You’ve invested all that effort to host your webinar or virtual summit. Your results were wonderfully successful. Yet after all the bills came in, your bank account does not reflect the great numbers you were looking at from the sales figures. What happened? After all, this was a virtual event. You had none of the expenses associated with a physical seminar or physically printing a book. Where did your money go and why wasn’t it as profitable as you expected?
Having done over 100 onsite profit and expense control consulting jobs to small business throughout the United States and Western Canada, I found that brick and mortar small business owners often overlook their overhead when doing job pricing and planning. When you jump to entrepreneurs, solopreneurs, and coaches, the problem is evident there too. The impact of ignoring or not being aware of your overhead is that you will make poor, if not outright bad, decisions.
While probably every solopreneur and entrepreneur believes that he can do everything himself, there is a cost to do-it-yourself. In business management circles, this is called “Opportunity Cost.” Basically, it comes down to what are you failing to do that could generate more money while you dabble in lower valued tasks that you could hire done for less than what you could generate with that time?
For instance, writers can be developing their next book while the accountant can handle their books. Small business owners can negotiate strategic marketing alliances while VAs (virtual assistants) can do all the typing and uploading content and images to the website.
While the above list is broken out into five categories for your ease of understanding. Technically, there are only two main categories of costs and expenses shown above:
While there are a variety of things that fall under overhead, the key difference between these two is whether you can attribute the line item directly to the sale of a specific product or service or, in this case, event. If so, it belongs under the cost of sales. If it tends to run year long regardless of the products and services, it falls under the overhead category. Now one item which I put under COS could be under overhead instead: advertising.
On this example, advertising is under COS because it assumes you will want to ramp up advertising specifically for this major event, i.e. your webinar or virtual summit. If on the other hand, you run advertising constantly merely changing the products and services emphasized, then your advertising belongs under Expenses as an overhead item.
Notice that just Commissions (usually 50% of the sale) and Tier 2 affiliate commissions (10% to 15%) could take up to 65% of the face amount of your sales if you rely on affiliates. Use PayPal and that could be another 2.9%. So just on these figures alone, you might end up with only 31.1% of your sales.
This is not at all bad. You are making money even though it may not be what you imagined it would be. More importantly, you are getting an email list of customers. People who have bought from you once are vastly more likely to buy from you again. Depending on your agreement, the next sale may have a smaller affiliate commission than the first one which means you make more money on the subsequent sales.
The key thing here is for you to be conscious of the costs and expenses (overhead) when planning your webinar or virtual summit so that you are realistic about how much you will net. Awareness of your cost of sales and your expenses enables you to manage so as to make a profit and not overspend. Remember, earning some profit far exceeds trying to cut corners and making none. “100% of nothing is nothing.”
Open your heart in selling,
John R. Aberle
P.S. To receive information regularly on how to develop and apply strategy to your small business, get your free e-Course, “9 Steps to Finding Prospects Who Want What You Provide” now.
Are Your Customers Able to Find You?
Does Passion Bring Success or Failure in Business?
Average Cost to a Small Business to Make a Sales Call
Why Keywords Are Alive and Well
12 Tools You Won’t Want to Live Without
Consistent Cash Flow Beats One-Time Huge Sale
Do You Want Your Emails Read?
SSL Checklist to Ensure Your Community Finds You