April 28, 2023
Let’s Be Honest – Most of Us Aren’t Getting Rich
Guest post by Kristin Meador, CPA
As many female business owners know, it takes sacrifice to start a business. Success doesn’t happen overnight. In fact, about 50% of small businesses will fail within 5 years according to the Small Business Administration (SBA). In this post, I want to normalize the fact that most of us aren’t getting rich from our businesses, or even making a living wage.
Dollars and Cents
I’m a CPA for many small business owners. In my daily work, I see first hand my client’s business health reports. Many businesses aren’t profitable, and many founders aren’t able to take home a paycheck until about 3 years into their journey.
When they do finally pay themselves, most founders take home a meager salary of about $50K-$60K per year. That’s on par with the annual mean wage of a US full time worker of $53,490 per year (according to the Bureau of Labor Statistics).
Why Don’t We Make More?
So why aren’t we getting wealthy from our businesses? There are several roadblocks in our way.
1) Lack of Sales
The first key indicator of a business’s health is its sales (also called revenue). Without sales, you do not have a sustainable business. This is also the area where most business owners get stuck. They don’t have the level of sales they need, and they’re constantly in feast or famine mode.
How to make sure that you don’t get stuck in this rut? Make sure your business plan is viable and you know exactly how much you need to sell to make it succeed. Make sure to get an audience or a few key customers first before going “all in” on your business.
2) Lack of Profit
After the sales roll in, many business owners get stuck in the profit rut. Profit, simply put, is your sales minus your expenses. Many businesses spend too much too quickly, thus eating away at their profitability and not leaving enough to pay themselves.
How to prevent this? Look into the Profit First methodology by Mike Michalowicz (life changing and simple to implement), which will coach you to pay yourself first. Invest in a Virtual CFO to help you stay on track.
3) Lack of Scalability
Lastly, after you figure out how to maximize your sales and profit, the next hurdle to building wealth through your business is scaling. Scaling your business takes you out of the day-to-day operations, and allows you to sell even more without having to clone yourself.
Many business owners get stuck here, essentially staying in the “freelancer” mindset instead of moving fully into a self sufficient business. As a one-man (or woman) show, your income is heavily capped based on the hours you can put in.
How to get unstuck? Make sure that you are strategically hiring team members (within your budget) to delegate where possible. Don’t just duct tape your team together, be intentional. Again, a Virtual CFO will help with this.
Why Does Social Media Say Otherwise?
When scrolling through your feed, you likely come across dozens of female entrepreneurs that appear to have truly “made it”. From the outside looking in, they are living a glamorous and expensive life.
However, the above statistics tell us that there’s a good chance that her business isn’t as successful as it appears. Similarly, her expensive lifestyle could likely be funded by debt. Most adult Americans have some form of consumer debt, including many owing large balances on credit cards.
Don’t fall into the trap of comparison. Likely, the person selling you that course or program is just one small step ahead of you in their entrepreneurial journey, not the millionaire that she may seem to be.
How To Support Each Other
Sometimes, talking about money is difficult even with your close network of friends. However, as entrepreneurs these money conversations are important to have to protect our mental well-being. We need to find safe spaces (or communities like Aught) where we can have these conversations with our cohorts.
It’s important that we are open about our business’s financial situation to show other women that they are not alone. It’s also important that we ask directly for support from other women in our network, whether it be sharing on social media or buying our newest product.
Kristin is the owner of Gradient Accounting. You can find her on social media @travelingcpachick and at her website.
Come sit with us!
For female entrepreneurs at all stages, this is a safe space for you to ask questions, vent about an annoying business concern, get advice, make friends who “get it,” and more.