You’re Measuring Success With the Wrong Number
It’s 11:00 PM on a Tuesday. You’re sitting in your home office in Grand Ledge, staring at your laptop screen while everyone else in Michigan is asleep. The spreadsheet in front of you says you did $2 million in revenue this year. You remember when $2 million felt like the finish line. Like the number that would mean you “made it.”
But here’s what the spreadsheet doesn’t show: You felt more financially secure when you were doing $500,000. You’re working 70-hour weeks. Your bank account doesn’t match the revenue. And somewhere between $500K and $2M, you stopped being a business owner and became the most expensive employee in your own company.
If this hits close to home, you’re not alone. I talk to service business owners every week who tell me the same story. Revenue went up. Hours worked went up. Stress went up. But profit margins? Profit stayed flat or went down. And nobody can figure out why because everyone’s measuring success with revenue instead of the number that actually matters.
Here’s the ideology shift that changes everything: What if your business doesn’t have a revenue problem at all? What if you’re solving for the wrong variable?
Most small business consultants will tell you to get more customers, run more ads, generate more leads. They’re measuring success by how much money passes through your hands. But that’s like measuring a doctor’s success by how many patients walk through the door instead of how many patients actually get better. The metric sounds impressive until you realize it tells you nothing about whether the business actually works.
The One Number Every Thriving Service Business Tracks
I’m Ryan Herrst, a Certified Profit Advisor and author of “Profit Foundation.” I help service business owners earning $250,000 to $5 million find six figures in hidden profit without spending another dollar on marketing. My background isn’t in business school theory. It’s in healthcare and systematic business optimization. I look at businesses the way a nurse looks at vital signs. Most consultants are checking pulse and calling it good. I’m looking at the numbers that actually tell you if the patient is healthy or just staying alive.
Through my work with service businesses across the country, I’ve observed a pattern that most owners miss completely. The businesses that thrive, the ones where the owner actually takes home money and doesn’t work themselves to death, are tracking a completely different number than the businesses that struggle. They’re not asking “how much revenue did we generate?” They’re asking “how much profit did each person on our team create?”
I call this your Return on People. It’s the ultimate measure of whether your business is built on a foundation that works or built on you working harder every year to make the same money. Revenue per employee tells you how busy people are. Profit per employee tells you how much value they’re actually creating. One number measures activity. The other measures results. And when you start tracking the right number, everything else starts making sense.
The mathematical relationship is straightforward:
$$\text{Profit Per Employee} = \frac{\text{Net Income}}{\text{Full-Time Equivalent Employees}}$$
According to U.S. Bureau of Labor Statistics data, service businesses that optimize this metric consistently outperform their competitors by significant margins. The difference between a service business that survives and one that thrives isn’t about working harder or getting more leads. It’s about understanding this single metric and what it reveals about where your profit is leaking out faster than it’s coming in.
What Your Return on People Actually Tells You
When I work with a business owner who’s frustrated because revenue is up but profit is flat, the first thing I do is calculate their profit per employee. Not revenue per employee. Profit per employee. And here’s what I’ve seen across hundreds of conversations: The number reveals everything about why they’re stuck.
Let me paint you three pictures of what this looks like in the real world.
Picture One: The $1.5M Service Business with Six Employees
This owner came to me exhausted. Revenue was climbing. He’d added two people in the past year. But his take-home pay went down. When we looked at profit per employee, we found he was generating about $18,000 in net profit per person. That’s below what he was paying some of his team members. He was literally losing money on every additional person he hired, which meant growth was making him poorer, not richer.
The problem wasn’t that he needed more revenue. The problem was that his pricing was three years out of date, his service delivery was inefficient, and he was doing $40-per-hour work that could be systematized. Every new person he added just spread those problems across more people. More revenue, same broken system, worse results.
Picture Two: The $800K Solo Operator with Three Part-Time Helpers
This owner was the opposite. She was terrified to grow because she’d “tried hiring before and it didn’t work.” When we calculated her profit per employee, she was generating $65,000 per person, which is healthy. But here’s what the number revealed: She was personally doing all the high-value work and treating her team like assistants instead of contributors. Her business couldn’t grow because she was the ceiling.
The problem wasn’t that she couldn’t afford to hire. The problem was that she’d built a business model where she was irreplaceable, which meant she’d never have time freedom and couldn’t scale beyond her personal capacity. Her profit per employee was good, but only because she was the engine doing the profitable work. Take her out, and the number collapses.
