Growing revenue can make a profitability problem worse, not better. Arron Bennett explains how owners can diagnose the economics underneath growth, protect the engine that creates demand, and make profitability a deliberate choice.
Revenue can climb while cash gets tighter, margins shrink, and the owner ends up working harder for less. Arron Bennett explains why trying to outgrow a profitability problem usually magnifies it: when the economics are broken at $1 million, adding more sales can simply scale the damage.
Arron introduces a framework built around 60% gross margins, 15% for sales and marketing, and 15% for general and administrative costs. Those targets help owners look beneath a disappointing profit number and find the real constraint—whether it is pricing, an overloaded service package, inefficient delivery, poor marketing returns, or excess administrative cost.
One warning sign may look like a reason to celebrate: an exceptionally high close rate. Arron argues that closing 70% of opportunities can mean the market is willing to pay more. Rather than shocking customers or the sales team with a sudden leap, he recommends testing measured price increases, watching the close rate, and continuing until price, demand, and margin reach a healthier balance.
The conversation also challenges the instinct to cut marketing when profits disappoint. Arron shows why owners first need to understand customer acquisition cost, lifetime value, and payback period, then decide where cash can produce the strongest return. The goal is not growth at any cost, but a company that can reinvest deliberately without buying growth that drains cash or scaling operational chaos.
Want to learn more about Arron's work? Check out his website at https://www.bennettfinancials.com/.
Connect with Arron on LinkedIn at https://www.linkedin.com/in/arron-bennett/.
Think you'd be a great guest on the show? Apply at https://podcast.allies4me.com/podcast-guest/.
Want to learn more about Craig Andrews' work at allies4me? Check out his website at https://allies4me.com/.
Key Points with Timestamps
- [00:02:15] A life-threatening health crisis pushed Arron to rethink his path, travel the world, and ultimately build a different kind of financial-services firm.
- [00:07:54] A fractional CFO should act as a navigator—using current financial data to map the route to the owner’s goal and flag bottlenecks and risks along the way.
- [00:13:51] Growth only works when customer lifetime value exceeds acquisition cost by enough to support the payback period; otherwise, scaling can multiply losses.
- [00:16:15] Arron’s operating framework targets 60% gross margin, 15% for sales and marketing, and 15% for general and administrative costs.
- [00:19:08] When profit is weak, cutting sales and marketing can damage the revenue engine; inspect pricing, packaging, and delivery efficiency first.
- [00:21:49] A 70% close rate can signal that pricing is far too low. Raise prices gradually, watch demand, and let the sales team adapt instead of forcing a sudden leap.
- [00:25:23] Profitability is a choice made now—not a reward that automatically appears at a higher revenue level. Broken economics at $1 million usually remain broken at $10 million.
Transcript
[00:00:51] Craig Andrews: Today, we have Aaron Bennett with Bennett Financials. He is a firm that helps 1 million to 20 million U.S. businesses build stronger financial foundations through fractional CFO, tax, and exit planning.
[00:01:07] Craig Andrews: Aaron's work centers on a challenge that many owners know well. Revenue can grow while cash gets tighter. Margins leak, teams become exhausted, and broken pricing keeps growth from translating into owner wealth.
[00:01:25] Craig Andrews: One of the things I'm really fascinated about is he has something he calls the 60-15-15 standard, and I may have misquoted that, I'm sure he will set us right.
[00:01:34] Craig Andrews: But it gave me a quick overview on the green room, and…
[00:01:39] Craig Andrews: It sounds impossible, but he makes it possible, and he makes it real.
[00:01:45] Craig Andrews: It says, tune in. Aaron, welcome.
[00:01:48] Arron Bennett: Thanks, Greg. Good to be here.
[00:01:50] Craig Andrews: So, first we gotta… let's deal with the obvious. You're… you live in Tennessee with not your average Tennessee twang.
[00:01:57] Arron Bennett: Yeah, I'm from Australia originally. I've been here about 13 years now. I met my wife while traveling the world.
[00:02:05] Craig Andrews: Yeah, so let's… let's back up. What… what prompted that? Why… I mean, a lot of people travel the world, different people have different reasons. What was your reason?
