Are Your Business Numbers Normal How to Tell If You’re On Track

your listening to the Creative Mind Smart Money Podcast. And today's episode is our final one in our series, our little series of CFO, things that we really want to be looking at and fractional CFO, things that we really want to focus on. So let's dive in to all things benchmarking. Benchmarking is kind of like asking yourself, "How do I measure up?" So if you've ever looked at someone's post and saw that they had a six-figure month and immediately thought, "Okay, am I doing something wrong?" Benchmarking isn't about necessarily copying their success, but giving your numbers context so you know what's working and where to grow. And it can feel like a complicated process, but I'm going to break it down into something that's really manageable and easy to consume so that you understand what benchmarking actually is. Okay, we're talking real-world benchmarks, not just Internet Fluff, so that we can build a business that's actually profitable for us. So we're not just going on to threads and looking at someone that has an amazing success and being like, "Okay, I'm gonna copy what they did. We're talking about industry standard benchmarks." So when we ask ourselves what benchmarking is, the first thing that we want to talk about is what does benchmarking actually mean? So it is not, again, comparing your business to random strangers on Instagram or threads and being like, "Oh, hey, like Jimmy Bob made $5,000 last month. I should have made $5,000 last month. That is not what benchmarking is." It is about measuring your key numbers, which again, keep performance indicators that we're bringing over. I know you're like starting to see this full picture against relevant standards, if it is either industry averages or own goals, which usually when we're talking about benchmarking in this context because we are already measuring up against our own goals, we are benchmarking against industry averages. So it helps you to answer, "Is this normal?" Am I undercharging? And it can also help you to answer, "What should I focus on next?" Okay. So what are some financial KPIs that are worth benchmarking? Again, you're hearing that word, KPIs, and these are things that we kind of have to bring into the picture and really, really understand. So these do apply almost across all creative businesses similar to the KPI one, but these are ones that we want to benchmark. So again, we were looking last week at the Netprofit Margin. So when we look at the Netprofit Margin, we're benchmarking that across all of the industry. So for example, a good indicator that is social media managers, for example, let's say that the social media benchmark is a 60% Netprofit Margin and you're at 40%. We want to analyze that. Why are you at 40% and not at 60% like, where are we not meeting the bar? And then same thing with owners pay percentage. Again, these are all industry specific. So when we look at KPIs, a lot of the times when we're looking at our KPIs that we talked about in the last episode, those are against our personal goals, like our goals. These are against our industry averages. You're cost of goods percentage. So the cost of producing your work, contractors, prints costs, et cetera, like what is going into your work? You're operating expenses percentage. And these are all percentages just so you know. So cost of goods percentage, I mentioned, operating expense percentage. So again, if we're looking at the social media manager and the average they spend is 20% on expenses and we're spending 50%. We're looking at that and saying, okay, why do we spend 50% on operating expenses last month? Like how can we make that better? Client retention rate is another good one that's looking at worth benchmarking. Like what is the turn rate of or the retention rate really of your clients based on other people in your industry? And then of course your average client value. Again, based on other people in your industry, that's what we really want to look at is based on how other people are performing, how are we performing? And again, this is not a competition. It is not you saying, okay, they're making $5,000. Why am I not making $5,000? Because you might not be there yet. Everyone's story is different, right? It is an idea for us to understand if we need to be doing things differently. We could be more successful than that person. We could be a little less successful than that person. If $5,000 a month is all you want to make and you're not reaching or you've already reached that goal and that's not the industry standard, then that's not a problem. Again, this isn't us trying to be like, okay, you're not doing good enough. This is us trying to see where could we be doing better. And I want you to really understand that. So now that we've kind of talked about what benchmarking is, we want to talk about some industry benchmarks similar to what we did for KPIs to help you understand what you should be looking at. And this is just industry-specific, industry benchmarks, pulled off of industry benchmarking websites. There's websites that I can pull data off of to find out if you need to be doing things a little bit differently. So one of the first ones again is brand designers, copy artists, creative strategists, people in that kind of range. Your net profit margin is usually 30 to 50%. That means that you're doing really well in indicator that you're doing strong, like you have a strong profit margin. So 30% obviously low and 50% is a high end. Your cost of goods is under 20%, unless you have a lot of subcontracting going on. So that's your direct cost again, not necessarily your cost of goods, but like the direct costs. And then your average project value is usually about 2,500 to 10,000. So again, that's industry benchmarking. Revision's per project is about 2 to 3. If higher, there's likely a scope or communication issue. Maybe that's something you need to look at. And again, this is an industry standard. And effective hourly rates are about 100 to 200 plus if premium positioning. Now of course, that's hourly rate. That's not something that doesn't want to tell you and want to tell you to charge. You want to be pricing yourself based on your value, not on your hourly. I'm always someone who's about value based pricing. And we can actually talk about value based pricing if we want to, but another good industry that I work with a lot of is photographers and videographers. So again, your direct cost travel editing props, things like that is about 15 to 30%. Your net profit margin is about 20 to 40%. Average sale per client, depending on the niche of photography and videographies, is about 1,500 to 5,000. Turn around time is about 2 to 3 max for galleries and videos, which based on my own experience with my photographer, that's about what she had as well, that she's right in that industry benchmark. And then your upsell rate is about 20 to 40% of clients that purchase extras or albums. For product-based creatives who are maybe running a boutique, they have Etsy, they're makers, things like that. Your cost of goods percentage is about 30 to 45%. Net profit margin is about 10 to 20%. So that's after all your costs at the end of