Firstly, to those of you celebrating it, MERRY CHRISTMAS! I hope Santa brought you everything you wanted this year.
I debated back and forth about launching a Christmas episode, but here we are. This is Episode One in a special bonus podcast-only series I've created to share the most important lessons I've learned over the past 25 years. Yep. I've been an online entrepreneur for over 25 years now - back when the World Wide Web was a new-fangled thing and the Internet itself was a young upstart, barely old enough to drink.
A lot has changed in the past two and a half decades. Ideas have come and gone, money was made and lost, businesses opened and closed. I was there through all of it - and learned quite a few lessons along the way.
This episode talks about the single most important lesson I've learned in my 25 years online - how your mindset is more important than the mechanics of being a creative entrepreneur... and how to set yourself up for success.
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Theme music: “Welcome to the Show” by Kevin MacLeod, incompetech.com. Music licensed under creativecommons.org/licenses/by/3.0/
Whenever I'm working with a new client, invariably we come to the topic of income. How much are you making? How much do you want to make? How much do you want to KEEP? All three questions are important, and are valuable for different reasons. At some point, the topic of "making six figures" comes up (or seven, or more).
This is where it gets fun and tricky. For some creatives, it feels like a dream number. Like it's an unobtainable "nice to have" that would be cool if it were possible. They envision lazy days on an exotic beach somewhere, sipping cool drinks by a warm sea, while people pay top dollar for their creative genius. Their flights of fancy are short-lived however, when they look at their current financial situation. They're just having a hard time believing that kind of lifestyle is possible for them. For others, perhaps, but not them... at least not now.
For some creative entrepreneurs, it's a clear goal. Maybe they've already hit it once or twice (or come very close) and they're ready to make it a regular thing. They're tired of being teased, and are ready to build something solid.
For others, they've already hit six figures, but they're not enjoying the income they're making because they're not as profitable as they thought they'd be (see my definition of profitable for a deeper explanation of how I use the word.). They're tired of trying to manage everything themselves. They know they need support, and they want to efficiently and effectively get the right people on the bus, as Jim Collins would say. They don't have time to play around, even though they have a LOT of fun doing what they love.
For some people making six figures is a necessity. It may sound hard to believe if you've never been in their shoes, but if you're living in a major city, like New York or San Francisco, rent alone can be a hefty five-figure sum for even a teeny-tiny place. If you've got a family, it's even more. While it's true that many people can have a six figure lifestyle without ever making six figures in a single year, it's also judgmental and probably not practical to uproot yourself and live someplace less expensive (particularly if you've got family or a spouse that are tied to your locality). If you've made choices that find you in this situation, no amount of criticism will help you earn the six figures you seek.
Note: you can add as many zeroes to the number as you'd like. The problem is still the same: you've got to have a clear understanding of your expectations. I call this the 6-figure distinction. Until you're clear on what "six figures" means to you - what it looks like, how it feels, how YOU experience it - you'll continue to hit walls in your business growth.
This week's episode of Creative Freedom sheds light on the 6-Figure Distinction, and helps you get clarity for your own life and business.
We didn't have time to really expound upon this in the video. As an entrepreneur who started with nothing, it's important to emphasize that my network of awesome friends and colleagues came because I've been able to be a resource to them. I didn't just make friends so I could use them for my own gains. Which means there's also a limit to how big your effective network can be. You can't help everyone all the time. So at some point, you DO need cash.
Jim Rohn famously said that you're the average of the 5 people you spend the most time with. But the more people in your circle, the more watered down your average is. These are the people talking about you, referring you, connecting you to their people. How do you want to be known? Who do you want to be known as? Your answers will dictate the size of your network. You have to judiciously balance the number of people you're serving in your network with the number of people helping you. If you swing too far out of balance in either direction, resentment ensues. Been there. Done that.
People are a resource, not a tool. Choose wisely. (tweet this)
You can have an incredible life and a business you enjoy without ever making six figures in a single year. You can also make millions and be miserable. I've seen it happen with clients and colleagues. I've lived it myself. Your distinctions and perceptions will ultimately color your experience of your life and Great Work.