[00:02:15] Arron Bennett: So, I got 3 blood clots, pneumonia, and pleurisine about died. And I was in construction at the time, sales, and helping companies grow, or a company grow. And I got the blood clots, and I'm in,
[00:02:32] Arron Bennett: in the hospital, and I'm like, what have I actually done with my life? I've been chained to a desk, I didn't enjoy it all that much. So I started to travel the world, I sold all my stuff.
[00:02:41] Arron Bennett: I broke up with the girl that I was with, and within 6 weeks, I had a, work visa to Canada, and then I just started hopping around the world, going to different places, getting, like, side hustles and jobs, just to have fun with it.
[00:02:58] Craig Andrews: Wow. So, the clots, arms, legs, lungs…
[00:03:05] Arron Bennett: I went down through, like, my abdomen, then came up, and it's lucky they went into my lungs, and they caught one, early enough where I was on Wolfarin, and it kind of helped through that. But they dropped down into my lungs. The guy that was in the next room, it went to his brain, stroked him out, and killed him. I got very lucky.
[00:03:24] Craig Andrews: Oh my goodness. What caused the clots?
[00:03:27] Arron Bennett: I don't know
[00:03:28] Arron Bennett: I've never had any more. I've never had them again. I've been on, obviously, traveling the world, tons of flights, and I've never… never had an issue. And they've not said that I've had a clotting issue, or anything like that, it was just a random incident.
[00:03:42] Arron Bennett: Woke up one day in pain, didn't sleep for 3 days, because I was in so much pain, and then finally went to the hospital.
[00:03:49] Craig Andrews: Oh my goodness.
[00:03:51] Craig Andrews: Thank goodness they found those, and…
[00:03:53] Craig Andrews: Thank goodness… not that it's great to have a clot in your lung, but thank goodness it stopped there.
[00:03:58] Arron Bennett: Yeah, that's kind of my thought as well. The one that was still moving was the main problem, but they managed to, like, use the wolf run and those types of things to move it, but it still dropped into the lung, thankfully.
[00:04:10] Craig Andrews: Wow.
[00:04:12] Craig Andrews: I, you know, when I was in the hospital, I had, I had some clots, which was common, but I also had a trach, and so the thing that they were trying to balance was getting enough blood thinner in my system to bust up the clots, but not so much that I didn't bleed out through my trach.
[00:04:31] Arron Bennett: That'd be rough. It's a balancing act.
[00:04:36] Craig Andrews: Yeah.
[00:04:38] Craig Andrews: Oh, my goodness. So, so you go off and you travel, so where all did you go? You mentioned Canada.
[00:04:43] Arron Bennett: China, I went to Canada, Japan, I went down… well, Canada, the US, because I met my wife through here, was going to go down into Brazil, but the flight company that I used took my money but didn't give me the tickets.
[00:04:59] Arron Bennett: So I didn't end up making it to South America, but made it through some of Central America, and I didn't end up in the European states, I ended up in Dubai, and those types of places.
[00:05:10] Craig Andrews: Where in Japan did you go?
[00:05:12] Arron Bennett: I've been to Tokyo, Kyoto, and those are the two main ones where I kind of stayed, and I just looked around.
[00:05:20] Craig Andrews: Did you go to any, like, small towns off the beaten path?
[00:05:23] Arron Bennett: Yeah, I spent a little bit of time, like, just taking a train, because I was by myself, and I would just jump on the train. And I didn't know where, really, I was going, but I just ended up outside, and I would just, like, poke around, look around, and see what I could find out there.
[00:05:38] Craig Andrews: Yeah, those are the best trips.
[00:05:41] Craig Andrews: Yeah, I lived… I lived in Japan, primarily in Western Japan, and then a little bit in Nagoya. Okay.
[00:05:49] Craig Andrews: And but yeah, it's fun getting off the train in one of these tiny little towns.
[00:05:55] Arron Bennett: And just going for a walk.
[00:05:57] Craig Andrews: Where the guide genes don't typically go.
[00:06:01] Arron Bennett: I, I would just go for walks around different places. They wouldn't speak English. I speak a little Japanese, but, like, only enough to be, like, polite.
