As a follow up to my blog post It's Not What You Make It's What You Keep, you'll hear a lot of the life coaches out there claiming to have "six-figure" businesses so I'd like to clarify this point so you have a better B.S. meter when you hear these claims and you'll know how to parse out the legitimate claims form the B.S.
The first thing you should know is that there is a vast difference between "top-line" revenues and "bottom-line" income.
On an income statement or a P&L (profit and loss statement), at the top you will see a line with your total revenues also known as total sales. This is your "top-line" (because it's on the top of the income statement). As I said in my previous article It's Not What You Make It's What You Keep, REVENUES - EXPENSES = INCOME, so even if you made $100,000 in sales at that big event, if you spent $20,000 on the meeting space. and $10,000 on food & beverage, plus your airfare to the far-off location and all your assistants cost you another $20k well your expenses just added up to $50,000. Your actual income just got halved to $50,000 about on par with the median salary in the U.S. from a corporate job, and you'll have to pay 15% self employment tax to boot.
So if you're going to want to really have a "six-figure" business, let's strategize on how to get INCOME of $100,000.
Well, how would you do that - what would your sales need to be to authentically have a "six-figure income"?
If you have margins of 30% (that's the percentage of each dollar in sales that you keep as income), then to have a six-figure business, you'll need to have NOT $100,000 in sales, but $300,000 since at 30% margins, you'll have $200,000 of expenses and keep as net income the $100,000 you didn't spend. Now that's a six-figure income.
One of the best ways to keep your expenses low is to automate your business. Code is a lot cheaper than people so anything you can automate saves you labor expense. You should also think about having a team of remote, technical specialists who can help you with design, SEO, and perhaps a virtual assistant. I'll talk about all those things in an upcoming blog entry.