What is your vision of a six (or more) figure lifestyle? What goals are you setting for yourself in your Great Work? Share your successes and ideas in the comments and be part of our Rising Tide.
I don't know a single entrepreneur that didn't start their business with some type of do-it-yourself (DIY) approach. Most of us begin with more time than money, and it makes sense to capitalize on that resource. In fact, I tell would-be clients all the time that the less money you have, the more you need to rely on "other resources" - friends, colleagues, connections, skill-sets, and other means of getting the job done without cash. In the direct sales world, I see a LOT of new consultants relying on family and friends to keep their business afloat (if that's your problem, you can fix it with a little Direct Sales 101).
For other entrepreneurs we often get a little too good at doing everything ourselves, and that creates a problem.
That's the point where income and time are roughly equivalent. It's not generally a lingering point, because responsibilities typically rise in correlation to our income. I'm not sure I agree with Upamanyu Chatterjee when he said, "the more money you have, the more hassles," but you get the idea. When things are roughly equivalent, we have to get ruthlessly honest about where we're investing (or spending) our time and money. Eventually, though, things ease up and we once again have either more time or more money.
Once we have more money than time, it makes sense to start liberating our time with some of our money. Yet, in the last couple of years, I've noticed that people are killing themselves (some quite literally) trying to do too much. I've mentioned Jon Morrow's story before, but his is not an uncommon tale. When the financial meltdown started rippling through my client's lives, I saw many folks tightening belts and even going dark to "ride out" the economic storm. Yet, history tells us that the companies that fare best are the ones that keep showing up and keep sharing their message even during hard times.
So how can you tell if DIY is still the way to go? There are several questions that bear exploring:
You've probably heard the old saw "everyone's a genius in a bull market" - right? Essentially, anyone with a website could slap up a paypal link and sell their stuff like hotcakes during the earliest days of this century. There were info product "gurus" hawking their schlock for $997 - and it was a pdf copy of a 3rd generation photocopy of a 75 page "report" that was poorly edited, and an MP3 of said guru reading the PDF aloud (I'm not joking). There might have been a few gems in there, but you had to dig through so much crap that it almost wasn't worth your time. The prevailing logic at the time was that if one gem could turn your business around, then who cares if it looks like crap? That was the advent of the "fail fast and fail often/good is good enough" mentality that swept the internet.
The problem was that it wasn't even good, let alone good enough. Stuff like that doesn't pass muster anymore. The bar continues to rise. Videos I filmed three years ago don't measure up to the new HD footage I can shoot with my webcam (my WEBCAM, people!). If there's more sizzle than steak, word gets out, and people stop buying. So if you've got inferior offers, it's no wonder your business is killing you. Maybe you need to invest in a team that will turn your offer into something people actually want to buy - or invest in a few beta testers to get feedback before you launch. Either get help or get out of the offering.
I truly believe you can make a living doing what you love (and in many cases a VERY GOOD living). If a grown-ass man can make money on youtube unboxing and talking about Transformers or doing video game walk-throughs, then I have no doubt in my mind there's an audience for whatever you love doing. But you can't offer crap or people won't keep showing up.
When responsibilities rise to meet income, many entrepreneurs forget about profit until the end of the year. They see profit as an event (income minus expenses, right? WRONG.) They just keep watching the dollar bills roll in... until they stop rolling in. Then they look at their business, start cutting costs, and scrambling to "stay afloat" - when they're already sunk.
You need a profit plan, and you need to follow that plan during the feast and the inevitable famine. Business, like so many things, is cyclical. If you're overspending when money is abundant, you'll be in the hole faster than Alice and the White Rabbit once the money dries up.
Look at more than just your income and outgo. Consider your long-term growth plans. No business can continue to grow indefinitely. Tastes change, markets change, and entrepreneurs have to be willing to pivot, shift, and serve their markets in meaningful ways. A profitable business today may not be profitable in future years (Blockbuster Video, anyone?), and a smart business owner keeps pace with the changes. If that takes up too much of your time, then a coach, an accountant, or another financial professional can help you keep your finger on the pulse of your business.