Picture Three: The $3M Firm with 12 Employees
This owner looked successful on paper. Strong revenue. Growing team. But when we ran the numbers, profit per employee came out to $32,000. That’s not terrible, but it should have been double that given their pricing and market position. We started digging into where the profit was going, and we found three massive leaks.
First, vendor bloat. They had seven different software subscriptions doing overlapping things, two insurance policies that covered the same risks, and a marketing agency charging $4,000 per month for work that generated zero measurable results. That’s $75,000 in annual waste that went straight to the bottom line when we cut it.
Second, underpricing. Their pricing structure hadn’t been updated in four years despite cost of goods, labor, and overhead all climbing 30% in that time. They’d given themselves a pay cut every year without realizing it. A 15% price increase across their service packages added $180,000 to profit with zero customer complaints.
Third, inefficient delivery. Their team was duplicating work, missing handoffs, and spending twice as long on projects as they should because nobody had documented how things should actually work. We built three standard operating procedures, and project completion time dropped 35%. Same team, same revenue, way more profit.
When we recalculated profit per employee six months later, it jumped to $71,000. Nothing changed except the systems. They didn’t work harder. They didn’t get more leads. They stopped the leaks and fixed the foundation. That’s the power of focusing on the right number.
The Three Stages of Profit Per Employee
Here’s what I’ve observed across every service business I’ve worked with. Your profit per employee tells you exactly which stage your business is in and what needs to happen next.
Stage One: Under $25,000 Profit Per Employee
If you’re here, your business is in crisis whether you realize it or not. You’re making enough to survive, but a single bad month could put you under. At this stage, you’re almost certainly dealing with at least two of these issues: outdated pricing that doesn’t cover your real costs, vendor expenses that have crept up without anyone noticing, inefficient operations where everything takes longer than it should, or a revenue mix where some of your services are actually losing money but you haven’t done the math to see it.
The solution at this stage isn’t more customers. It’s fixing the foundation. Cut the waste, raise the prices, streamline the operations. You’re pouring water into a bucket with holes in the bottom. Adding more water doesn’t help until you patch the holes.
Stage Two: $25,000 to $60,000 Profit Per Employee
If you’re here, your business is healthy but vulnerable. You’re making money. You can pay your bills. But you don’t have much margin for error, and you’re probably still working way more hours than you want to. This is the stage where most service business owners get stuck because the business is “good enough” to not feel urgent, but not good enough to give you the freedom you started the business to get.
At this stage, the opportunity is optimization. You’re not in crisis, but you’re leaving money on the table. Usually the wins come from bundling services into packages instead of billing hourly, implementing the 80/20 rule to focus on your most profitable customers and stop chasing everyone else, or building simple systems so work doesn’t depend entirely on you being involved in every detail.
Stage Three: Over $60,000 Profit Per Employee
If you’re here, you’ve built something that actually works. You’re outperforming most service businesses. You have margin. You have options. You can afford to invest in growth without gambling everything. This is where business stops feeling like survival and starts feeling like freedom.
The businesses I’ve seen at this level all have three things in common. They charge premium prices and don’t apologize for it because they deliver premium value. They have documented systems so quality doesn’t depend on one person’s heroic effort. And they’re ruthless about saying no to low-margin work that eats time without contributing to profit.
The Real Role of a Business Consultant in 2026
You’re reading this because you searched for “small business consultant” or something similar. So let me be direct about what you actually need from a consultant and what you don’t.
The business consulting industry has evolved significantly, but many consultants are still selling the same outdated approaches. According to research from SCORE, 82% of small businesses fail due to cash flow problems, not marketing problems. Yet most consultants still focus exclusively on revenue growth.
You don’t need someone to brainstorm ideas with you. You don’t need another strategy session where you walk away with a whiteboard full of possibilities and no clear next step. You don’t need cheerleading or motivation or someone to tell you to “think bigger.” You already work 60-plus hours a week. You’re not lacking ambition.
What you need is someone who can look at the vital signs of your business, identify where profit is leaking, and give you a clear plan to fix it. Not in six months. Not “eventually.” In the next 30 to 90 days. You need someone who understands that your problem isn’t motivation or mindset or lack of ideas. Your problem is that the business you’ve built has structural issues you can’t see from inside it.