[00:06:11] Arron Bennett: Had no idea half the time, so I'd just kind of look around and do what I could to see what was there.
[00:06:17] Craig Andrews: Yeah.
[00:06:18] Craig Andrews: Oh, that's awesome.
[00:06:20] Craig Andrews: That's awesome.
[00:06:21] Craig Andrews: So let's talk a little bit about what you do for companies.
[00:06:26] Arron Bennett: True.
[00:06:27] Craig Andrews: And, you know… Are you a CFO, a tax strategist, a bookkeeper? What CPA? What… what…
[00:06:37] Craig Andrews: How do you classify it?
[00:06:38] Arron Bennett: Not a CPA, yes to everything else.
[00:06:42] Arron Bennett: Okay. The way that I kind of look at a business is very, very different, and I'm sure you hear that all the time from most, is I started as a bookkeeping firm, and the first thing that happened was bookkeeping, and then I had a client come to me crying because they'd partnered with a CPA firm that was supposed to do tax planning.
[00:07:02] Arron Bennett: ultimately ended up doing tax prep. And she had a $17,000 tax bill.
[00:07:07] Arron Bennett: took food off of her table, and her children's… out of her children's mouth, effectively, because she had a $17,000 tax bill, couldn't necessarily pay it. So, that was the first step in my journey. I was like, okay, tax prep doesn't save anyone money, it doesn't help really all that much.
[00:07:23] Arron Bennett: From where I stood. So then I added tax planning in. And what I'd found when I was doing tax planning is the more net income you make.
[00:07:31] Arron Bennett: The bigger the strategies are, and the more savings that you can have, instead of just putting a dollar in and getting a 30 cent discount, you can put a dollar in and get a multiple of that dollar as an expense.
[00:07:41] Arron Bennett: So, I added CFO services over the top to help these companies grow and act as the navigator for their company. So I can do tax planning, I can do CFO services, those types of things, but…
[00:07:54] Arron Bennett: the way I see it is, is as the CFO, my job is to take all of the data, you're the captain of the ship, say, you're the CEO,
[00:08:00] Arron Bennett: My job is to take all the data, and if you say, Aaron, I want to go to $5 million, my job is to map that path with all of the data that we currently have. And then, on a monthly basis, look at it and go, okay.
[00:08:13] Arron Bennett: after I get a sign-off from you, okay, here's where we dropped the ball, this is the bottleneck we have, and, like, these are the risks coming, so here's the iceberg ahead. We're kind of off-path from our map. And then we've kind of got that north star as you forecast, and we're able to see and navigate the path forward. So I always kind of
[00:08:32] Arron Bennett: coined myself the navigator, and the owner as the… or the CEO as the captain of the ship.
[00:08:38] Craig Andrews: You know, it's… it's, it's funny. Whoever signs, whoever signs the check, they're the captain of the ship, regardless of their title.
[00:08:47] Arron Bennett: Exactly, that's kind of how I look at it, but it also allows for a different kind of position, because it's not just…
[00:08:56] Arron Bennett: protecting the balance sheet, and protecting the cash flow. It's… you become a growth partner. And when you're using leveraged tax planning strategies, I had a guy, $5 million net income, was supposed to pay $3.5 million in taxes. We paid a million and a bit into one structure, and he had $2 million worth of additional cash savings, not just tax, cash savings, paid minimal taxes.
[00:09:19] Arron Bennett: We use that $2 million to blow the company from $22 million to… we're going to about 40 to 42 million. So we can reinvest that money very, very aggressively to grow companies exponentially, or…
[00:09:33] Arron Bennett: Take that money off the table, put it into wealth management strategies that are going to make it so that when and if your biggest asset turns into a liability, you still have cash flow to the home.
[00:09:44] Craig Andrews: Yeah.
[00:09:45] Craig Andrews: Well, I liked when you said reinvest. It reminded me of, I was talking… I was attending a breakfast with some exit planners.
[00:09:53] Arron Bennett: Okay, yup.
[00:09:54] Craig Andrews: And one of the things they said is, be careful with the distributions.
[00:09:59] Craig Andrews: Because if you're eventually gonna sell the company, what that tells the buyers
[00:10:04] Craig Andrews: Is the stock market, or whatever, you consider to be a better investment than your own business?