This is where it all comes down. You can work like a dog and have a profitable business, but have no life to speak of. Likewise, if you're constantly "re-investing" into the company, then you're not creating something sustainable. You're blue-balling your business (yes, I said it) - stringing it along and keeping it from really performing.
I had a client that owned a screen-printing company. The company was recognized for doing great work and the employees liked working there. My client was an investor, he didn't work in the business. His good friend was the owner, and wasn't particularly responsible with the income. So my client had stepped in as an "investor" to make sure payroll would be met on a consistent basis. Year after year my client plowed money into the company to keep it afloat, but when we looked at the books, the company wasn't sustaining itself. It wasn't profitable, but he didn't mind plowing the money into the company because it kept his friends in jobs. I told him he was blue-balling the company and that they needed to sit down and get real about their revenue plan. I told him he needed to have this conversation with his friend sooner, rather than later, because the company wasn't really a business!
He told me he didn't have time to have that conversation because he was busy with his own job (where all the "investment " money was coming from). Plus, he didn't want to "get into it" with his buddy. So the company hobbled along for a few more years before his buddy finally bailed on the business. Now, he's got a solid business manager in there running things. Hopefully, he'll be able to turn the ship around and create a profitable, sustainable business.
You can pump all your time or all your money back into your venture, but that doesn't mean you have a business. It's certainly not sustainable. If you can't walk away from your business to practice some self-care, or take some time to "just be" then something's amiss.
If your business can't run for a time without you, then you're the problem, not the solution. (Tweet this)
Hire someone to look at the numbers and give you some ruthless honesty. Give yourself permission to get support in creating or delivering your offering. Maybe you're lousy at writing sales copy - get a copywriter. Maybe your training style doesn't resonate with your team, hire a pro. Don't force yourself to be everything to your company, or your company can't survive without you. The day you get sick (or worse) is the day the company goes under. That's not a profitable sustainable business. That's just crazypants.
How have you set yourself up for success? What are you doing to ensure that you're not the bottleneck in your business? Share what's working for you in the comments below so we can all learn from one another.
At this point in the new year, more than 25% of Americans have already given up on our New Year's resolutions -that is, if we even made them in the first place. By the end of the month, that number climbs to nearly 35% of Americans (more resolution-related stats here).
Some folks (and businesses) are just getting started. I'm still seeing people offering courses on setting up your budget and/or income plan for 2015... that don't start until February!
I hate to break it to you, but you can't get a "jump start" on 2015 if the year is already rolling along!
One of the common problems I see for entrepreneurs stems from income or revenue planning. In fact, if your business is new (less than 5 years old, or making a market transition in the past 2 years), it's not always easy to predict where the money's going to come from in your business.
For many entrepreneurs, the first couple of years feel like throwing spaghetti on the wall to see what will stick. You make offers, do some research, hone your product or service, make more offers, and see who bites. You keep what sells, and table the rest. Sometimes you resurrect that stuff, and sometimes it's gone forever. In my own business, I've had a resurgence of interest in products that I wasn't actively promoting. I had essentially tabled these offerings, so I didn't include them in my revenue planning for this year.
Big mistake. If you've got an offering available, it should always be included in your revenue plan - even if you don't sell many of them during the year.
That got me to thinking about other mistakes I've seen when it comes to planning out your income, so I figured I'd conjure a post to help save you from making the same mistakes in your business.
Your budget and your income plan are not the same thing. Because a lot of creative types feel hemmed in by the word "budget" it's become common for coaches and trainers to use a different word (abundance plan, income plan, spending plan, etc.). A budget tells you how you project you'll spend/invest the money you earn. The income plan tells you how you project you'll earn the money in the first place.
I remember one of my early years in business, I created a budget with roughly $50,000 in line item expenses. I had no income plan. Sure enough, about two months into the year, I was pulling my hair out because the income wasn't keeping up with the expenses. I had no idea HOW I was going to earn the money, I had just put down the income of my dreams with no real plan of attack on how to make that income happen. In short order, I quickly reduced my "budget" to align with the realities of the income of my business.
