have something of real value. You should pay this much. And by the way, in my experience, when you build a product that is super high quality and really, really good and you find the right customer, you don’t have to have that conversation with them. They will know and they will pay the money and that’s when you know you’ve hit on the right market is when they’re paying the money without any kind of argument.

You’re not having to go back and forth. They just pay it because they see the quality, they have the money, they will pay you so you have those margins. Another way to build margin into your money is to never go into debt for your business. Don’t use debt to grow your business. It is a booby trap. It is horrible. It will ruin your life. I’m here to tell you I’ve learned these lessons after 20 years of mistakes and going bankrupt in my first business and losing everything I had. It’s painful. Debt is a trap because debt offers you the myth or the idea, the illusion that you can grow your business faster than you would have otherwise. You can grow in a year because I’ll buy the gear and I’ll do all this stuff and I’ll upgrade all my stuff. I can do better work and get more customers in a shorter period of time than if I just slowly over time saved up money and then bought that new whatever it is I need or then upgraded my equipment or then did a better website.

It’s going to take longer for you to build your business with no debt, but it is worth doing. You need to extend the timeline. You think it’s going to take you to succeed in your business. If you are sitting around thinking, I’m going to start this business and then a year later I’m going to quit my day job and I’m going to be able to pay all my bills and have margin and not the case, it never goes like that. Businesses don’t actually grow fast, not good ones, not lasting ones. You might have a spurt of growth and then you get a bunch of debt and a bunch of payments, and then what happens if you don’t have a client for a few months? What happens if you don’t have a client for six months? What happens if you get sick? What happens if something happens in your life and you need to take a break from your business?

Well, guess what? The people you owe money to don’t care and they’re going to come looking for their payments and you better have ’em, and if you don’t have them, it is going to ruin your business. So extend your timeline in your mind. Say instead of the next year, what can I accomplish in the next five years? What can I accomplish in the next 10 years? If it took me seven years to get the gear that I want or the upgrade, would you be willing to spend the seven years of doing the work to save up the money? Would you should because that’s how lasting businesses grow. But the trade-off you get when you don’t go into debt is you don’t have that extra risk and that extra stress that comes along with always having to put money out. The other thing is remember margin inflow versus outflow.

When you borrow money, you’re paying the money back with an interest tied on top of it. Extra money. That person or that bank or that whatever it is, credit card is loaning you the money with interest, so they make money on their money, so now you’ve instantly paid more for that piece of gear or that upgrade or that whatever it is you need to do, you’re paying more than you would if you paid for it cash. That’s a terrible way to go in because now you instantly are eating your margin every single month and it never stops until you pay the whole thing off. Don’t do it. You might’ve heard people on YouTube or something. Real estate investors are really bad about this. They called it leverage. I’m going to get this mortgage and then I’m going to get at that interest rate and I’m going to take the equity out of that house and I’m going to leverage another loan over here to buy this other thing.

You might even heard of companies like Apple or Coke or Nike. They carry hundreds of millions of dollars in debt and they do grow their businesses and they are profitable and all that stuff. Okay, can you grow a business with debt? Yeah, but that’s not your business and that’s not my business. Those are big businesses who have teams of accountants and financial people that can manage that stuff and even then sometimes they fail, avoid debt at all costs. Another counterintuitive way to build margin in your money is to take on another stream of income. In other words, a job like a part-time job. Now, you might be saying, but I want to be a full-time creative. Well, yeah, I get that. I understand that, but I’m telling you, the most successful entrepreneurs, the most successful business people always have multiple streams of income. And so if that means you take a weekend job or you clean houses at night or whatever it is in the short term, that might be what you need to buy yourself financial margin.

