There are many talks, myths, stats, goals, and suspense surrounding the “6 figure business class.” I’ll be asking and answering the right questions on this topic which will hopefully put an end to the curiosity bug in you looking for an answer to the question, “how to build a 6 figure business of your own?”
According to a study conducted by the Kauffman Foundation, only 6% of businesses are actually capable of making 6 figures. This number further drops to 2% for businesses making 7 figures. It may come as a shocker that more than half of the business owners fail to earn more than $25,000 per year.
In a time where businesses have the power to reach potential customers across the world with a promising web app idea, why are there so few 6 figure earning businesses?
Because a business making 6 figures works differently and faces different parameters—Let’s find out how different is such a business and how you too can boost your business to make 6 figures annually.
How Much Is Enough For A 6 Figure Business?
Getting to six figures seems the ultimate goal of any business person starting a store or company in 2020. But the question remains, how much is enough as a six-figure income for a business? Because a six-figure can be anything ranging from a 100k to 999k, and that is a very vast range.
As turnover increases, so does the size of the business and with that changes the laws and regulations, the business model, pricing models, revenue sources, marketing strategy, and a million other things.
So which end of the 6 figure spectrum are you targeting to reach?
The Truth About 6 Figure Businesses
Just because everyone is chasing the 6 figure unicorn, doesn’t mean you also have to. There have been cases where businesses were more profitable when they operated on a smaller scale, and as they reached 6 or 7 figure, their sales increased, but profits dipped because the upkeep cost was way too much.
So, before we talk about how one can earn 6 figures from their business, let’s first see the truth behind the 6 figure myth that people don’t talk about.
When a business publishes their income report, what you’re often seeing is the gross sales and not the profit. This means that a food delivery service business can show $200,000 in sales, making it technically a “six-figure business”, but what they don’t mention is that it costs them $265,000 in expenses. So, at the end of the year, this company (although a 6 figure business) is in a loss for $65,000.
Let’s put the theory to a direct comparison.
Company A has an expense of $20,000 and makes sales of $75,000. So, the profit of company A will be $55,000.
On the other hand, we have company B with expenses of $145,000 and sales of $115,000 which brings the company in the 6 figure category but also incurs a loss of $30,000.
So, whose business model sounds better? Obviously, Company A even though it lies in the measly 5 figure bracket, but the profits are good (far better than company B that has only losses.)
My aim is not to demotivate you and glorify stagnant businesses. What I wish to advice is that you practice caution and common sense instead of running blindly towards a big, shiny looking number.
Now let us see what businesses like company A do wrong and how you can scale the business model of company B to a 6 figure approach.
Why Is Your Business Not Reaching 6 Figure Earnings?
There are 5 reasons from financial to psychological in nature that are hindering your business’ growth to a 6 figure entity. We’ll take a look at those 5 factors right now.
1. Experimenting Is Thought Taboo
Have you mixed chemicals in school’s chemistry lab practicals? Then you can understand that one can not get a different result by mixing the same two chemicals over and over again. So a business strategy that earns you a five-figure amount in sales can’t magically start getting your business a six-figure income all of a sudden.
You need to upgrade your business strategies with new ideas and thoughts and keep experimenting. Some ideas may fail while some will get traction and boost your sales towards your “6 figure” goal. So you and your team need to get creative and try new things until you hit the right chord.
2. Mass Vs. Class Approach
Would you like to serve 100 customers or 1000? Obviously 1000 sounds way better than just 100. But once again, numbers can lie and show you the wrong picture. What if I tell you that the 1000 customers will only buy from you once while the 100 customers will stay loyal and be consistent purchasers for your business.
Now serving the 100 seems a better approach than running behind 1000 one-time customers. This is the Mass vs Class approach of customer acquisition. The solution here is to find your target audience and serve them well enough that they bring more friends and family to you rather than you trying to chase uninterested people.
Remember that unless you are selling ice creams, you can’t make everyone happy, and then again some people are lactose intolerant. So rather than trying to please everyone, find the select dedicated audience for your business and serve them really well.
3. Unequal Energy In Different Phases of Business
The energy that you and your team brings to the business has a massive impact on your potential success or failure.
When you start a new project, follow a new passion, or in this case, start a business, you are more passionate about it and willing to sacrifice more for it in the beginning. But as things settle down slowly, you start to set up your own routine with other things in life, and the lack of energy and focus is visible towards the business.
Now one would think that the best thing is to keep giving more and more energy and time to grow the business. This could work, but only if you can keep that initial bolt of energy for the entirety of your business timeline, whether it is ten years or fifty years.
Do you really think that maintaining the same level of energy would be possible throughout the lifetime of your business? We all know the answer is a sad no, but that’s a good thing. Because now you know that running madly towards the red cloth will only make you a meaningless bull, and it’s time to become the matador rather than the bull.
You need to keep the excitement checked when initially launching the business so that you don’t get exhausted by the end of the year and start slacking. And as time passes, you find the hot spots across the year when your business makes the best sales, and concentrate higher bursts of energy on these times.
So you’ll have to set your goals and energies accurately and precisely directed towards the long-term growth of your business.
And this brings us to our next point.
4. Setting Wrong Goals For Your Business
Many businesses fail because they set the wrong goals or no goals. These goals could be in terms of financial performance, customer acquisition, expansion to new verticals, etc. One can easily set a goal to make their business’ profits grow 700% in a year, but when it comes to creating a viable plan to meet those goals and executing them through the year, reality hits hard (a rock to your head hard).
So, you, as the business owner or the wo/man in charge must understand what are the achievable goals for the business and if you are in the state to reach a 6 figure sales number this very year. Talk to your team, get an external consultant to review your books and your business plan and make sure that you are chasing something that is possible as well as beneficial to you and your business.
5. Weak At Team Building & Managing
Many entrepreneurs start from a grass root level, and hence they can’t stop getting into the bullpen. This may look like a dedicated individual, but this approach sabotages the team’s productivity and the chain of command.
I am not saying that you will not hire people, or hire wrong people for your business. Rather you will get the best people for the job but then hinder them from doing their job. Many business owners can’t let go of the “one-man army” concept and let people do what they are hired for.
You need to stop interfering in domains that are below your roles and responsibility, and just keep an oversight occasionally. When you get hands-on with your junior’s tasks, it leads to issues when it comes to accountability and responsibility, resulting in chaos and a failure to achieve your six-figure mark for your business.
Time To Fulfil Your 6 Figure Dream
Now it’s time to execute what you learned from this blog into your business and see that graph go up in a steady swing. Remember one thing, the journey that you went through to bring your business where it is at present was long, so reaching your 6 figure dream will also take time and consistent efforts and not some shortcut or quick fix.
Be patient and consistent in your actions, and you will see through your six-figure business dream.