Budgets are often wishful thinking. Income planning is where the rubber meets the road. If you can't figure out how to earn the income, you shouldn't be creating a budget to spend money you don't have.
A direct sales client of mine was struggling to get ahead of the curve in her business. She had come to me with an income plan that included very tight margins and little "wiggle room" in case something happened.
Of course, something happened, and her husband was unable to work for an extended period of time. She was panicking about how to make ends meet. After she took a breath, we looked at where she could leverage her existing offers, find better clients and increase her average ticket sale. Then, I illustrated the need to plan for more than just "the minimums" because there's always something for which you can't possibly plan.
Rates go up and "life happens" - yet time and again I see entrepreneurs build a budget and project income based on that budget, without any realistic expectations around the "what if" scenarios of business. What if your current supplier dries up? What if your web host goes out of business or raises their rates in order to stay in business? Most companies give you a 30-day lead time on rate increases, which means you could get hit at the worst possible time of the year if you're not prepared.
One of my previous clients relied heavily each year on the income from one particular offering. Last year, they found themselves scrambling for most of the year to make up for the lost income when they had fewer enrollments than they budgeted for. It wasn't really "lost" income, though, because they never had it to lose! They had put too much reliance on a single source of income. It came back to bite them when they didn't have a plan in place to generate more income with some of their other offerings.
If this is your first year in business, then it makes sense to focus on one thing, get really good at it, and sell the heck out of it. But once you've been working with clients, listening to customers (you are listening to them, right?), and doing your research, you'll see other offers that you can provide to some if not all of your market. Facebook started as a connecting point for college grads (of particular schools), and only after they got good at that did they expand. Now, they've got Instagram, partnered with Google for advertising, and have their fingers in a bunch of pies. That doesn't mean you have to offer auto parts and jewelry (like Murrays Discount Auto Stores used to). If you're seeing an opening to serve your clients (and you are looking, right?), then it's more than likely you'll have more than one source of income over the years.
What if what you're doing today becomes illegal tomorrow? How can you shift and remain profitable?
This year's VAT regulations for international buyers created a firestorm of resistance, but it still went through. And international vendors of digital goods have to deal with the fallout - at a price. If all your eggs are in one basket and that basket is locked down, you're not in business anymore. On the other hand, if you've got more than one source of income, you'll stand a better chance of weathering the storm (I'm moving my "digital only" products to a platform that handles the VAT for me so I don't have to deal with it).
Technically, this could be construed as a budget item, but the reality is that I see a lot of entrepreneurs planning to make all kinds of money, without any kind of support behind it - whether that's a coach, learning a new skill set, or some other type of professional development. Your budget needs to include these items and so does your income plan. As you scale, costs change. You may hire a VA to handle things that you used to do yourself. If you're planning on earning more than six figured, you can pretty much guarantee that you'll need some kind of support. Your income plan needs to cover the costs of that support. Don't assume that you'll be able to cover it with the growth of the business, because, as I've already said "life happens" and you may find yourself in need before the cash-flow comes in to support it. Which brings me to mistake #5.
I can't tell you how many entrepreneurs I've talked to that tell me they made "six figures" in the last year - only to find out the company may have taken in six figures, but they didn't pay themselves a salary.
Say what?
That means that not only did YOU not make six figures, but the company probably didn't either! There's a difference between income and profit. And no, your salary is not profit. If you're not paying yourself, then you're lying to yourself about the actual profitability (and viability) of your business.
You can bet that Donald Trump, Warren Buffett, and Oprah don't work for free. They have large businesses and each draw a salary that's part of the company expenses. Profit is money that's not allocated to covering expenses. Most businesses erroneously think profit is what's left over after covering expenses. I'll show you why that's wrong in a minute. Regardless, you need to be sure that your income plan is built to cover a salary and savings for emergencies.
Financial guru Dave Ramsey reminds us that it's not a question of if, but when emergencies will happen. The printer dies, the laptop gets dropped, the external hard drive crashes... and those are just the minor emergencies. If your income plan (and yes, budget) doesn't include a line-item for savings, you'll find yourself scrambling. What if your tax bill's higher than you budgeted? That's where savings can be a blessing.