The 5 Pillars That Actually Drive Profitability
Most consultants will talk about the “5 C’s of consulting” as some generic framework. But here’s what actually matters when you’re fixing profit leaks in a service business. I call them the 5 Pillars of Profitability, and every business I work with needs at least three of these optimized to move from surviving to thriving.
Cash Flow: This isn’t about having money in the bank today. It’s about knowing where your money is going to be 30, 60, 90 days from now so you’re not caught off guard when payroll hits and a big client payment is still two weeks out. Most service businesses run on hope instead of forecasts. Hope isn’t a strategy.
Cost Control: This is where most owners assume they’re already optimized because they “watch expenses carefully.” But watching and analyzing are different things. When’s the last time you actually audited every vendor to see if you’re still getting value? When’s the last time you compared insurance quotes or renegotiated contracts? This pillar alone usually generates $15,000 to $30,000 in annual savings within the first month.
Complexity Reduction: Every service you offer, every custom variation you agree to, every “small exception” you make for a customer adds complexity. Complexity kills profit. It makes training harder, quality inconsistent, and operations inefficient. The businesses that thrive ruthlessly eliminate low-margin complexity and double down on what actually drives profit.
Client Retention: It costs five to seven times more to acquire a new customer than to keep an existing one. Yet most service businesses spend all their energy chasing new customers and almost no energy on making sure current customers stick around. A 5% improvement in retention can increase profits by 25% to 95%. That’s not a typo.
Contribution Margin: This is fancy language for a simple question: After you pay the direct costs to deliver a service, how much is left over to cover your overhead and pay you? If you don’t know your contribution margin for each service you offer, you don’t actually know if you’re making money or just staying busy. Some of your services are subsidizing others, and you can’t see it without this number.
These aren’t theoretical frameworks. These are the actual places where profit hides in service businesses. Fix three of these five, and your profit per employee jumps 30% to 50% without changing your marketing, your lead generation, or your sales process.
Here’s what fixing those structural issues actually looks like. It’s not complicated, but it does require looking at the places most business owners ignore because they’re not as exciting as landing the next big customer.
First, you need to know where your money is actually going. I mean really know, not guess. Most service business owners can tell me their revenue within 10%. But when I ask where their profit went, they look at me like I asked them to solve a calculus problem. We’re talking about a complete vendor audit, expense analysis, and understanding your true cost to deliver every service you offer. This usually uncovers $15,000 to $30,000 in annual waste within the first two weeks. That’s pure profit that goes straight to your pocket without adding a single task to your team’s workload.
These quick wins matter more than you think. In the current economic climate, business owners aren’t looking for abstract five-year visions. They’re looking for tangible progress they can see this month. Finding a $2,000 vendor saving this week builds momentum toward the $100,000 profit optimization over the next year. Small victories compound into transformation, but you need to see results fast enough to stay committed to the process.
Second, you need to understand which customers are making you money and which ones are costing you money. The 80/20 rule applies to service businesses harder than almost any other industry. 20% of your customers are generating 80% of your profit. But you’re spending equal time and energy on everyone, which means you’re subsidizing bad-fit customers with profits from good-fit customers. Fixing this isn’t about firing customers, though sometimes that’s exactly what needs to happen. It’s about getting very clear on who you serve best, what they value most, and structuring your business to do more of that and less of everything else.
Third, you need pricing that reflects reality, not history. If you set your prices three years ago and haven’t touched them since, you’ve given yourself a pay cut every year. Your costs went up. Your team’s wages went up. Your overhead went up. But your prices stayed the same, which means your profit margin got squeezed from every direction. Fixing this isn’t just about raising prices, though that’s usually part of it. It’s about understanding the real value you deliver and pricing based on that value instead of pricing based on what you think people will pay.
Fourth, you need to move away from billing by the hour and toward packaging your services. Hourly billing punishes you for getting faster and better at what you do. The more efficient you become, the less money you make. That’s backwards. Service businesses that package their offerings into outcome-based solutions typically see margins improve 10% to 30% without losing customers. Your customers don’t want to buy hours. They want to buy results. Start selling what they actually want.
Fifth, you need basic systems so your business doesn’t collapse when someone is sick or you take a vacation. I’m not talking about complicated enterprise software or spending months building process documents. I’m talking about documenting the three to five critical processes that make your business run. How do you onboard a customer? How do you deliver your core service? How do you handle problems when they come up? If these only exist in your head, you don’t have a business. You have a job that requires you to show up every single day.
