Why you need a wealth mindset to grow a six-figure business
Today I want to talk about wealth. I want to talk about wealth because it is impossible to grow a six-figure business when you don’t know what wealth is or how to create it.
I know and coach many entrepreneurs trying to start and grow thriving businesses when they don’t know what wealth is.
If you are running a business that has not reached the $100,000 mark and/or is not where you want it to be financially I want you to temporarily take pause and read on.
Because if you don’t have a wealth mindset (as discussed in the following steps) you will continue to struggle:
- Understand how wealth is created
- Be specific about what you want to earn
- Pay close attention to your financials
- Hire trusted advisors to support you
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Understand how wealth is created
In “Common money problems and how to solve them” I discuss an old essay about wealth by venture capitalist Paul Graham. One of the most powerful insights he provides is:
wealth is all the things we want (house, travel, advice, etc.)
wealth is created by generating the equivalent in value
money is a way of shifting wealth (a medium of exchange)
Let’s break this down a bit more. When you start a business your goal is to generate value by creating wealth (i.e. making something that someone else wants). Money then comes to you from your customer in exchange for the wealth you created for them. This money allows you to go out and get what you want (i.e create wealth for yourself).
To make it even more clear: you need to know what you want (the wealth you want to build for yourself), figure out its equivalent in a dollar amount, and then create something that’s valuable to another person that matches what you want in value.
The number one issue I have to address as a business coach with my clients is the reality of how wealth is generated. Many business owners have ideas for products and services that are not valuable — i.e. they can’t identify a thriving base of customers who want what they have on offer at the price they are offering it.
So allow me to be a broken record and drive this home once more: if you want to build a six-figure business you need to be creating at least six-figures worth of wealth for your target market.
Be specific about what you want to earn
If you want to build a profitable business you also need to be as specific as possible about what you want to earn (and why) so you can organize all of your business activities around that goal.
Let me give you an example from an actual client. This client is a creative entrepreneur who came to me in order to make more money with her business and gain financial stability. There was a lot of inconsistency in her income making it hard for her to rely on her business to support her livelihood.
The first thing I asked is how much she wanted to make and the second question was why.
I discovered that my client had a strong desire to buy an apartment in a big city (her definition of wealth). I asked her to research a few requirements for homeownership in that area and she found that the minimum amount she would need to make to qualify for a good loan would be $150,000 (the equivalent value in money she needs).
This became her new earnings goal (i.e. what she wants to “take home” after expenses) and just knowing the what and why put us in a better position to create a financial plan for her business.
Having the why also served as a strong emotional driver that motivated her. She came to me a bit discouraged but with the vision of her new home top-of-mind she has that much more dedication to do what needs to be done to hit this goal.
We put a deadline of end of the year on this goal and came up with a simple breakdown of the figures she needs to achieve:
- $150,000 a year take home goal
- $12,500 a month net earning
- $2,500 monthly expenses
- 15,000 gross earnings (including expenses)
- $750/month rate for her services
- 20 clients needed per month to hit gross earnings
Instead of her scrambling to find 20 new clients every month, we came up with a monthly membership program (i.e. wealth for her clientele) that we believe will resonate so she can lock-in recurring revenue.
By looking at her past conversion rate we know that she has the ability to close 25% of her leads. So her goal at the moment is to identify and make a list of 100 qualified leads.
Once she has her list we’ll work together to outline the best approach to outreaching and pitching her services to maximize success. Because she already has a strong network of existing clients and supporters, I have no doubt she’ll be able to completely fill her membership program in 3-6 months.
We also believe she will have a strong retention rate because of the quality of her work so most clients will stick with her for a full year. We calculated a retention rate of 80% so each month 20% will drop out and she’ll only have to worry about bringing in 5 new clients per month (which she’ll hit via a word of mouth strategy we’ll build in the near future).
These facts and figures have been slightly tweaked to protect the client’s data but you get the gist. We came up with this whole action plan (the how) in only two coaching sessions because of two simple questions (what and why).
