Ep 27: The Secret of 7-Figure Business Owners

Aug 23

The Secret of 7-Figure Business Owners

I recently wrapped up looking at my numbers for the last fiscal year. Looking to identify my revenue, revenue sources, expenses, and looking at my profit margin. I am in the business space and most of you who read this are as well. There's something that's really common in our space, and it's the seven figure business owner claim.

We hear people say that they are seven figure business owners all the time, but what does being a seven figure business owner mean? If I were to ask you and 10 other people, I would probably get 11 different answers to that question. Because here's the reality, nobody has really defined what it means to be a seven figure business owner, yet so many of us aspire to be one.

Last I checked, where we put our aspirations, attention and focus is the direction that we will go. Many business owners focus on obtaining the seven figure business owner title. Most of us haven't defined what that means. We don't know the direction that we're heading in because here's the reality, seven figures can mean a lot of things to a lot of people. We have been led to believe that reaching the milestone of seven figure business owner gives an exorbitant amount of credibility in the marketplace, so people will try and obtain that title as fast as possible.

7-Figure Business Owner Title

What does that mean? That means that some people are calling themselves seven figure business owners whether they made seven figures in two years or 10 years.

So I can call myself a seven figure business owner, which can mean that from the time I became an entrepreneur in 2012 until today. I've made more than a million dollars in revenue in my business.. I can have that title right now if I wanted to have that title, but is that really the intention behind it?

Now, if you're reading this right now and you're like, gosh, I've never asked this question about time, you're probably thinking it actually makes more sense for it to mean that they have earned a million dollars in revenue in a one year period of time. I'll just be real with you, there's no regulating body out there that's actually checking to make sure these people have made even a dollar in their business, much less a million in a year..

The Importance of Profit vs. Revenue

Here's what I think is the most important conversation. It's the conversation that many of us are not having about profit. So, we talk to and hear from course creators, membership site owners and group program owners who are talking about being seven figure, six figure or multi six-figure business owners all the time. We really don't know if that means in a year, 10 years, who really knows.

What we're also not talking about, and I think we need to talk more about is profit. Because there are so many people who are investing tens of thousands of dollars in advertising in programs and masterminds, and there is no profit to show for it. Maybe they do have that six figure launch. That is a goal for so many people, but what they don't tell you is that $80,000 of that $100,000 they just made was already spent before they ever opened the doors to that program. Their profit may have been $20,000 and they can't even pay themselves.

We need to have conversations about profit versus revenue. It's my hope that we could all be a little bit more open about what our revenue and our profit looks like inside of our businesses. Because when we say seven figure business owner, we're not talking about seven figures of profit. I don't think you can find one out there that is giving themselves the title of a seven figure business owner based on their profit and not their revenue. But revenue is only one part of the equation. Now, revenue is important because the more you make, the more you can invest back in your business.

There's quite a few people that would justify right now that they have low profit margins because they're turning around and putting all of that money back into ads to continue to grow the business. But I think for many business owners, especially in the online marketing space, we're really just trying to fudge the numbers a bit. We don't want people to know that we actually aren't paying ourselves or that we can't afford to have an employee support us because we are pouring money into ads or programs. There's nothing wrong with investing in programs and developing your skills, but I think we need to start being a little bit more honest about what that revenue number actually means.

Understanding Your Numbers

When I set my own business goals, I knew exactly what I needed to bring home. That requires me to know not only my revenue, but know the profit margin. The profit I need to create in the business does not equal the amount of money that my family needs to live on because of a few things.

One in particular, being taxes. Uncle Sam likes to take a lot of the money that we make, and we need to factor that money in because there's no skipping on paying Uncle Sam. I mean, there's some people out there that can get really creative, but I'm not all about wasting time on that. I'm just going to pay Uncle Sam and move on.