[00:10:10] Arron Bennett: I have seen that, yes.
[00:10:11] Arron Bennett: we kind of need to balance it very, very carefully. Or, you put the money into investments in the company, and you just have it managed there, like, a company that… I just found out that X does a 6% rate of return, if you put… you hold money with them. So, we went and took a large amount of money and just put it over there in the company's name, and they're getting 6% rates of return, so we can then…
[00:10:33] Arron Bennett: Take that money whenever we want, because it's not really in the stock market, but we're able to utilize that very, very effectively if you've just got cash lying around.
[00:10:42] Craig Andrews: Yeah.
[00:10:43] Craig Andrews: Yeah. Wouldn't it be nice to be Apple, where you have, like… where are they now? Like, $100 billion? Last I heard, it was, like, $100 billion.
[00:10:51] Arron Bennett: Something like that. I don't keep up with that side of things very much, honestly.
[00:10:56] Craig Andrews: But, yeah. But no, I guess the point of that is…
[00:11:02] Craig Andrews: you know, if I use the example of Apple, you know, right now, anybody that's been following the cost of RAM knows that the price of RAM has gone through the roof, and you'll see that reflected in the new Apple's, you know, the new Mac Studio that they just announced.
[00:11:16] Arron Bennett: Yep.
[00:11:17] Craig Andrews: But the benefit of having that, you know, they have a supply problem.
[00:11:21] Craig Andrews: And so they're throwing some of that $100 billion At the supply chain.
[00:11:27] Craig Andrews: To build capacity, because they know if they do that, they can sell more computers, and they can make more money.
[00:11:33] Craig Andrews: Now, they're doing that on a scale that you and I aren't doing, but it seems like those principles still apply.
[00:11:39] Craig Andrews: at… You know, even the $1 million business.
[00:11:43] Arron Bennett: For the AI side of things, but it's very, very important to get economies of scale and utilize AI, so making sure that you have that is super important right now.
[00:11:53] Craig Andrews: But also just having the cash laying around so you can make investments to facilitate growth, whether it's AI or something else.
[00:12:02] Arron Bennett: Yeah, and that's what we kind of look at. If you can save $100,000 on taxes without deploying that much cash, or $300,000 of cash.
[00:12:10] Arron Bennett: Well, that's extra employees. That's extra marketing expenses. That's these extra things that you can reinvest into the company, and cash flow that you can deploy to speed up your growth.
[00:12:22] Arron Bennett: So if you know what your sales and marketing metrics are, and you know that you can throw an extra $300,000, or $200,000, let's say, because it's 100 and something to invest.
[00:12:32] Arron Bennett: And it's like, okay, we now have $200,000 to deploy, is it people?
[00:12:36] Arron Bennett: Is it marketing and sales?
[00:12:38] Arron Bennett: Well, what's the goal? Are we looking to…
[00:12:40] Arron Bennett: streamline ops, because we need more operational efficiency, or have we got such a good front engine that you put that $200 in, and now it's going to make you a million dollars, because you're getting a 5X rate of return? So you can kind of run forward with that, and you make the decision based on then, and then the cash comes in, you can then hire those people.
[00:13:00] Arron Bennett: And then you've got capacity to be able to continue to do that.
[00:13:02] Craig Andrews: Yeah.
[00:13:04] Craig Andrews: Well, and one of the things you said in there, you brushed through it quickly, you know, if you know your numbers.
[00:13:09] Arron Bennett: Yes.
[00:13:10] Craig Andrews: if you know your numbers, one of the questions I ask a lot of people, and I find very few people know this, I'll ask them, what is the lifetime value of a client? And technically, I mean the customer lifetime value.
[00:13:22] Arron Bennett: Yes.
[00:13:24] Craig Andrews: And I find so few people know that.
[00:13:27] Arron Bennett: I agree. I speak to that a lot. Like, LTV to CAC is another one that I really focus on, because you can just buy growth and scale chaos, depending upon what your LTV to CAC is.
[00:13:40] Craig Andrews: Okay, let's slow down, go through that, and put that in the language of normal people. What'd you just say?