Regardless of what you sell - or how much of it gets sold - it's imperative that you have a profit plan. If you sell even 20 cents worth of products or services this year, you need a plan in place to ensure that your company derives a profit.
Okay, twenty cents might be a little ridiculous, but maybe not.
Mike Michalowicz, author of "Profit First" says that profit needs to be a habit - not an event - in your business. Instead of making profit an afterthought (profit = income - expenses, like most businesses expect), Mike says pay your business first and set aside a portion of your income so that you always have profit in the business. I recently led a webcast to explain the Profit First approach and help you get a handle on making sure your business is always profitable.
Whether or not you come to the webinar, it's important to see profit with fresh eyes. You don't have to build your business on the "leftovers" - which, if you're anything like most entrepreneurs I know, there aren't many leftovers to begin with. Instead, you can make an intentional step toward building a solid profit plan - and income plan (and budget) - that's built realistically around what you need to accomplish in the next 12 months (and beyond).
I'd love to hear what mistakes you've made in your budgeting/income planning process. What did you learn and how did you recover? Let's learn from one another in the comments!
As I hear clients, colleagues, and friends sharing their goals for 2015, there's a chorus being repeated over and over:
"This year is the year I FINALLY break __ figures!"
I've heard it so many times that it makes me dizzy and sad to think about the number of folks who continue to miss the mark on this particular goal each year. When I ask why they haven't hit their goal yet, I hear lots of "reasons" - but ultimately, those reasons all mask the truth of why they really haven't hit their big income goal - whatever it is.
First a warning: "Big income goal" is relative. Like dream shame, the fact that you have a goal means it's big. For you, it might be 10 figures, or 6, or 5, or being able to finally quit the day job. The number doesn't matter. The principles are the same regardless of the number of zeroes at the end of the figure.
Why is it that most entrepreneurs that dream of making "mucho dinero" don't hit their big income goal? Here are a few reasons I've encountered (both on my own journey, as well as with my clients): (more…)
What does it really mean to be profitable?
With my newly-minted certification as a Profit First Professional coach (huzzah!), I've spent more than a few hours thinking about this question.
Profit First is a concept (and now a book) penned by business author (and my friend) Mike Michalowicz. The book drives home the point that most business owners make profitability an event (or worse, an afterthought), rather than a habit. Mike says "Shouldn't your profit come first?"
Um. Yes.
In fact, even a "for-purpose organization" (a term my friend Doug uses for non-profits) needs to generate positive cash flow in order to be sustainable.
Yet, so often, people bent on making a positive difference in the world think that focusing on profits is "icky".
*breathe*
There's a good reason for the ick. It stems from a very dismpowering definition of the word "profit". Let me explain...
Here's how we typically define "profit" today - courtesy of our friends at Google. The idea of "more" for the sake of more can leave heart-centered entrepreneurs feeling icky. We're not trying to get "more" all the time - especially not at the expense of people. Neither are trying to take advantage of others - or be taken advantage of ourselves! Yet the top two definitions of the word "profit" relate specifically to those two concepts:
For most of us, the word "profit" is synonymous with the word "money". They think about "rakin' in the dolla bills" and then rolling around in a pile of money like Scrooge McDuck. It's the "bottom line" of the balance sheet. It's the account balance, the number that's left at the end of the month when all the bills are paid - and before the next bill comes due.
Evil empires have hoarded it, conquered for it, and some companies have been built to focus on it (and only it) relentlessly.
No wonder we get all icky inside just thinking about it. After all, we're here to make a difference, to make a positive impact on the world. We want to make people happy, bring them joy, ease their pain, and we put the welfare of people ahead of money money.
We want to do good things, and all that ick, can't be good, can it?
We get mixed messages: loving money is the root of all evil, yet it makes the world go 'round.
Ah money, why do you vex us so?
What if profit had a wider, more holistic definition? Or is that too much of a stretch for you?
(more…)