You can see how this all ties back to understanding what wealth is. Answering these questions for yourself with as much detail as possible will provide you with a higher goal to peg your work to. It’ll also empower you with the raw data you need to make smart decisions about where you spend your resources.
Pay close attention to your financials
I’ve coached many entrepreneurs who don't have a clue where they stand financially — from both a business and personal perspective.
They can’t articulate their pricing clearly, don’t understand their cash flows, and haven't projected where they want to be income-wise in the near future.
This typically leads to a whole host of issues such as feast and famine cycles where one month business seems like it’s thriving and the next the coffers have completely dried and you’re scrambling to make ends meet
I’ve struggled with this too. I had hidden beliefs and fears about money that caused me to literally ignore my financials for long periods of time (like being too afraid to regularly check my account balances). My businesses didn’t start thriving until I addressed the negative mindset behind my negligent behavior.
The definition of an entrepreneur is someone who takes on financial risk in order to turn an idea into a valuable product (wealth for someone else) that they believe they can profit from (wealth for themselves).
Again, the whole point is to create wealth for yourself by creating wealth for others — but you can’t accomplish this if you don’t pay attention to the important figures that convey the health of your business.
I now handle my financials in-house but for over a year I used Bench to do my bookkeeping as part of a bigger effort to improve my mindset in the area of financial accounting. Bench is a financial service for small businesses and they helped me keep a solid handle on my income and expenses and monitor my bottom line.
If you aren't good at accounting or don't want this part of your business taking up disproportionate amount of time there’s still no excuse for not tracking your financials. Bring in the pros who will tackle this area for you while you focus on running other parts of your business.
You can even try Bench out by signing up for a trial and get instant access to a dedicated advisor and their sleek platform. They’ll do a month of your bookkeeping and provide you with a set of financial statements for free.
Hire trusted advisors to support you
I’m already skilled at generating six-figures but I’m currently working on a new venture with aggressive income goals in a short amount of time (mid six-figures in one year).
I could totally go at it alone but I’ve learned from experience that smart entrepreneurs make strategic investments that amplify their efforts for faster and better results.
So just last week I committed to investing in a set of advisors — including a lead generation agency as well a financial coach — to support my goals.
That’s right. Despite being a business and marketing coach and strategist I still thought it imperative to get help. My job as an entrepreneur is to add value (i.e. create wealth) as quickly and efficiently as possible — not to waste time, energy and money trying to do everything myself.
The same is true for you. You may not realize it at the beginning but you will ultimately end up in a worse place by not getting the support you need. No matter if it’s arrogance or ignorance, it’s important to get out of the DIY way of thinking.
This self-limiting belief stops you from asking for help or being willing to spend money on sound counsel. It’s a scarcity mentality that many business owners struggle with, not realizing how it hurts their performance.
Sure, there are skills that you are strong in and areas of your business that you’d be wise to save money on because you are qualified to handle it on your own.
But speaking from personal experience — where I struggled for years to make my first six-figures as an entrepreneur even though I made six-figures for years as an employee — it’s always better to be mindful of your own energy and have enough faith in your idea to invest in the people and services that can take you further.
I’d first start with the Bench trial and get the free financial statement which will offer a clearer picture of where you need the most help. Then you can research and find the additional assistance you need (be it a coach or consultant) to move forward.
This article was written in partnership with Bench, my recommended platform for small business owners who need an easier way to conduct bookkeeping and keep track of their financials.
Bench gives you a dedicated team of bookkeepers that interact with you via a sleek platform. Each month they output key financial statements (including income and expense reports) that empower you with actionable insights that’ll help you grow your business.
You can get started with a 30-day risk-free trial where they’ll do a month of your bookkeeping, and give you a free income statement and balance sheet.
I’m an affiliate for a very select number of business services I trust and have thoroughly vetted by using myself. I will receive a small affiliate fee for any sales I generate.