Money Talk.

What will your life be like at 6-figures per month? I can tell you from experience it’s not exactly what I had imagined.

I know people say you shouldn’t talk about money since so many people make crazy claims on the internet, but we NEED to talk about it! We’ll tackle questions like…

What does it actually look like when a business makes $100,000/month?
How does that money get spent and where does it go?
What should I be doing with that money?

Watch the episode below and get ready for a reality check. We’ll crunch some numbers, but don’t worry! You won’t need a pen and paper. Let’s break down the things that really happen at the $100k/month level of revenue in a business.

 

 

Video Transcript:

Today I want to talk about the thing you’re never supposed to talk about- Money.

And I know that the internet is just like full of people with massive money claims, and I want to talk about what it actually looks like when a business makes that much money. How that money gets spent, where it goes and what you should be doing with it.

Some of you may not even be anywhere close to the big numbers with the people that you follow. And you might dream about oh “what would my life look like if I could make that much money.” And today, I want to do a little bit of a reality check.

Alright, so I want to talk about the big numbers. $100,000 a month.

Someone said to me, her name is Allie, she was like, “I want to think about what my life would be like when I’m making ‘Julie money’.”  

And in March of 2017, I crossed the 100k a month mark for revenue in my business. And I remember thinking, “oh that’s what it feels like to hit 100k.” Because what actually happened versus what I thought in my head was completely different.

So I would like to do a little math. Don’t worry, you don’t need a piece of paper or pen or anything.

But I just kind of want to break down what happens at that level.

If you’re making, 3,4,5 thousand dollars a month, chances are if you are an online business, most of that is profit, right. You probably have 80% profit, maybe even 90%. Because let’s face it, things like you know ClickFunnels and ConvertKit cost a couple hundred dollars a month.

As you begin to scale, you have to get things like you know, higher level packages, let’s say your email service provider, gets more… as your list grows. You also need to get contractors.

So, things grow, right? So in an online business, you want to look that as you start to scale 35-50% profit margin.

So at the 100k mark, it’s pretty common that you actually, at the end of the day, probably only have somewhere between like 35-50 thousand dollars less.

Now, I know- That’s still a lot of money.

But I want to just make it really clear that it costs about 30 to 50 thousand dollars to make 100 because I’m using a lot of that money in Facebook advertising and in labor costs.

Okay, so let’s pretend that you’ve made 100 thousand. We’ve chopped off fifty, now you have 50 thousand dollars left. So what happens next?

Well… Uncle Sam. Uncle Sam will take anywhere between 15 and 25 percent of that profit after everything is said and done, right? Sometimes it’s higher depending on the state  that you live in.

Okay, so you have 50 thousand left, right? So, you gotta put aside money for taxes. So about 20% would be 10 thousand. So 25%, 30% would be 15 thousand. So let’s take 50 and let’s subtract 15.

So now what do you have?

Now you have 35 thousand dollars which is still really freakin awesome.  But remember, we started at 100. So for those of you who are dreaming about the 100k months, now we are down for to 35.

The reality is that for most of us, we don’t think about business savings, and business savings is so important. Because especially in businesses when you’re not always where your leads are going to come from. There may be months where things don’t work out as you thought.

Or  you have lower revenue months. So you want a nice cushion. You want to be able to run your business for several months, just on your savings.

It also helps if you have things like conferences or events or you know, unexpected travel. You have that savings.

So what I do, is I take that 35 thousand and I chop it in half.  And half of 35 thousand is what, 17-ish. 17.5. So 17.5 just goes right back into the business savings account.  And that is expressly for investments and projects and things that would just come outside of the normal monthly budget.

Which means I have 17 thousand dollars that I can take as a distribution.

So, 100k months means about 17 thousand in my pocket, as an LLC or a sole proprietor, or however, it is you file.

So that is a lot different than 100. And that starts to give you some perspective. So if you have these like grand ideas that you’re going to have, you know, this multi-million dollar house when you make 100 thousand a month. I wanted to give that perspective.

So what I’m doing, I’m taking a distribution once a quarter. So that’s 17 + 17 + 17, assuming that everything was like completely the same for three months. I would take those three months, and that’s a little bit less than 60 thousand dollars. And that would be a distribution.

So what do I do with that money, right? That’s a lot of money.

Well for those of you who know my story, I had to play catch up. I had to buy a house. I had to start funding my 401k,  I had to start putting aside money for college for 4 kids, like all the children.

Umm, so for me, 60 thousand dollars a quarter is going all into those big giant purchases.

So that may not be the sexiest explanation on what to do with that kind of money, but it’s really realistic.

So I wanted to encourage you if you’re starting to scale your business, here’s my advice: My advice is that you try to make sure your profit margin is somewhere between 35-50% if you’re an online business.  If you’re ecomm or brick and mortar, it’s going to be a lot less.

Second, I would say that once all your expenses are paid and you’re going to take a distribution, leave half of that money in a business savings account. To save for the big projects and investments and things that you want to do that are not part of your regular monthly budget.

And then whatever is left, I recommend you take that quarterly, not monthly. That way you have a big and that way you can kind of plan and think about what are we going to use this money for. Like, what big project. Whether it’s a big vacation, a new car, a new home. What are we going to put it towards?

Or if you’re still, you know, struggling financially, you’ve got debt you know. Pay down that debt.

The other thing you can do is you can take that quarterly distribution and you can imagine it over the year and start to pay for things or you can see the new ideas. Let’s say you want to go to Disney World. It’s going to cost 10 thousand.  You can start to put that money aside.

When you do it this way, you ensure that your business stays healthy and your personal finances stay healthy.

So if that was helpful for you. If you have any questions about money, put your comments below. Let me know what you’re doing with your extra money at the end of every month.

And of course, you can leave a message about this episode or any of my other videos over at juliechenell.com.

You know the best conversations happen after the camera stops rolling so please, let me know your thoughts about this and have a great day.