The reality of having a product business, or having a product arm of your business, is profitability has to be the answer to everything.

I’m not talking about getting rid of people who genuinely help you do the job well.

I’m talking about profit optimisation within the company and within your own personal life.

Let me give you an example.

Very recently (as in, just this weekend passed), I moved back to South Australia from my Melbourne CBD penthouse apartment. I’m currently sleeping on the floor of a tiny office in my family’s house.

Not only is this super smart from a money perspective – my personal costs, previously funded by the business are basically zero – but from a happiness perspective, I’m significantly happier living in the country.

Now, is sleeping on the floor a long-term solution? Absolutely not. I don’t recommend it, although it is good for your back.

But what is has allowed me to do is increase the profitability of the business by 75% with one decision. Because even with the cost of renting (or buying a property in South Australia), my costs have been cut significantly.

The business used to pay for a really lavish lifestyle for me and you know what? That was a really important part of my business journey and the success I’ve had. Sometimes you have to have the thing to know that you don’t want the thing.

But I’ve realised that once you reach a certain level of success and comfort, the lavishness is just a way to get rid of good money because it makes you feel uncomfortable. And that’s exactly what I’ve been doing the past six months.

And this is just on the personal lifestyle side of profit optimisation.

The internal side of the business is much more complicated and is more about engineering than anything you’ve ever done before. In a consulting and coaching business, it’s pretty straightforward to optimise profit.

In a product business, it’s a hell of lot of work because there are so many factors at play:

  • Your COGs on your product
  • Your operating expenses
  • The average order value of your business
  • Your advertising spend to acquire customers
  • The retention rate of your customers
  • The lifetime value of a customer

And really, this is what you should be focusing on in 2021. Because where there is more profitability in your company, there is more room to solve problems, make investments and grow.

Listen to this podcast I was featured in talking about this very same topic here: