I spent two hours last week with a business owner who hasn't looked at client profitability in eight months.
Revenue is up 35%. Team is growing. Clients are happy.
But when we ran the numbers, two of her biggest clients were barely breaking even, and her fastest-growing service was operating at 8% margins.
She was working harder to make less money.
The Success Blindness Problem
In my experience coaching business owners between $2-5M: Success creates dangerous assumptions.
At $1M, I tell most owners to sell whatever they can. You just need through put but by $3M, you’ve got to start focusing on gross margin and profit.
The three deadly assumptions I see repeatedly:
Growing revenue = growing profit
Big clients = profitable clients
Busy = valuable
Why This Becomes Critical
Between $2-5M, your business becomes financially complex:
Multiple service lines with different cost structures
Team expenses that don't scale with revenue
Cash flow cycles that hide profit problems for months
The owners who break through develop systematic financial visibility. The ones who plateau keep flying blind until crisis forces them to look.
The Reality Check
Successful owners can answer these with confidence:
Which clients put money in my pocket vs. just keep me busy?
Which services are worth my time vs. just filling my calendar?
Where is money getting trapped in operations?
What can I actually afford to invest in growth?
Three Questions Right Now
Answer honestly:
Do you know your profit margin by client?
Could you rank your services from most to least profitable?
When did you last make a decision based on profitability data?
If you answered "I'm not sure" to any of these, you've found exactly where to start.
What's Next
Want to know where your profit blind spots are? Reply to this email ([email protected]) with your annual revenue. I'll send the 3 metrics that matter most for businesses your size.
-Alan
P.S. The owner I mentioned? After finding her blind spots, she raised prices on her best services and stopped accepting bad clients. Revenue stayed flat, profit up 40% with 15 fewer work hours weekly.
The data was there. She just needed to look systematically.