How To Earn A 6-Figure Income (REALLY) – Part 3
This week I’m demystifying what a 6-figure income looks like in our industry. Over the last couple days I’ve done the math to dig deep when someone says that they can “show” me how to make a 6-figure income. (You’ll want to revisit our posts from Part 1 and Part 2 if you are just catching up.)
And, what did we learn? We learned that it is REAL HARD WORK. There is no quick way around this. But there is fine line between working hard and working yourself into the grave. And, depending on how your own business numbers work out in the equations I presented this week, you’re either looking at some achievable sales targets or not.
Today, I’m going to share some ways that you can still achieve a healthy income without killing yourself. Also, I realize that many of you aren’t trying to achieve 6-figures. I want to keep with this example, because this is what I keep being promised by lots of coaches and gurus out there. You find what income level feels good for you.
SOLUTION #1: INCREASE YOUR PROFIT MARGIN
To increase your profit margin you will raise your prices and cut your costs of services rendered (cost of labor, cost of materials).
This was the example we were playing with yesterday:
Income from 1 wedding: $4000
Cost of Services from 1 wedding: $300
Profit Margin from 1 wedding: $3700.
If we raised prices by 20% and cut out one assistant the profit margin would look like this:
Income from 1 wedding: $4800
Cost of Services from 1 wedding: $150
Profit Margin from 1 wedding: $4650
In yesterday’s example, we were aiming to achieve $130,000 annual profit.
$130,000 / $4650 = 27.95 weddings! (let’s round up to 28)
OR
28 weddings x $4800 price = $134,400 in sales
Which results in:
Income $134,400
Costs of Services Rendered – $4200 (cost of labor: 1 assistants at $150/each for 28 events)
Profit Margin $130,200 (see note)
Expenses – $30,000
Net Income $100,200 (BOTTOM LINE)
This is why pricing is CRITICAL to the financial viability of your business! By increasing your price by 20% you go from doing 36 events to 28 events! Even if your goal isn’t a 6-figure income, you can save yourself from insanity. I’ll spare you the math, but if your goal is $50k take-home income, raising your prices by 20% in this example shifts you from doing 22 weddings to 17 weddings. It’s still hard work, but it’s closer to *normal*.
PRICING is sooooo important to building a sustainable business! (There are a million other reasons why pricing matters, but this is the biggest one.)
SOLUTION #2: CUT YOUR EXPENSES
Naturally, if you cut your expenses, your income will increase. You know this. Some of the biggest offenders that I see are the following:
- paying for ads that aren’t bringing any return on the investment
- doing wedding shows that don’t result in any sales
- dinners and lunches and coffees
Keep in mind, these are REALLY important. Just make sure they aren’t eating into your bottom line too much and that they’re bring you the results you expect.
ALSO – interestingly enough – cutting expenses doesn’t have as significant of an impact on your bottom line as our first solution, increasing your profit margin. Your ability to boost your profit margin (increase your pricing) is going to have a much larger impact on how much you earn than solely cutting your expenses. Do the math and you’ll see that I’m right.
SOLUTION #3: ADD OTHER REVENUE STREAMS
And… I’m going to break right here…
This is a series of blog posts all unto itself. I want to give you a chance to let the numbers settle in. Please come back August 30th where I’ll talk about adding revenue streams to your business.
For this series, I’d LOVE for you to share with me! If you have some fun ideas you’ve seen out there for ways to expand your income, please email me at michelle-at-sageweddingpros-dot-com and I’ll share your tip in our series and credit you and your business.
Please come back tomorrow where we’ll be learning from and Industry Insider. Next week we have a fun series where the masters in our field share with us how they work to perfect their craft.
Michelle,
What a fantastic series. I really applaud you for putting this out there. As a “high end” wedding photographer, our studio has hit all the high numbers. But what no one really talks about are the significant personal sacrifices required in order to do so. And when the “gurus” set themselves up as the expert who’s going to show you the way to higher income, they don’t highlight the marriage struggles and family sacrifices they have experienced, nor the high cost of maintaining their image (designer brands, fancy suites, limos lead to living beyond your means…which leads to foreclosure).
I have always felt there was something deeply wrong/broken with our industry that feeds off & chases after the glamour and wealth of our high end clients. It’s false and exhausting.
I’m glad to see that you are putting realistic information out there. People in our industry really need this kind of education, to stop chasing the “high end” and focus on the bottom line more.
Michelle – I agree with Lara. This series is absolutely wonderful and applicable for all entrepreneurs!! Thank you so much for taking the time to give some actual examples. Time to go crunch some numbers! p.s. – looking forward to the next series on adding other revenue streams!
I learned a long time ago– it’s never about what you make– it’s what you keep– and ultimately learning how to spend less than
that. The disconnect is when we can’t say “no” to ourselves, thus having to pay the consequences. Great series!!!
This series is really informative…I can’t wait until the 30th!
This series is great…thanks, Michelle. Question – when do you suggest raising prices or does it really matter? Would it be something done say at the start of the New Year? Would you tell your clients say in a blog post or something that prices are about to increase so be sure to get the current rates now? What are your thoughts on all of this?
Hi Cherin! Each business is different. I recommend that most wedding businesses raise their prices at the tail-end of the wedding season / beginning of the new season.. right in the ‘lull’. For example, Seattle’s wedding busy season tends to Mar-Oct, so I would recommend raising prices in January. In Florida, the slow season is Jun-Aug, so I would recommend raising rates in June here. Regarding “announcing the price increase” – for most wedding businesses I wouldn’t recommend an “announcement”. But I do recommend that wedding pros state on their rate sheet “prices subject to change” or “prices effective thru December 2011”. Because you sell product, you may want to announce that rates are going up – to spur people’s interest. But – not sure if that is in line with your target market and pricing. You can always try something once and see what results you get.
As always, thank you, Michelle! 🙂 My slow is pretty much just November and December, so I will work on doing it then if I do decide to raise them. Thanks!
and then there’s the price of your accountant, taxes, general business expenses to be paid quarterly, print and online marketing, commissions for referrals, etc, etc.
Although netting 6 figures is nice and it becomes a standard goal of folks in any industry, after all of the above, I’ve noticed a rough take home of 40% true profit over my last 20 years of working in music, sports corporate and weddings.