😮‍💨 (Finally) master your numbers

The Progress Report | February 18, 2025

Here's a number that should keep you up at night: 82% of businesses fail because of cash flow issues.

Just ask Marie Forleo. At seven figures, she was living the entrepreneur's dream—or, she would be if she wasn’t two weeks from missing payroll.

WEEKLY INSIGHT

Forleo's wake-up call came when she couldn’t afford to take a client meeting. This isn’t metaphorical, either: she literally couldn’t afford it. Seven-figure revenue and a packed calendar—but she was nearly broke.

After digging into the numbers, she uncovered a painful truth: her highest-paying clients were bleeding her dry. They demanded custom everything, constant revisions, and ate up 80% of her team's time. All while generating just 30% of her revenue.

What’s worse is that taking on customized projects meant money went out months before it came in. She was essentially financing her clients' businesses with her own cash flow.

It’s the classic leaky bucket: Getting so focused on pouring water in the top that we fail to notice what’s coming out the bottom.

In Forleo’s case, the fix wasn't making more money. It was plugging the leaks:

• Standardizing offerings (no more custom work)

• Requiring upfront payment (no more accidental financing)

• Firing clients who wouldn't adapt

As a result, profit jumped from 3% to 30% within 90 days. Oh, and she had the best sleep of her life.

INTENT TO ACTION

Here’s how you can find your own leaks:

1. Map the flow of your money (30 minutes) 

Use a tool like Wave or Float to visualize:

• When money leaves (payroll, expenses, contractor payments)

• When money comes in (like, actually hits your account)

• The gap between the two

This could be done with a simple Google Sheet, too. The key is seeing the pattern.

2. Find your time sinks (1 hour)

For your three best clients:

• List every task you did for them this month

• Find out who worked on their account

• Calculate each person’s total hours × hourly rate

• Compare against what the client paid

This is the most time-consuming step, but also gives you the greatest data. If you want your data to be more than an estimate, run a time-tracking sprint using tools like Toggl or Clockify.

3. Fix the leaks

Tackle your leaks one at a time, prioritizing by cash flow impact.

If it's late payments:

• Set up recurring billing (using something like Stripe or PayPal Business)

• Switch to 50% upfront, 50% upon delivery; it creates more friction in your sales process, but it’s worth it to minimize unpaid work

• Automate payment reminders

If it's scope creep:

• Create three fixed service tiers

• Document what's included (and what's extra)

• If you want to offer a custom tier, price it 2x higher than standard tiers

If it's unpredictable cash flow:

• Move retainer clients to annual prepay (10% discount)

• Shift project clients to milestone-based billing

• Build a 60-day cash buffer

A business that bleeds cash will eventually bleed out, no matter how impressive your revenue looks.

Next week: How to scale without creating new leaks, burning yourself out, or starting to hate your business. It’ll be a fun one.

See you then.

PS: Your Weekly Challenge 

Pick one leak to fix this week. Just one. Tell us what you chose and why—and how you’re going to solve it.