When I was much younger, I heard a joke that goes like this:
"What do you call the guy who graduates last in his class from med school?"
Now that my book, Creative Freedom is alive in the world, more people are talking about the harsh realities of building a profitable, sustainable business doing what you love. It's not all sunshine and rainbows. It's hard work sometimes, and effortful most of the time. Because I haven't been afraid to tell the truth, I've gotten a lot of requests to talk more about what I call the six-figure illusion: this airbrushed reality of the so-called "lifestyle entrepreneur" that's mostly smoke and mirrors.
I love to talk about this reality, but there's something else at play here, and it reminds me of that joke. I left it out of the book, because it really goes beyond the basics. I call it the Six-Figure Starving Artist.
There's a BIG difference between $100,000 and $999,999.99 - but it's all "six figures".
Bring in $100k and congrats! You're a six-figure entrepreneur and can start billing yourself as such in all your marketing materials. Heck, right now, I could make $1,000 US and call myself a six-figure entrepreneur if I converted those dollars to Yen. The semantics are crazy, but we hold this illusion in such high esteem, and bow at the feet of anyone who says:
"I made six figures last year..."
"I shot to six figures quickly..."
"I made six figures in the past six months..."
"I finally broke six figures..."
But what you don't hear is how that sentence ends. Typically, it goes like this:
"... and had NO time off because I busted my ass to make $102,000."
"... and re-invested most of that into the business to pay my support team."
"... and spent the rest of the year recovering from a stress-induced illness that laid me low for months."
"... but I don't know how to re-create or maintain that kind of momentum, so I'm saving every penny because who knows when it'll happen again!"
Further, it's probably not even true.
YOU didn't break six figures. Your business did.
BIG difference. Your business isn't an ATM or a slot machine (tweet this). The sooner you start seeing your business as its own entity (and not your personal piggy bank), the better off you'll be. In truth, if you're trying to grow a profitable, sustainable business, then having a six-figure income at the low end of the range means you're barely getting by. Seriously! I've talked about this in a previous post about the 6-Figure Imperative, but let's do the math and see what I mean. Chaotics, stay with me. This will be enlightening, I promise.
We'll use US Dollars to keep things easy. So your business just broke six figures. Hooray! First, do a dance. You've earned it!
Okay, back to work! I'm using Mike Michalowicz's guidelines from his book, Profit First. I swear by it, because it works. Play along with me and let's see what's really going on behind the scenes.
Let's lop off 15% for taxes (which is generous, because several European countries tax about 40% of your income!) That leaves you with $85,000. Let's set aside another 5% for profit sharing - so that your business actually HAS a profit this year. That leaves you with $80,000 to pay yourself a salary and run the business.
Since you're barely breaking six figures, Mike suggests paying yourself half the real revenue of the business - that's no more than $50,000 to live on. Leaving you with $30,000 for everything else the business needs.
Everything: marketing & advertising, insurance, storage, supplies, tools, materials, your part time VA, website, design, biz travel, and continuing education. Makes you think twice about that $2,000 online class, or that $10,000/yr mastermind group, doesn't it? And that conference on the other side of the country? Registration, travel, meals, and accommodations easily top out at over $5,000. That's one-sixth of your total operating budget for the year!
Now, in many parts of the U.S., you can live decently on a $50,000 salary, and if you've got a two-income household, you might be doing fine indeed. Nicely done. Enjoy it! You'll also be able to collect a portion of that profit you set aside as a quarterly profit sharing distribution, which will bump your personal income a little higher to roughly $52,500 - or about $1000 per week in personal income.
But hold up... I've had clients making $80,000 in their day job, so this "six-figure lifestyle" would actually result in a pay cut (and more work!) for them. What a way to burst your six-figure bubble! This is why I see countless creative entrepreneurs on the hamster wheel of hustle all the time, thinking that the six figure lifestyle is their ticket to riches, only to find they're working harder than ever, with so little to show for it.
That's not even the worst part....
Recently, I was sitting at a party, talking with a Chaotic creative entrepreneur that was struggling to get her amazing invention into the hands of people who not only needed it, but could help spread the reputation of her creation like wildfire. She already knew who to approach, she even sort of knew how, but she didn't have the bandwidth to make it happen.