[00:13:47] Arron Bennett: Customers… Cost a certain amount of money to acquire.
[00:13:51] Arron Bennett: If you spend $100,000 on marketing, and you acquire 5 customers, you have $50,000.
[00:13:59] Arron Bennett: Okay? Sorry, $20,000 per client that you bring in. If they make you, the company, $15,000 for the lifetime of however long they are before they churn out, or before the project is finished.
[00:14:14] Arron Bennett: You now lost $5,000 per customer. So you scale that exponentially, you're going to find that your profits shrink over time.
[00:14:22] Arron Bennett: Just as a matter of course. Now, if we do the other side of that, that lifetime value is 3 times the amount, or let's say 5 times in this example, costs you $20,000, they… lifetime value is $100,000, now you've got a 5 to 1 kind of ratio, and you're able to grow that company very, very quickly, because you know that every client's going to make you $100,000. Your profits aren't necessarily
[00:14:47] Arron Bennett: going to shrink.
[00:14:49] Arron Bennett: they will start to grow over time, depending on how quickly that payback period is. Like, if that $100,000 is 30 days.
[00:14:58] Arron Bennett: You can exponentially grow that. If the payback period of that $100,000 is 12 months, well, you're going to have to wait 12 months before you can kind of scale effectively, or you're going to have to pay for that growth for 12 months.
[00:15:12] Craig Andrews: Yeah.
[00:15:13] Craig Andrews: You know, there's, well, I took a class years ago, and they gave us a formula for maximum
[00:15:20] Craig Andrews: Maximum sustainable growth.
[00:15:22] Arron Bennett: Okay.
[00:15:23] Craig Andrews: And presented this scenario where, hey, you know, you have all this opportunity to grow, but if you don't do the math.
[00:15:33] Craig Andrews: you may find that you grow yourself out of business. You accelerate You accelerate bankruptcy.
[00:15:40] Arron Bennett: Yes, I've seen that.
[00:15:42] Craig Andrews: So, how does that… because that seems counterintuitive, because the average business owner
[00:15:47] Craig Andrews: Unless they know their numbers really well. Your average business… and let's just be honest, a lot of people that go off and start businesses, they're really good at something.
[00:15:55] Arron Bennett: Yes.
[00:15:56] Craig Andrews: And it's that that they're focused on, it's that that they're scaling, and for a lot of people, the numbers and the books are just kind of a nuisance.
[00:16:05] Arron Bennett: Yes.
[00:16:06] Craig Andrews: So it feels counterintuitive to say, well, hey, if I'm growing my business like mad, how am I losing?
[00:16:12] Craig Andrews: How does that play out?
[00:16:15] Arron Bennett: So, I have a framework, and I've broken it down to make it super simple for the business owner. For this exact reason.
[00:16:22] Arron Bennett: So, my framework is 60% gross margins, 15% into sales and marketing.
[00:16:29] Arron Bennett: 15% into general and administrative. So, basically, 60% margin, so 15% of your revenue into sales and marketing, and 15% of your revenue into general and administrative.
[00:16:41] Arron Bennett: Each one of those, if you aren't at that level, there is a core indicator of why, and it breaks down into 3 or 4 different decisions that you need to make.
[00:16:51] Arron Bennett: to be able to understand what the leading indicator of that is. Because traditionally, it's not a revenue problem, it's either a delivery.
[00:17:00] Arron Bennett: pricing, efficiency problem, if it's a COGS area. If it's sales and marketing, it's usually a return on investment problem, or it's a customer acquisition cost problem under the hood, and then general administrative is usually, like, too many admins because we've got upstream problems in cost of goods sold.
[00:17:18] Craig Andrews: So…
[00:17:19] Craig Andrews: I'll be honest, I mean, I find 15% generous on marketing. Sales and marketing. Yeah, that's kind of… that's a lot of my interest in.
[00:17:27] Craig Andrews: I mean, to give you an example, some of the folks that we deal with, we work with a lot of wealth management firms.
[00:17:35] Craig Andrews: A firm that's the average spend for a firm that has more than a quarter billion in assets under management.
[00:17:42] Craig Andrews: The average spend is 2.5% of revenue.