I set aside a percentage of the revenue for taxes, a percentage for investing in the business for savings, and then I have my own salary. Then I can take distributions above and beyond that if I need to. What's important is that I know the amount my family needs to make every month to maintain the lifestyle that we have now. I started with that number and I worked backwards to determine how much revenue I need to make from an annual or monthly basis. How much revenue I need to make and what my profit margin needs to be in order to hit that money in my personal bank account goal, keeping in mind taxes, business savings and all of those other items.

My friend and business coach PJ is an extremely wise man. He guides me in my business and he makes sure that I know my numbers. I'm just passing on this wisdom to you. This doesn't come from me other than the fact that I've been an entrepreneur for more than 10 years and my family has suffered from me not knowing these things and not asking myself these questions ahead of time. That means, not just how much I need to charge and how much revenue I need to make, but what does my profit margin needs to be to get the amount of money that I actually can live off of.

I can tell you by looking at my numbers, in the back half of 2021, I had an 84.7% profit margin. And in the front half of 2022, I have had a 72.6% profit margin for a total profit margin of 77%. That is not typical for people who are only doing courses and memberships because you have a lower dollar offer. Often that requires a big audience for you to pull from to get the conversions that you need. Profit margin is usually much lower if you have a membership or a course. Now I have a community training course, but my primary income, the place that I spend most of my time and give most of my energy to, are my consulting clients. Since I work one-on-one with them, it's a high ticket offer. I'm able to get them amazing results and I love that.

Truth About Being a Seven Figure Business Owner

I just want us to be transparent and open here in this conversation. If you're new to business, I've been in this game for a while and I have had this desire to be able to say that I am a seven figure business owner. I know the credibility that comes with that, whether deserved or not deserved. I just want to give you the gift right now of knowing that there is nothing special about being a seven figure business owner. The definition of seven figure business owner is just muddy. Remember, nobody really knows what it means. We could be talking about seven figures in a year. We could be talking about seven figures over the lifetime of the business. And I guarantee you, they're not talking about seven figures in profit.

For some of you, you're doing well and you have a high profit margin and you have a lot of money in your pocket. Don't give that up to turn around and try and launch a membership or a course because you're not gonna get that same profit margin. It's gonna take you a while to build that energy up. Leverage this time where you have this high profit margin offer, pocket that cash and store up as much of that cash as you can so that you can use it to invest in creating an offer that's more scalable down the line if you choose.

I also wanted to give you the gift of knowing that the launch statistics that you see posted in all of the Facebook groups, that 99.9% of those people never post their expenses. Some of them will post their expenses related to their launch, they might post their ad budget, but they're not talking about all of the work they did to get there. They're not talking about what they're paying their podcast producer, copywriter or tech person that created their sales page or their assistant.

Acting Like a CEO

Be the CEO that knows these numbers and not the CEO who posts on Instagram they finally hit the seven figure revenue goal number but doesn’t know the actual number that plays out in the day-to-day of your life, which is the money that you take home at the end of the day, the end of the year, at the end of the month. In the end, that's what matters. Not what you can say you did on Instagram.

Have goals. By all means, have these wonderful, lofty goals. But at the end of the day, I want you to act like the CEO of your business in the same way that I've been challenged to do. Get really clear on your numbers. You need to know how much money you need to be putting into your pocket. You need to factor in taxes, business expenses, and business savings. A.ll of that is going to roll up to that big revenue goal. And if it's not a seven figure goal, that's okay. It doesn't make you any more valid of a business owner to say that you're a seven figure business owner when the title is just arbitrary.

I want to be a voice to you, the community creator, the digital course creator, the membership site owner, the group coaching program owner, that person who's watching all of these big influencers on their podcasts and on Instagram proclaiming the goal is to be a seven figure business owner. I want you to be the smart business owner that knows your numbers and doesn't care about the titles.

Instead, focus on the goals that you have for your family and set a financial plan for your business that is going to help you succeed well beyond all the people out there doing the flashy things that have no profit margin to back them up.

Shana Lynn