Low Profit Doesn't Lie - Episode 215

 I just bought the business from my now former partner. It was more than a few years ago, sometime in 2012. He had always managed the numbers. 

Now that was my job. I remember staring at them. Sales looked fine.

Pipeline was steady. It's kind of numbers you'd expect to feel good about. But the profit? There was barely anything left.

And that was my wake-up call. Because profit doesn't lie. It's like someone grabbing a bright yellow highlighter and dragging it across your P&L.

It doesn't hand you the answer. It doesn't explain the whole story. But it shows you exactly where to start looking.

And that's what we're going to talk about today. Why low profit isn't the problem. It's a signal that your business is pointing out what really needs your attention.

Welcome to the Buddy Entrepreneur Podcast. I'm Randy Bridges, business advisor, consultant, coach, and trusted partner to service-based business owners who are serious about performance, profit, and progress. This podcast exists to do one thing.

Help you solve the real problems that stall your growth, kill momentum, and burn out the very people who built your business. So let's get started, shall we? 

All right, all right. We are on episode 215 and today is Wednesday, September 3rd, 2025.

Today's episode is personal. For years, I thought low profit meant I had a sales problem. If I just got more deals, everything else would balance out and make it so much better.

But here's what I learned the hard way. But here's what I learned the hard way. Sales don't fix bad math.

All more sales do is pour water into a leaky bucket. And low profit, that's not really the problem. That's the highlighter circling the spot where the leak is.

So here's what I'm going to cover in today's episode. Why we misread profit and why I did too. The three most common root causes of low profit that I've seen in my business and with lots of clients.

We're going to cover a case study on uncovering the real issue behind low profit. And a framework you can use to help you start treating profit as the highlighter, not the villain. Let's dig in, shall we? I'll be honest.

For years, I thought profit was the thing I had to fix. The math didn't add up though. Clearly, I just needed more revenue.

So I'd push harder, work longer, chase the next deal, and I'd expect the numbers to improve. And surprisingly, they didn't. And that's when it hit me.

You know, profit wasn't the problem. It was the marker of what's happening. It's like a highlighter.

It doesn't give you the whole essay. But it drags a line right across the part you need to reread. And once you learn to see it that way, you stop blaming profit.

And you start paying attention to the places that are bleeding you dry. Now before I get into the list, let me frame this. Every business I've worked with, and even in my own business, profit struggles always boil down to one of a few core issues.

You may not recognize them right away. But once you do, the highlighter analogy will make perfect sense. Number one is pricing gaps.

I've done this myself. I underpriced jobs just to win them. And yeah, I got the sale, most of the time.

But by the time the work was done, I was exhausted and wondering why there was nothing left in the bank. Profit highlighted the problem. I wasn't charging enough to actually cover the work.

Number two, systems inefficiency. Another time, I had a delivery project that took twice as long as it should have. The team did their best and we didn't have a tight process.

That delay ate the margin alive. Profit made it obvious. The system was broken, not the sale.

And keep in mind, this is one of the reasons why I switched away from hourly pricing to fixed fee pricing. Because I could better control that margin and have more leeway without having to really dial in on exactly where my systems were efficient. I could improve them along the way.

And number three, misaligned spending. I'll admit it. I've thrown money at ads that brought in clients, but they weren't the right kind of clients.

Their lifetime value didn't cover the cost to even acquire them. And profit showed me the mismatch. The sales looked fine, but profit circled the truth.

Here's the bigger picture. Profit problems are never just about profit. They always point back to something deeper.

Whether it's your pricing, your systems, or your spending. And until you fix those, profit will keep circling the same spots over and over again, going right down the drain and you won't know where it's leading to. So let's talk about a mini case study that I have.

We'll call it, When Profit Highlighted a Pricing Gap. I worked with a client who was convinced that their profit problem was all about overhead. They were looking for ways to cut costs, trim expenses, and even lay off a team member.

