I love the show The Mentalist. Classic 90’s-00’s procedural. Case of the week with a former con-man “psychic” using his skills to catch the bad guys.

Now. Regardless of your thoughts on the legitimacy of psychics, in the show he uses tricks to convince people by either influencing them, reading subtle tells, or applying broad statements that feel personal.

If I were to pretend to be psychic I’d start by telling you some very specific things about your business… that aren’t actually that unique.

I’d close my eyes tightly and raise my hands. From behind my eyelids I’d appear to be getting.. getting… A VISION!

You stare nonplused.

Yes. yes. It’s coming in clearer now. My head tilts back as if I’m listening. No, no that’s not it, I turn away. Wait. No there’s something else. Yes, here’s it is….

You’re growing, oh wow are you growing. It’s beautiful but… but you’re sad. No. Stressed. Confused.

You squint, you’re intrigued but suspicious.

You’re growing but… you’re not making more. It’s harder in fact.

Yes, your bank account, I can’t make it out but it’s… 1, 2, 3…. 5 digits. Flashes of 6. I can’t pin it down for some reason… OH… that’s it, it’s changing. Constantly. But… it’s not going up. And…. Oh…. I see.

You’re leaning in now. HOW IS HE DOING THIS? you think.

I’d open my eyes. I’d look right at you. And I’d say,

“I have good news. I can help…”

…and suddenly there’s a venmo QR code for payment.

Keep your money. This isn’t a shake down. I’m going to tell you what it is right now, for free. Now, maybe this isn’t your specific issue and if so, let’s talk, but this is true so often that if it’s not valuable now… it will be.

Let’s talk about the 3 killers of profits.

No no no. That can’t be right. I track this every month and know my costs to the penny!

Ok ok. It’s not EVERY month but I’ve got a good idea. I ran the numbers!

Fine. I didn’t run the numbers. I sketched it out back of the napkin style.

Whatever, I asked ChatGPT how much I should charge to make sure I made money and I know that if I charge twice what it costs, I make money.

It’s ok. This is a safe place. And you did your best. But we can do better.

Here’s why you probably aren’t as profitable as you think you are:

The calculation is not a hard one, but it’s easy to not catch everything or make overly optimistic assumptions. A LOT more can go into this than you’d think. And often when looking at your P&L to see the ACTUAL cost of goods or services you think, “that can’t be right.” It’s not what you mapped out originally. So it must be wrong. So you stop looking at it because, what’s the point it’s not accurate.

Except.

It is.

You’ve listened to all the marketing podcasts, set up the ClickFunnels account, taken the copy writing course, and are RIPPING away at Facebook ads.

You are CRUSHING a gorgeous 1:7 CAC/LTV ratio and are dumping money into the money machine!

And look at those numbers! Volume! Conversion! Up and to the RIGHT, BABY!

But you never seem to have cash despite these great margins and steady growth. WTF?

You’re cash cycle sucks.

Specifically your payback period (we’ll go into a lot more details about other cash cycle issues another time).

You calculated an LTV properly, it’s LIFETIME value, right?

Yep. And you keep customers on average 2-3 years! So while that customer returns you $500 per month for 24 months bringing in a total of $12,000… Your payback on the $1700 cac is over 3 months.

Meaning. You put in $3500 and got two clients for $1000. Then next month you spend $7000 and get four clients earning a total of $3000 - $2000 from this months new clients and $1000 from month 2 of last months new clients.

You have a positive CAC to LTV.

But your spend every month is $3500 vs $1000 in revenue. $7000 spend vs $2000 in revenue. And every month you grow and add to the spend it gets worse.

Now yes, over time, those will stack and if you stop spending or if you spend the same or less it will catch up. But that’s not a very cash efficient model so it’s hard to see the gains manifest into take home profits for quite some time.

This is the easy one… everyone thinks it’s obvious. And yet. I still see it.
Over. and over.

It’s easy to see those sales happening, see that revenue going up, and when faced with decisions assume, “yeah, we can afford that”.

And you probably can.

But it’s quietly chewing up your profitability.

Additional saas tools, another VA or offshore contractor, additional team members which of course add more seats/users to your software.

Office space - although less common these days.

Professional services, coaches, it’s all “investment”, right?

And don’t get me wrong, a lot of these are super valuable. But you have to make sure that overhead as a % of revenue holds or goes down as you grow. Most of the time the issue is just simply, nobody was looking at the numbers.

If you can manage to these goals to get profitable and improve your cash conversion cycle, you’ll start seeing a meaningful change - without any additional growth.

That bank account will start climbing and you’ll have more to invest back in OR take home.

Hopefully this gets you on your way. Even if you aren’t expressing this pain point to the extreme painted at the top, there’s still a lot of benefit to improving these things in your business.

Apply it to your specific situation and I know you’ll see results. We’ve done this hundreds of times.

And if you’d like some help, reach out and we’ll help tailor a plan to your situation for getting you better cash flow, deeper cash reserves, and more distributions coming home.

Stay profitable out there,

Chase “Psychic Hotline” Spenst