the day, you're taking home about 10 to 20%. Inventory turnover. So this is a number you want to look at to see how fast your inventory is going out the door, which is usually four to six times per year ideally. And that's the number again. These are a lot of numbers, like a high level numbers, but this is just stuff I'm trying to help you understand. Like, okay, this is the industry standard. Do you know these numbers yourself, right? Average order values, $40 to $150. And then shipping and packaging costs should not exceed 10 to 15% of revenue. If you have like a 20% shipping packaging cost, you have something that's going to be worth $50,000. Something that's going off somewhere, like you need to figure out how to like analyze those costs a little bit better, or you need to up your prices, right? So that's where I'm saying, like a lot of this, if you're looking at this and you are an Etsy maker, let's say you're listening to this episode right now and you're like, my shipping and packaging costs are like 20%. That's probably an indicator that you need to raise the prices on your products to cover more of that shipping cost, right? Then of course, we have course creators, coaches and digital educators. Profit margins are about 40 to 60% after I'd spent and delivery team completion rate 30 to 50% for courses. Obviously the higher equals better retention. The conversion rate at launch is about 2 to 5%, which is the industry average. We fund rate under 10% is ideal. And then upsell slash cross sell rate is about 20 to 30%. And then as well for social media managers, we have client retention, which is six plus month is stronger. Short equals a higher churner or burnout, cost of goods, subcontracting or scheduling tools like direct cost again 10 to 25%. Average monthly retainers about 800 to 3000, depending on platform volume and deliverables. Effective hourly rate is 75 to 150 plus for strategic social media managers. And so if you're above those, you're doing fantastic. The client ROI tracking. So benchmark engagement, girth, reach and conversion to clients, not just likes and then obviously client communication hours. So two to four hours per month max if more of this is a bandier scope issue. So again, those are all industry averages and those industries that you can kind of look at and really dig into to see if how do you how do I stack up? And if you don't stack up, don't think of it as like a man I'm doing terrible think of it as how do I improve my numbers? So I can stack up. And again, don't think of it as like a negative think of it as a positive. Okay, so if you're new or unique niche, your own progress is your best benchmark. Okay, so if you're someone who's feels like maybe you're not really very yet to benchmark against an industry, benchmark against yourself. What I want you to compare if you are very unique is this quarter versus last quarter. So look at your current quarter versus last quarter kind of look what change your average project profitability over time. So what is the average profitability there? And then your client value now versus what it was a year ago. So obviously benchmarking is not something you can do if you are just brand new. And so you kind of do over time because you again growth is a goal. It's not uniformity. And then of course when we benchmark, we want to do it without spiraling into this chain spiral. You don't want to be someone who's telling ourselves, "Hey, we're not good enough. We don't stack up. Don't compare revenue without comparing your expenses." Okay. So if you have, you know, $5,000 in revenue and you have a 20% expense and maybe someone else was $10,000 in revenue and they have 50% of expenses. So ask when you're looking at this and you're like, "Okay, well, I'm comparing industry standards. Ask yourself, do they have a team? Maybe they have a team and that's why their costs are different. Are they running extraordinary amounts of ads? What season are they in?" So again, like when you're thinking about the internet, industry average. Again, you're looking at that and asking yourself these questions and saying, okay, so that's why I don't check up because I'm not writing ads. I don't have a team. I'm not in the same season that they are. They're not growth season. Look at these numbers as inspiration, not imitation, not limitation. Look at them for inspiration and how you can grow your business. Because of course, this data is supposed to give you power to understand your business, but are not cosmetic or anxiety or stress, which is why sometimes you know, having someone who's like me, who's a fractional see if I look at that can also help you to not be stressed because if you're looking at these numbers and you're like, oh my gosh, like I'm doing terrible. Of course, you're going to look at that and think that in your head, but that's not the truth, right? Now, you're probably asking, okay, it's not that great. You've given me numbers. You've told me about benchmarking. You've told me I shouldn't spiral, but like, what do I even do with it? Like, what's the point of it? You want to use benchmarking to raise your prices for one thing. So if you have a lot of products and you're looking and you're seeing that someone else hasn't used your average as higher, use it to raise your prices, use it to cut costs. Maybe your average costs are higher than someone else's. Again, this is not saying you have to cut costs, but these are things you could use it to do. Shift your offer stack, you know, maybe you need to shift what you're offering so that it matches up a little bit more and then change how you're delivering services if you're hitting out your hourly limit, but not your profit. So as an example, if most social media managers are charging 1500 and you're at 700, but working 20 hours a month, it's time to repackage and get yourself up to that 1500 so that you can, you know, maybe have don't have to cut costs. Maybe you don't have to cut costs because you just need to raise prices. That's the power of benchmarking and how you can kind of utilize that. Okay. So benchmarking isn't about being behind. It's about getting aligned with what you want your business to do for you. If you would love to kind of get some assistance with benchmarking, please reach out to me again. Send me a DM, send me an email. Let's chat about it. Maybe you want to book a discovery call. We can talk about that too. Otherwise, if you love this episode and you found it really valuable, please leave a comment, like it, subscribe, share it on social media, tell your friends about it, get them to come listen to the podcast too because we would love to hear more people, see more people listening to the podcast. And of course, if you want more topics like this or you have ideas for topics, fill out the form in the description box below and discuss whatever topics you want that have to do with finances. Maybe you're creative and you're like, I've been craving hearing about this. Samantha, please help me understand it better. I would love to help you understand it better. Just tell me what you are kind of looking for. Otherwise, as always, I wish you the best week ever. We will see you next week. Farewell fellow travelers.