When the owner and I dug into the numbers, the real issue jumped off the page. They weren't charging enough for their core service. Keep in mind, core services are the things that you do for everyone.

And so if you're not charging enough for it, it's going to leak all over every job you do. Now on paper, they had plenty of clients. Sales looked healthy.

But after we got into the delivery costs, there was barely anything left. Profit was highlighting the problem in bright yellow with red flags and everything else. This isn't an expense issue.

It's a pricing issue. So we rebuilt part of their pricing model. Part only.

We aligned it with the actual value delivered and the time invested. And we communicated those changes clearly to the clients. Now, a quick part of that story is that's the same thing I did in my own company when I transitioned away from hourly billing to fixed fee.

Of course, getting back to the client, they did lose a client or two in the process. But the ones that stayed, they were a much stronger fit. And more aligned with the value that my client's business delivered.

Something unexpected happened. I sat down with some of the clients of my client. And they quietly admitted to me, almost kind of with relief, that they thought my client's pricing had been too low before.

This new structure felt more competitive. And it reinforced why they chose my client in the first place. Superior service delivered consistently.

Now on the client side for my client, within 90 days, the margins improved by over 15%. And the client base was healthier, more loyal, and better aligned. The lesson? Profit wasn't broken.

It was showing us exactly where the leak was. Underpriced services. So let's work into a framework for profit as a highlighter for you.

And here's how I think about profit now. Step one, ask what section of my business is profit highlighting? Is it pointing towards pricing, delivery, overhead? And I'll add another one to that list. If you have different divisions, classes, silos, whatever you think about it, different types of service you're providing that are completely dissimilar from each other.

Make sure you're breaking it out by that class, silo, whatever you want to call it. Step two, trace through the likely culprits. Don't just cut costs.

Look at how the work is priced, delivered, and supported, and then make your decision. Step three, pair the lagging indicators, profit, with the leading ones. You know, when profit tells you something's off, it could be something like a cycle time, a cost per lead, and delivery hours.

Those will tell you where the real problem is. And step four, treat low profit like feedback, not failure. Because that's all it is, feedback written in yellow highlighter across your financials.

And here's why this matters to me. Profit, and this idea of using it as feedback, was the seed for two of my programs, the Profit Foundation's Accelerator and the Owner's Advisory Board. Both were built on the principle that profit comes first.

Profit isn't just a number, it's a lens you can use to spot leaks, fix systems, and build a foundation you can scale from. So when I say profit is the highlighter, I mean it. That's exactly how I developed these programs, by listening to what profit was trying to tell me in my own business, and in the business of my clients.

So as your quick self-check, here are three questions to ask yourself this week. Number one, is profit consistently low even when sales look fine? Are you more focused on cutting costs than finding root causes? And do you celebrate revenue without really checking the margins? Now if you answered yes to any of these, profit isn't your problem. Make it your highlighter for your business.

In closing reflection, profit doesn't lie. It's the highlighter your business uses to say, look here. It won't solve the problems for you, but it will certainly circle the spot where you need to dig.

So don't waste your energy blaming profit. Follow the highlight, fix the real issue, and watch what happens when your numbers start lining up with the effort you're putting in. I know once I did it in my own business, I felt so much better.

Now if you want help figuring out where profit is trying to point you, if you want help figuring out where the profit is trying to point you, start with the link in the show notes. Schedule your complimentary maximum business impact session. You and I will walk through what's working, what isn't, and where profit is highlighting your next step.

Remember, build it smart, run it clean, stay aligned. 

That's it for this episode. I hope you picked up some valuable insights and maybe even sparked a few new ideas.

If you want to keep the conversation going, or maybe even explore partnerships, don't hesitate to reach out. And hey, don't forget to subscribe, leave a review, and share this with someone who needs to hear it. The steps you take today could be the start of something big tomorrow.

For The Budding Entrepreneur, I wish you the best in your health, your wealth, your business, your family, everything about you. Take care, and we'll see you back here next week.