Recapture & Reallocate
A Revenue Enhancer for Freelancers, Coaches, Solopreneurs, & Creatives
Author’s Note: This is my take of an exercise I learned about from Nic Peterson.1
If you’re a freelancer, coach, solopreneur, or creative experiencing a consistent monthly revenue shortfall, your instinct is probably to try to make more money.
There is a much more efficient path to more effortlessly boosting your bottom line in much less time and with far less risk.
(BTW, if you prefer to watch a video of this whole process, scroll to the bottom of this post. I share it there.)
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How to Optimize These Insights
Be receptive. Take notes. Ask questions and share reflections in the comments. Check out the resources listed at the end of this article. But the most significant force multiplier for getting you closer to what you want is to apply these insights.
The Situation
When you feel pinched or lacking in your personal financial position, your instinct is to make more money by working more and harder.
As a business owner, when you’re in a revenue dip, you double down on your marketing efforts or start creating, marketing, and selling new offers. Both approaches take much more time, attention, money, and effort.
In either case, your ROI (return on investment) on doing more is far less than if you prune your expenses and optimize your revenue system’s reliability.
How to Recapture Revenue
Audit your personal expenses and activities. Prune unused or underused expenses, app subscriptions, streaming services, etc.
Audit your business expenses and activities. Eliminate all unnecessary costs and activities and raise the floor on the essential elements of your business revenue systems. (This is detailed in The Coaching Business Prescription.)
Example of Recapture of Personal Revenue
Here’s what happened the first time my wife and I audited our basic personal expenses.
We discovered that we spend:
$260/month on coffee ($10/day, six days/week)
$260/month on dining out every month ($60/week)
$100/month on wine
$200/month on books and craft supplies
$200/month on entertainment (streaming services, lifestyle apps, etc.).
Total discretionary spending expenses: $1020/month.
Rather than go into full austerity mode, we reduced our spending on these expenditures by half.
Total recaptured: $510/month ($6120/year)
Results of Reallocation of Personal Revenue
Reducing our discretionary spending by half increased our bottom line and enhanced our experience. Coffee, dining out, and wine dates are more special, and shopping and entertainment are more intentional and enjoyable.
Our annual savings allowed us to fund our primary solvable problem™, something that we really wanted to get in life (see Dan’s book, Rigging the Game). The revenue we recaptured that year paid for our two-week beach vacation.
Example of Recapture of Business Revenue
The recapture of revenue in your business is amplified twice. First, you save a ton of time, attention, money, and effort that would have gone into trying harder to sell existing offers (or creating new ones).
Second, if you have prospects that would genuinely benefit from your offer but can’t afford it, you can work through a recapture with them, and they can reallocate that revenue into enrolling in your program or product.
Here’s what happened the first time I applied the recapture process to my business.
Revenue: $4K/month (gross)
Hours spent: 80+/week
Total expenses: $1800/month (software, services, subscriptions)
Profit Margin: 55%
Total expenses after recapture: $900/ month
Amount recaptured: $900/month ($10,800/year)
Cool, huh? But then look at the additional savings in time, money, and effort
The Math
The additional sales necessary to increase my business revenue by the amount recaptured would be $1636/month (savings/margin).
That’s $19,636 annually.
Raising revenue through sales means taking on more risk and takes an enormous amount of time, attention, and effort.
Recapturing $19,636/year required no risk and just an hour of time, attention, and effort. Think about the risk, time, attention, and effort that would go into raising $19,636/year in sales!
An additional benefit is that pruning all the unnecessary and under-performing software, services, and subscriptions from my revenue-generating system increases that system’s reliability, which further increases my revenue without any additional work.
Click here to learn more about system reliability.
Click here to grab my handbook that teaches the complete process for optimizing your business revenue-generating system so you not only increase revenue even more but also save time and effort and reduce risk.
1 Year After Recapture & Reallocation
Here are the numbers for my business one year after my initial recapture and reallocate.
Revenue: $9K/month (gross)
Hours spent: 20/week
Total expenses: $1400/month (software, services, subscriptions)
Profit Margin: 84%
When my business revenue reached $5K/month, I reallocated some of my savings into advertising, which catalyzed my revenue growth to $9K/month (a 700% ROI).
Additionally, I reduced the hours I worked in my business and increased my profit margin, significantly amplifying my revenue.
Go Further
What’s your biggest lesson or question from this training? Contribute to the conversation by leaving it in the comments.
I learned how to recapture and reallocate revenue to get closer to what I want in life in Dan Nicholson’s book, Rigging the Game. I learned additional force multipliers from Nic Peterson in his book, Bumpers, and in content that he shares in the Guardian Academy Substack.
You can grab Rigging the Game and Bumpers in the Creative on Purpose Bookstore. (You can also grab my book, The Coaching Business Prescription, for $1).
Let’s Keep the Conversation Going
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I go through the recapture and reallocate process live and provide several bonus insights in this video.
Or click here to tune in to this Creative on Purpose podcast episode.
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Scott, your article and analysis are very insightful. It's the perfect reminder that every business needs to frequently evaluate every line item in their P&L for cost savings. So many expenses "creep up" with time that they go unnoticed!
I like your reference to your margin. As your recurring expenses are reduced, your margin improves, leveraging your profits. Margin is a key Lever a business should work to improve constantly!
I look forward to learning more from your references and other books, too!
Thank you for sharing!
David
Thank you, Scott. This explanation is clear and offer a sequence for work that enables me to follow it.