I’ve been speaking to a lot of people about their goals this month, ‘tis the season and all that. There’s been a common theme, and that’s been around building a 6 figure business. 6 figure chat seems to be everywhere I look at the moment, particularly in the female founder online space, so it’s not surprising that it’s on a lot of people’s 2023 vision boards. Having a financial goal is a great idea, as when you know where you’re going you can use your numbers to plan for what will happen along the way.
But often when I start drilling down into what 6 figures means to them, they don’t have a clear definition in mind of this, or how they’ll know when they get there.
I don’t necessarily subscribe to the idea that your goals have to be super strictly defined (I use the Alice Benham method of setting intentions rather than rigid targets), but if you don’t know what success looks like to you then you’ll never celebrate your achievements when you get there.
When you think of having a 6 figure business, what do you see? Each of us will have our own ideas about this, and view all of the chatter about it through this lens. We’ll then assume that everyone else has the same definition and that’s where we can start falling into the comparison trap.
On my Instagram feed so far this morning I’ve seen 2 different women talking about growing a 6 figure business, and each of them is using a different way of measuring it. The first is talking purely about cash she’s received in the last 12 months, including VAT she’s charged to clients. The second is instead looking at her net profit (sales minus all expenses), before corporation tax is calculated, and excluding VAT. Both are at 6 figures, but they’re at very different points to each other.
If you want to get to the magic 6 figures, you need to be clear on what you’re working towards. Any definition is fine, your goal your rules.
I’ll blame the nature of my business (and definitely not the fact I’m just super nosy) but whenever someone is talking about 6 figures, or £10k months, or whatever else, I immediately have a list of questions as long as your arm.
Give me details!
If we look at the different numbers within our businesses we can see that there are lots of ways of defining this:
You can see how somebody with £100,000 of sales is bringing in less money than somebody paying themselves £100,000, but both can say they have a 6 figure business.
My own base definition of 6 figures is £100,000 of sales before any VAT is added, but I’d also expect there to be decent profit as well. Believe it or not, you can have a 6 figure business and make a loss. For example, a business with sales of £125,000 and expenses of £150,000 would technically meet my definition, yet the fact there’s a loss of £25k would leave me feeling a bit dissatisfied.
It’s all well and good having a revenue/sales goal, but you also need to consider the costs involved in getting you there. This is why we can’t just look at one number in our business, or throw around a phrase like “6 figure business” without defining it. If you have this as a goal, what do you want from your 6 figure business? What will leave you feeling that you’ve accomplished it?
Regardless of how you define it, you won’t get to 6 figures of any description without reaching 6 figures in sales. While that’s easier said than done, increasing our sales also often means that our costs will increase too. The women I speak to who have reached the £500k sales mark are nearly all spending a minimum of £10k per month on support of some description, whether that’s a VA, copywriter, technical support, or an accountant. Your business will look very different at £500k than it does at £100k, with cash flow forecasting and budgeting becoming even more important.
Whether we’re setting goals or intentions, we need to have a good idea of what success looks like to us. If hitting 6 figures is something that’s important to you, that’s great and I’m rooting for you, I just ask that you know what you mean by it.
Bring your bookkeeper or accountant along with you on the journey too. We can tell you that you’re on the right track and help you to build the business you want. I work closely with my clients to make sure that they understand what their numbers mean, monitor them against their goals, and show them what effect launching at a certain time of year or bringing on board a technical VA will mean for their numbers.
If you’d like to work with me towards your own definition of a 6 figure business, my Finance Sidekick service is made for you.