To make it worse, she had already plowed tens of thousands of dollars into a complex marketing "solution" that only slowed her down and made selling harder. The small trickle of sales she had coming in had dried up because this "solution" meant tearing apart what was already working... including her website where people were already buying from her!
Her expenses were static. She still had a factory and overhead to handle. She was infrastructure rich and cash poor.
She was a six-figure (or more) starving artist.
This happens WAY more often than most entrepreneurs will admit. And there's nothing abnormal about it. These creatives had a good run, made good money, and then they hit whitewater - where their business got more complex and their systems didn't keep up. Either that, or they're back in early struggle again because they've pivoted to a new audience/offer and haven't found the profit yet.
Every pivot isn't seamless or easy. A LOT of times there's a whole new round of thrashing involved. It's part of the pivot process. Still, we feel guilty or ashamed because we think we shouldn't have to thrash around any more. That we should be beyond this. I mean, we're freaking six-figure entrepreneurs now, dammit! This stuff is beginner crap and we shouldn't have to deal with beginner crap anymore, right?
You are beginning again.
A new market, a new moment, a new offer, a new direction, or even a new reality can change your playing field. Especially that "new reality" part. Changes in legislation, market shifts, competition, even your own lifestyle demands can shift everything in a moment and have you beginning/thrashing again.
My entire financial reality changed when I became my sole provider. My divorce put me squarely in charge of every spending decision in my life. Before, I could rest easy knowing that my husband kept the rent paid, the lights on, and food in our tummies. But now? Now all that comes down on me. If I don't pay the bills, they don't get paid. That's a new reality that impacted my business. I had to re-evaluate my offers, my pricing, and every move my business made from a new perspective.
I was thrashing again. Yippee (that's sarcasm, in case it isn't clear.).
But there's also a gift in having a beginner's mind. Take our party-going entrepreneur friend in the example above. Because I didn't hold her preconceived notions, I was able to pinpoint a quick and easy way to get her product into the market without a lot more effort or expense on her part. In our short conversation, I found a simple, elegant approach to help her generate revenue quickly without being the bottleneck in the process.
"Why didn't I think of that?"
I told her, "Because as a Chaotic you're too close, overwhelmed, and too focused on the experience, which means you still think your hand has to be on everything. It doesn't. That's why you couldn't see the obvious answer right in front of your face." Then, in a matter of minutes, I gave her Linear creative husband the specific steps to implement to get the ball (and positive cash flow) rolling again.
That's what I do. I don't pull things apart that are working. I build on what you've already got going so you can grow. I don't reinvent the wheel or add complexity when you don't need it. Simple, elegant solutions are usually the best approach. Often times, a few emails back and forth are all we need to fix an issue and get you some momentum. I have a handful of openings in Portable Coaching, if that's something that would serve you. It's a great way to get real, actionable help and accountability for your growing your business and stay sane in the process.
Not ready for one-on-one work? My Accountability Club is now enrolling new partners. Get group support and encouragement for all the goals you've set for the year. We even added co-working options to help keep you focused and on task!
These are just some of the symptoms and scenarios I see.
Like I said, they are everywhere, and you don't have to look very hard to find them... though they may not openly admit it (even to themselves). Do you know a six-figure starving artist? Have you been one? What was the tipping point that got you on the comeback trail? In my next post, I'll talk about ways to solve this problem so achieving your goals can be easier. Until then, share your thoughts and ideas in the comments and let's be a rising tide for everyone!
Facebook Twitter Buffer Pinterest LinkedIn This is Season Four, Episode Six. This is the next logical step after our last episode. Once you get clear that it's time to raise your rates, how, exactly do you go about raising them? Have a listen to this week's episode, where I walk you through a few different approaches, […]
Confession time: I have sort of a business crush on Mr. Franklin. I stumbled across his first book, Produced by Faith, just as I was finishing work on my own book, The Secret Watch. His collaborator, Tim Vandehey was a friend of my editor, and I was actually checking out Tim's work when I came […]