I really enjoy working with consultants and professional service firms that are new to the six-figure earnings level. What I find when I’m sitting down with a client at this level is that many of them are earning six figures, however, they are still experiencing cash flow challenges and business building stress.
Here are three reasons newly six-figure CEOs are not enjoying their new level of financial and business success and what to do about it:
Lack Of A Money Management System – Before earning six figures many business owners keep track of their revenue and expenses by using a manual software or system. This not only takes up a lot of time to maintain it also doesn’t provide the financial insight needed to properly manage a six-figure earning. As a six-figure business owner, you should be reviewing your financials weekly and monthly. You should also spend time examining your KPIs and industry trends. In order to accomplish this, I recommend using virtual software that allows you to access your financial data from any device that has internet capabilities. In addition, your money management system should be used to not only send invoices but track expenses, prepare reports, monitor your budget and accept payments. My recommendation is QuickBooks Online. This is the number one accounting software in the world for small business owners.
Confusing Revenue With Cashflow – The next struggle for six-figure business owners is confusing the amount earned with the amount they currently have to spend. In most cases, there is a delay between the time the business makes a sale and the period in which the money hits the bank account. This gap is most likely due to the payment terms extended to their clients.
For example, when invoicing a client you may immediately record the amount earned and mistakenly believe you currently have that amount available to spend. However, that amount is not available until the client actually makes the payment. The trouble comes, when you are spending the funds before you actually receive them. This leads to potential hardship and financial challenges.
Confusing Revenue With Profit – One of the major challenges with earning six figures is not differentiating if the amount earned is revenue (top line number) or profit (bottom line number).
With permission I’m going to provide you with an example of one of my client’s cash flow cycle before we begin working together:
- As a six-figure earner, they provided services and products for sale that allowed them to earn $9,000 each month for 12 months, totaling $108,000.
- In order to operate the business, they had expenses such as overhead, accountant, attorney, payroll, marketing, rent, subscriptions, education and training and additional expenses that cost $6250 per month over 12 months, equal to $75,000.
- After earning $108,000 and subtracting the total expenses of $75,000, their Net Profit was $33,000.
This was discovered by implementing an accounting system and preparing one of the top three financial reports – the Profit and Loss Statement.
Revenue – Expenses = Net Profit
With only $33,000 remaining after earning $108,000 suddenly a six-figure business doesn’t seem so appealing.
If we were to dive deeper and factor in the cost of goods sold and taxes that $33,000 decreased even further.
So what does it take for the Net Profit to result in six figures? Ideally, the business owner must determine their percentage of expenses against their revenue then work backward in creating a plan, pricing and proper money management in order to double even triple their top line number.
No Financial Accountability – Congratulations on your success because earning six figures is not easy. It takes a lot of hard work, dedication, money, and determination to build the business of your dreams. Now that you have reached a level of success that over 80% of small business owners never achieve you must build a team that will support you and pushes you to the next level.
At the six-figure earnings level, you will experience many new financial challenges, such as new tax compliance, proper payment collections, time management, small money leaks that add up over time, business restructuring and the list goes on. This is the perfect time to enlist the help of someone that is familiar with the new change of structure and business operation that six-figure CEOs face.
At this level, you will benefit a great deal from an accounting and business advisory firm that offers not only outsourced bookkeeping and accounting services but most importantly Virtual CFO and advisory services. At the six-figure earnings level, you will need in-depth financial expertise and industry insight along with reliable and accurate financial intelligence at your fingertips. By having an accountant that specializes in this area of expertise this will enable you to reach seven even eight figures in less time and less stress.
Are you a newly six-figure business and you don’t have anyone guiding you financially we should talk.
CEO of Say Yes To Profits, a virtual CFO and bookkeeping firm that focuses on educating dentists, consultants and services-based businesses on how to use their numbers to increase cash flow, boost profit margins and grow their business faster.
Founder of the Say Yes To Profits Academy and author of the bestselling book, Say Yes To Profits NOW, Octavia”The Profit Maximizer” Conner is known as America’s Leader in Profit Maximizing For Small Businesses. She is equipped with over 14 years of finances, accounting, and business development experience.
Octavia Conner is a high achieving accountant and financial management consultant who specializes in closing financial gaps and locating hidden money leaks in order to significantly increase profit margins.
She has a keen eye for improving the financial health of a company and as a typical result, clients double (even triple) their bottom line within the first 60 to 90 days of her guidance.
Download her free cd today to learn how your business can start to Say Yes To Profits!
For more information contact SayYESToProfits.com