[00:17:45] Arron Bennett: Yeah.
[00:17:46] Arron Bennett: The one that I was talking about, taking from 22% to nearly 40, we're spending 15%.
[00:17:53] Arron Bennett: And it's a wealth management company.
[00:17:55] Craig Andrews: Okay.
[00:17:57] Craig Andrews: So you… so let's go back through those numbers. You took them from how much in revenue to how much?
[00:18:02] Arron Bennett: So they started at $300,000 in first year, and now, by the end of this year, we'll be at about $40,000 to $42 million in 4 years.
[00:18:11] Arron Bennett: Because we reinvested consistently, paid minimal taxes, we consistently reinvested into marketing at that 15% range. It actually… we got so clean with our data that we actually bumped it to 20%, and then Facebook broke.
[00:18:25] Arron Bennett: So now, the company is just acquiring cash too quickly, and now we're trying to work out other channels to market on, because we can't spend the money quick enough.
[00:18:33] Craig Andrews: Yeah.
[00:18:35] Arron Bennett: But that 15 is because so many people under-invest in marketing. That's why it's… it's what feeds the revenue engine, and if you're doing 2.5%,
[00:18:46] Arron Bennett: You're not going to grow at the rate needed over time, and then you're probably going to over-invest in cost of goods sold, so your margins are probably skewed, or your general and administrative is over-skewed, which means we've got efficiency problems under the hood.
[00:19:00] Craig Andrews: Henry Ford said those that would cut advertising to save money are like those that would stop their watch to save time.
[00:19:07] Arron Bennett: Yeah.
[00:19:08] Arron Bennett: That's what I've seen. I've seen a lot of, and this isn't to talk badly about anyone, I've seen a lot of people in the finance industry say, cut sales and marketing.
[00:19:19] Arron Bennett: But that's the thing that keeps the lights on, because you have new clients coming in, doing those types of things. We wanna… we wanna look at pricing first.
[00:19:26] Arron Bennett: You don't necessarily have to cut. You… the very first thing that you should always look at, and every time I go into a new business, the first thing I look at is pricing and packaging. Those are the first… those are the leading indicators of whether you've got a problem underneath the line.
[00:19:43] Craig Andrews: And what do you mean when you say packaging?
[00:19:45] Arron Bennett: So, packaging is… Well, there's actually 3. So, pricing, packaging, and efficiency. Packaging is, are we offering too much of a service?
[00:19:55] Arron Bennett: for what we're charging. So, say your… your close rate is 30-40%, because close rate is an indicator of what the market is going to allow you to price at. If you're at 70,
[00:20:07] Arron Bennett: That means you're way too cheap, and you need to put it between 30% to 40%. You need to increase your prices.
[00:20:13] Arron Bennett: And then the next thing is, is if you are at that 30-40% mark, well, are we off, and you're not at 60% margins?
[00:20:20] Arron Bennett: Are we offering too much service, or is there too much scope creep?
[00:20:25] Arron Bennett: that we need to deal with under the hood, or through there, and then once you kind of fix that, and you say, alright, I'm gonna cut this and this for the next 5 clients that you bring in the door, what happens? Do they churn quickly? Do we have no issue? They stay the same amount of time, we just
[00:20:42] Arron Bennett: Charge more, or charge the same amount for less. Think what happens at the grocery store. And then last one is efficiencies. If…
[00:20:49] Arron Bennett: The pricing is good, we're finding that everyone is operating effectively, and packaging is fine. We can't change the packaging, because people churn too quickly. The next is, is how do we automate as much as possible?
[00:21:01] Arron Bennett: And so those are the 3 steps that you have through your cost of goods sold that you can pinpoint very quickly and easily if you just break up your P&L into
[00:21:11] Arron Bennett: all of your delivery costs, sales and marketing, and general and administrative, and you just go through those steps. Close rate.
[00:21:18] Arron Bennett: Pricing, Packaging, efficiency. They all kind of work hand-in-hand.
[00:21:24] Craig Andrews: So let's talk about the close rate, and you gave the example that, you know, you're doing 70% close.
[00:21:30] Craig Andrews: I mean, the sales team is strutting at that point. They, they're feeling pretty awesome.