So then slowly over time, you can take some of that money and put it onto time margin stuff. Accountants, bookkeepers, stuff like that. You can save up for your gear. You can save up for things and pay cash for them. By having that extra stream of income, it’s going to give you more peace of mind. It’s going to give you more margin in your money, and in the short term, it’s going to cost you time. Okay? Fair enough. But remember, we have long timelines here on this podcast and we are trying to build incrementally small little baby steps forward and then over time you can build that up. Some of the most successful entrepreneurs I know have multiple jobs, and I’m talking like millionaires and they have multiple projects going at any one time. They work multiple jobs. I have worked in a 10 year period in my life.

I worked three jobs for 10 years, three jobs, 10 years. Yes I did, but you know what it did? It built margin in my life. So now I don’t have to work as hard. I can be more strategic, but in the short term work like the dickens, but think in the long term, think about how you can build margins in every little aspect of your life. A last way to grow money margin is to invest your money smartly. Now, caveat, I am not an investment person and I am not an expert. I’m not a financial person. I’m not giving you advice. Whatever disclaimers need to be on the screen right now, I’m not doing that. But what I am telling you are there are some very safe places to put your money so that they grow without you having to do anything. One of my favorite is a high yield savings account, a high yield savings account.

You can go off and look this up online and find them. We use Ally Bank. Ally a l l y. Ally is not a sponsor of this program. I wish they were. If any of you know anybody at Ally, tell them I love you Ally, and I’d love you to be a sponsor. Companies like Ally offer high yield savings accounts. It’s exactly like the savings account you have at your local bank. It’s the same thing. It’s insured by the federal government up to $250,000. It’s not a scam. You put your money in a high yield savings account, and right now I know Ally with us, it’s like four and a quarter percent or something like that. Our money just sits there and grows. Now, the money you have sitting in your savings account with your local bank is probably not growing at all. If anything, it’s not growing at all.

So just moving it over to a high yield savings account, you’re growing at like 4%. You’re getting money. It’s margin in your money you don’t have to go work for. It’s also very safe. So I’m not talking about the stock market, I’m not talking about real estate investing. I’m talking about it’s a bank that just gives you a higher yield, so they call it on your money than if you put it in just any old regular old savings account. So that’s something to look into. Again, I’m not advising you, I’m just saying we do this at Wewa Films. It works out for us. I do this personally in my personal life, my wife and me, we do this. It is a good way to build financial margins into your work. The last way to build margin into your money is to spend less of it.

The two ways to build money margin are to make more of it or spend less of it, and if you do those two things at the same time, you build margin even faster. So avoiding debt is going to help you with that. Paying for everything. Cash is going to help you with that. But look around your life. There are plenty of apps out there that can help you track your expenses, and I’m talking like the little things. All this stuff adds up and cutting those things out are really going to help you save up that margin, and once you start to build that margin, it’s snowballs. You build a little money margin, now you have more money to go out and spend it on an accountant or to invest in your business or to buy a piece of gear that will then make you more money and you get more time back.

You hire out now you have more time. You have more time to do better quality work. You make more money, more money, more time, more money, more, more time. You start to build these margins up and now you’re running a business. Now you’re doing the work you really want to do and you’re just doing the parts of your business that you really, really love, which means going to have a better business. The bonus margin that comes from having money margin and time margin is emotional margin. It’s mental health margin from a guy who has been bankrupt and a guy who went into debt for his first business and paid way too much and I couldn’t service the debt. I couldn’t make the payments after a few years, and I slowly bled to death because I didn’t have the margins. Can I tell you, it is a miserable way to live your life.

When we started Wewa Films, we did it differently. We set it up so we had instant margins early on. We spend very little money out of the business. We also have other income streams. We also are very careful with how we’re spending. So we built margins, and I can’t tell you the mental health that comes along with that. I sleep better at night. I’m in a better mood. I think better about my business. I make better decisions. We make bad decisions when we are scared or we are desperate. If you are scared and desperate, you will start a negative spiral right on down to ruining your business. What you want to do is build these margins so you start a positive spiral up. Remember, take your time, give yourself a break, give yourself a longer period of time and start building those margins slowly over time because happiness is in the margins. You can do this. I love you.