The Real Cost of Business Consulting: Investment vs. Expense
I know what you’re thinking right now. “This all sounds great, but what does a business consultant actually cost? Is $100 an hour reasonable? Can I even afford this?”
Here’s the truth that most consultants won’t tell you: If you’re thinking about consulting as an hourly expense, you’re asking the wrong question. An hourly rate is what you pay someone to do a task. A plumber charges hourly. A bookkeeper charges hourly. They complete the work, you pay the bill, and that’s the end of the transaction.
But a profit advisor isn’t completing a task. A profit advisor is building infrastructure that keeps generating returns long after the engagement ends. When we find $30,000 in vendor waste, that’s not a one-time savings. That’s $30,000 every single year for the life of your business. When we implement a pricing structure that adds 15% to your margins, that compounds as your revenue grows. When we build systems that give you back 10 hours per week, you’re not just saving time. You’re reclaiming your life.
So the question isn’t “what does this cost per hour?” The question is “how quickly does this investment pay for itself?” In most cases, the answer is 30 to 90 days. The profit we find in the first month covers the engagement. Everything after that is pure return. That’s not an expense. That’s self-funding infrastructure.
This is what fixing those structural issues actually looks like. Not your marketing. Not your lead generation. Not your sales process. Your foundation. Because all the marketing in the world won’t help if your business is built on a foundation that leaks profit faster than you can generate it.
Are You Ready to See What’s Actually Possible?
Here’s where I’m supposed to tell you to hire me. But before we get there, I need to know if you’re actually ready for what fixing this requires.
This only works for business owners who can’t go another day stuck where they are. If you’re comfortable with 70-hour weeks and profit margins that don’t match the revenue, this isn’t for you yet. If you’re okay with feeling like the most expensive employee in your own company, keep doing what you’re doing. But if you’re at the breaking point, if you’re tired of revenue growth that doesn’t translate to take-home pay, if you’re done sacrificing your life for a business that’s supposed to serve your life, then let’s have a conversation.
I run a diagnostic called the Pathway to Profit Assessment. It’s a 45-minute deep dive into your business where we calculate your profit per employee, identify where your money is leaking, and map out exactly what needs to happen in the next 90 days to fix it. This isn’t a sales call disguised as a consultation. It’s a real diagnostic. You’ll walk away with specific numbers, specific opportunities, and a clear picture of what’s possible when you stop chasing revenue and start capturing profit.
Here’s what makes this different from every other “free consultation” you’ve been offered. I’m going to challenge you. If you tell me you can’t raise prices, I’m going to ask why you’re undervaluing what you deliver. If you tell me you can’t cut expenses, I’m going to ask which expenses you’ve actually analyzed versus which ones you’re just assuming are necessary. If you tell me you don’t have time to work on systems, I’m going to ask how you’ll ever have time if you don’t build systems that give you time back.
This is coaching, not cheerleading. I’m standing for the business owner you’re capable of becoming, not accommodating the excuses that are keeping you stuck. That’s what caring actually looks like. Not making it comfortable to stay where you are, but challenging you to build something that actually serves your life instead of consuming it.
If you’re in Michigan and generating $250,000 to $5 million in annual revenue, I want to talk to you. Not because I need clients. Because I’m obsessed with this question: Why do most service business owners work so hard for profit margins that don’t match the effort? And every conversation I have gets me closer to understanding the patterns that separate businesses that thrive from businesses that just survive.
Schedule your free Pathway to Profit Assessment here
Stop working harder. Start keeping more.
About the Author
I’m Ryan Herrst, a Certified Profit Advisor and published author of “Profit Foundation.” I help service business owners in Michigan and across the country find six figures in hidden profit without spending another dollar on marketing. Based in Grand Ledge and working with businesses throughout the Lansing region and Mid-Michigan, I’ve seen firsthand how local service businesses struggle with the same profit challenges whether they’re in trades, healthcare, legal services, or restoration.
My philosophy is simple: Just because you can work 70-hour weeks doesn’t mean you should. I believe business should serve your life, not consume it. And I believe the difference between a business that survives and one that thrives is usually three to five decisions you haven’t made yet because you’ve been measuring success with the wrong number.
Contact: ryan@mediaaceadvisors.com | 517-955-2154 | www.mediaaceadvisors.com
My father taught me: “All because you can, doesn’t mean you should.” That applies to your business, too.