[00:21:37] Craig Andrews: And you're coming in and telling them, hey guys, we're gonna deliberately tank your closing rate.
[00:21:44] Craig Andrews: How do you navigate that conversation?
[00:21:47] Arron Bennett: Usually…
[00:21:49] Arron Bennett: Very delicately. We don't… so, I like to use Alex Hormozy's, structure. He's really, really clever in how he does things. At 70% close rate, he says, you're about 400% too cheap.
[00:22:04] Arron Bennett: And that's not saying we go out today and change the price by 400% tomorrow. You've got change management you've got to deal with. If I did that overnight, the sales team, they're going to tank, and it's going to be a problem. But you should raise the prices by 5%.
[00:22:19] Arron Bennett: What happens to the close rate? Does it change at all?
[00:22:22] Arron Bennett: Out of every… out of 10 clients that came on, whomever sold it.
[00:22:27] Arron Bennett: Did they close 3 or 4? Did they close 6?
[00:22:30] Arron Bennett: Well, if they close 6, we bump it again the next month. And we continue to walk it up until we get to, like, 40%.
[00:22:38] Arron Bennett: And the pricing, when you kind of do the analysis, the pricing and their commissions will kind of go hand in hand.
[00:22:45] Arron Bennett: slowly over time, it will start to come back, and they will make the commissions, the way that they were. And then the next phase of that is, is what you find, they'll solidify at 30-40%, because it's a new price, they will struggle mentally to get it where it needs to be.
[00:23:01] Arron Bennett: And then they'll start to get to 50% and 60% again, because it should be about 400%. Then you raise your prices again. But you do it slowly over time, and then you can kind of step it up. There's a lot of companies right now that have margins problems.
[00:23:16] Arron Bennett: Because they haven't raised their prices in 3 years.
[00:23:19] Arron Bennett: And they haven't walked that up over time, and it's causing them problems, because they still have the costs, cost more to acquire people, all the people internally have gotten raises, all of those types of things, and then they've got to turn around and try and do a 25% raise, rather than 5% a year for the last 5 years, say, or 4 years, it's 20%.
[00:23:39] Craig Andrews: Wow.
[00:23:41] Craig Andrews: Yeah, and I think that that's another one of those things that's really counterintuitive. You know, if you have exceptionally high closing rates, this is not a good sign.
[00:23:49] Arron Bennett: It means you're selling too cheap, the market can bear more.
[00:23:53] Craig Andrews: Yeah.
[00:23:53] Arron Bennett: And they do, traditionally. They will, traditionally, like, if you raise your prices a little bit, that's what the market can bear. And then slowly, but over time, it will increase as the sales team gets better. Or, if you're the person doing the sales, as that gets better.
[00:24:08] Arron Bennett: Because you will see that happen again and again and again, because what'll happen is, is your gross margin will compress over time, because your cost of delivery does go up every year if you're doing bonuses and raises.
[00:24:21] Craig Andrews: Yeah.
[00:24:22] Craig Andrews: Yeah. Well, and the reality of today is, healthcare. You know, the benefits… healthcare benefits are going up double digits.
[00:24:31] Arron Bennett: Yep.
[00:24:32] Arron Bennett: You know, I just saw that just recently, we did an analysis and a large forecast, and we had to bring in, about a 9%.
[00:24:40] Arron Bennett: average increase, over a 5-year period, so we had to bring that in every year, and the associated costs, as well as raises and everything else to keep the customer base happy. Well, the client, the employee base, sorry.
[00:24:53] Craig Andrews: Yeah.
[00:24:54] Craig Andrews: Yeah.
[00:24:56] Craig Andrews: Well, you know, there's some thinking, and I'll just be honest, I find myself
[00:25:02] Craig Andrews: falling victim to this, I'm like.
[00:25:04] Craig Andrews: well, hey, I'm not as profitable as I'd like to be right now. You know, let's say I'm at $1 million.
[00:25:10] Craig Andrews: I'm not as profitable as I'd like to be now.
[00:25:13] Craig Andrews: But I just need to grow revenue, and once I grow revenue, then I'll be able to grow profits. Is that…
[00:25:20] Craig Andrews: Is that good think? Is that bad think?
