If you’re active in the online world and on social media, you’ll no doubt have come across a lot of talk about six-figure businesses. While building and running a six-figure business is a great achievement should all entrepreneurs be aiming for a six-figure online business? Should this be the ultimate goal for every business owner out there? In this post, I lift the lid on what it means to build and run and a six-figure business and help you decide whether it’s right for you.
Having worked on a six-figure business which reached seven figures when I was working with them, I know that running a business that turns over six figures requires a lot of work. And I believe that for a lot of entrepreneurs aiming for six figures is a very artificial goal. And one that I don’t think you should pursue for the wrong reasons.
Does ‘six figures’ refer to turnover or profit?
Firstly, it’s important to work out what people really mean when they talk about six-figure businesses. Are we looking at a turnover figure or a profit figure?
- Turnover, just to clarify, is the amount that your business makes in total before you take off any of your costs.
- Your profit, on the other hand, is what you get to take home after you’ve deducted all your costs, including VAT (if you go over the VAT threshold) and taxes.
Six-figure entrepreneurs obviously don’t tend to share their accounts online, so how can we be sure they have money to show for at the end of the year? If the figure refers to turnover, we can’t automatically assume that a business is doing well. What we really need to understand, rather than how much a business is making in revenue, is whether they’re making a profit and a return on their investments (ROI).
In my podcast episode The Truth About Building A Six Figure Business, I interviewed my good friend Marie-Helene di Benedetto, who runs a six-figure Social Media and Content Marketing Agency. Coming from a marketing background and feeling tired of the corporate world, Marie-Helene left her day job and started freelancing in digital marketing five years ago. While she managed to turn over six figures by the end of her third year in business, she says her personal income didn’t increase much. She made more money, but she spent considerably more too, because as her business grew and developed, her business model changed.
What does the business model of a six-figure business look like?
While ‘getting to six figures’ is the phrase that seems to be bandied about the most in the online space, how much are we actually talking about? 100k (whether it’s pounds, dollars or euros), 999k or anything in between? As turnover increases, so does the size of the business. There is a huge difference between a company turning over 100k and one turning over 750k, not just in the figures but also in size and business model. When a company reaches a certain size you need to start thinking about multiple income streams and about outsourcing or delegating tasks or even entire processes. At some point, you need to start employing and managing people. You need strong policies and processes in place. As you scale, the costs and expenses in your business increase.
If you’re trading time for money, like in Marie-Helene’s case, you eventually hit a glass ceiling, and you either start turning clients away or you push through it and scale. If you decide to scale, you’re able to take more business on and have more money coming in. But you also spend a lot more to run your business. And if your turnover doesn’t increase more than your costs do, your profit may remain the same or even decrease. That’s not uncommon when businesses scale.
How long does it take to build a six-figure business?
As Marie-Helene points out in our interview, building a six-figure business isn’t as quick as what some online coaches imply. Realistically, the time it takes to build a six-figure business depends on where you are when you’re starting out and how much time you can dedicate to your business. Are you still working full-time and building your business on the side using your evenings and weekends? Did you already have an existing and engaged network or audience when you started out, or are you literally starting from scratch?
It took Marie-Helene between 12 and 18 months to start making real money. And it took her three years to get her first six-figure turnover. It’s completely normal for things to start really slowly initially and snowball later. When your satisfied customers and clients start to recommend you to others, things get easier. But it’s important to be patient and realistic from the start, which is why I recommend you always set financial goals for your business and define what success looks like for you.
Setting financial goals for your business
While I think it’s brilliant to set ambitious goals for your business, even when you’re starting out, I also believe you shouldn’t aim for six figures if that’s not what you want. You definitely shouldn’t set this goal for yourself just because everyone else in the online space seems to be doing the same.
A lot of my clients when they’re starting out want to earn enough to pay the bills and support their existing lifestyle. This was the case for Marie-Helene as well. So if you’re just starting out with your business, look at your basic living costs – calculate how much you currently spend on a monthly basis. And based on your findings (be sure to include all costs and expenses), calculate how much you need to make in your business.