[00:25:23] Arron Bennett: My experience, and I've seen this time and time again, is profitability is a choice.
[00:25:28] Arron Bennett: If you are not profitable at 1 million.
[00:25:31] Arron Bennett: You're not gonna be profitable at 10.
[00:25:33] Arron Bennett: And I've had… I've worked with marketing companies, I've worked with sales companies, I've worked with those types of CEOs, and…
[00:25:40] Arron Bennett: they are always of the mindset that I can outgrow my profitability issues. But the problem is, is you spend the money that comes in on the next thing, and the next thing, on the next thing. So, that continues to happen. So it's a choice that you make today.
[00:25:56] Arron Bennett: to allow you to get to where you want to be. Now, I'm a Profit First professional. Mike Michalowic's book is phenomenal. It will automa- it will work you through a system that you can use based on your bank.
[00:26:08] Arron Bennett: It's just an envelope system, so it's super, super easy for business owners to kind of work through, but it becomes a choice. His methodology is sales minus profit equals expenses.
[00:26:20] Arron Bennett: That's the mindset that you should be taking to this, not, I'm just gonna grow, and eventually money's going to appear. All of the companies that I've rapidly grown.
[00:26:29] Arron Bennett: and are hyper-profitable. More money than they can handle, have all, at $300,000, had a good amount of money.
[00:26:36] Arron Bennett: And… at $22 million, had a ton of money as well. They were all highly profitable people.
[00:26:43] Craig Andrews: Yeah.
[00:26:44] Craig Andrews: Going back to the financial advisor, or wealth management example.
[00:26:50] Craig Andrews: Kim Fisher with Fisher Investments has publicly said he spends 6%
[00:26:54] Craig Andrews: of top-line revenue and marketing. The latest estimates, he's a private company, but the latest estimates are that he's spending $265 million a year on marketing.
[00:27:05] Arron Bennett: Yeah. As you get higher, you won't need as much unless you have, like, a… the next problem that you'll face, and this is what happened in the investment firm, is we can't spend the money quick enough.
[00:27:16] Arron Bennett: Right. Facebook breaks, Google breaks, brand positioning, you just eventually get to a place where you've outspent, and you can't hire quick enough
[00:27:26] Arron Bennett: the right hires that can close and aren't just gonna cost you money, and then if you throw more than, I think it's, 15%, don't quote me on this, I was talking to someone recently, they were like, if you throw more than… increase your budget on Facebook by 15%, your ads have diminishing rates of return, and your cost per book call goes up.
[00:27:44] Arron Bennett: So you're going to have, like, brakes on either side of that that you slowly gotta walk in to make it so that it will come together. So as you get bigger, and as you work that whole engine, it will just come down as a matter of course, because you can't spend quick enough.
[00:27:58] Craig Andrews: Yeah.
[00:28:01] Craig Andrews: Aaron, I think we could go for another hour. I really do. But I know we both have meetings coming up.
[00:28:08] Arron Bennett: Cool.
[00:28:08] Craig Andrews: Aaron, this has been delightful. How can folks reach you?
[00:28:13] Arron Bennett: Sure. So, we do a full analysis of a person's business for free. So, we do a leak check first, just to show you where the profits are, how much we can potentially save you on taxes. We do that in 20 minutes. So, you can go to, Bennett Financials, with an S.com.
[00:28:27] Arron Bennett: And just go for the leak check, and then the next phase of that is, is we do a scale-ready assessment, which
[00:28:33] Arron Bennett: Enterprise value? How much is your business actually worth?
[00:28:37] Arron Bennett: Free tax plan, and a full analysis of your business, looking at your data, putting it all together so that you can kind of see what you need to do to grow the business, and or you can work with us on it, or you can take it away and do it yourself.
[00:28:49] Craig Andrews: And Bennett has two N's and two T's, and Financials has an S.
[00:28:54] Arron Bennett: Correct.
[00:28:55] Craig Andrews: Well, hey, thanks for coming on Layers and Legacies.
[00:28:58] Arron Bennett: No worries. Thanks, Craig. Appreciate being here.