Once they’ve made enough to cover their living costs and expenses, a lot of entrepreneurs aim to earn the amount they used to be paid in their last job (i.e. their last salary). But often once they’ve reached that milestone (assuming their salary was under 100k) there can be a bit of a vacuum. What should your next financial goal be? Is turning over six figures the next obvious step? Only you will know the answer to that question, and I believe it should be based on your definition of success.
Defining what success looks like for your business
Success for you could be working 10 hours a week and making £30k. What’s important is to set goals that you can always review and revisit. But equally, we should be mindful not to constantly and continuously move the goal post.
My top tip is to look at the financial goals of your business while taking into account what you want to get out of your business in terms of lifestyle and work-life balance.
- Does running your business make you happy?
- Do you have a good work-life balance?
- Are you stressed or close to burning out?
- Do you feel like you’re ‘caught up in the game’ and you’re only pursuing a certain goal because it looks like everyone else is?
I often come across business owners who set a target for themselves to hit the six-figure milestone, but when the reality of what it’s like to run a six-figure business hits them, they realise they would be a lot happier if their business made a lot less. Is it worth turning over six figures if you can’t have the life (or the business) you want?
Personally, having been through burnout, I know that running my business shouldn’t come at the expense of my health and well-being. I value feeling relaxed about life and about my business. I work really hard on it, but I feel very strongly about getting more from the hours I put it while not having to put that many hours in overall. What matters to you in your business?
Building a profitable business
Six figures or not, ensuring your business is profitable should be your top priority. There really is no point in having to spend 100k (or more) in order to turn over 100k. And if that’s the case, you may as well not have a business at all! If that’s what happens behind the scenes of some businesses, I’m sure you’ll agree that having a six-figure business becomes an accolade that means nothing. And quite frankly, it’s a ridiculous way of doing business.
Instead, to ensure your business is always profitable, follow these simple steps:
- Calculate your cost price. List everything you’re spending over a year for your business, including your own salary.
- Decide how many hours you can or want to work in your business (taking into account holidays and time off).
- Set your prices by dividing the amount of money you want to make by the number of hours you’ll work for.
If you’re just starting out with your service-based business, for example, don’t be tempted to think you should be cheaper than your competitors. You’re selling a specific skill set that not anyone can offer, so charge an appropriate amount and don’t undersell yourself. A top tip from Marie-Helene is to always make sure that each and every one of your clients is profitable. If they’re not making you money, you need to be prepared to let them go.
Don’t compare yourself (or your business) to others
No one can tell you whether you should or shouldn’t aim for a six-figure online business. Building and running one isn’t easy. It’s not straightforward, and it most certainly doesn’t happen automatically or effortlessly, which is why I find it so frustrating that a lot of the people we come across online make it sound so easy! As I’ve shared in this blog post, if you don’t do the work up front by setting financial goals and working out exactly what you want from your business, you may fall into the trap of going after one thing after the next.
It’s very easy to tell yourself that you’ll be happy and satisfied when you reach a certain number of clients or a specific financial goal. But the reality is that you may find that’s not the case at all. Only by deciding where you want to be and by when you’ll insulate yourself against doubt and comparison and pursue goals that are right for you and your business.
If it takes you longer than what the ‘experts’ on social media say it takes to establish your business, so be it. Remember that you are the benchmark, and no one else. If you want to grow your business, look at where you are now compared to last year or to five years ago. Consider how you’ve grown, how much you have improved, what path you’re on, and most importantly, why.
Do you need any help to up-level your business?
So, do we all need to go out and build six-figure online businesses for ourselves? If that’s what you want, it’s completely possible for you, and I’d be excited and honoured to help you figure out how. But I also want you to go into the process with your eyes open. It will take time, money, and a lot of work. Six-figure businesses don’t happen by accident. And if you decide that six figures aren’t for you, but you’d like some help planning out your strategy, up-leveling your business, and making it a place you love to be again, get in touch and let’s talk about the ways I can help.