A couple weeks ago I had the honor of speaking on pricing strategies at Posh Retreat, a filmmakers retreat and workshop for women in Cancun Mexico.  This was a real treat for me.  For starters, I love speaking and I love teaching.  Also, it was a privilege speaking to a group of women business owners.  I love all you fabulous men out there, but let’s be real, we ladies have come a long way in the last several decades in our careers.  I have a lot of pride for my fellow fempreneurs!  Lastly, I’ve always secretly wanted to be a filmmaker so it was fun for me to see the inner workings of their craft.

Posh Retreat 2011

Posh Retreat is one of the best conferences I’ve ever had the privilege of speaking at or attending.  The seminars were informative and extremely valuable.  And, the participants were welcoming, fun, and generous.  And, not much needs to be said about the beauty of the Riviera Maya!

What blew me away is the talent coming from female filmmakers.  One of my favorite parts of the conference was viewing short clips of the participants’ work.  WOW.  The women of POSH bring creativity and artistry that is revolutionizing the wedding industry.  The emotional depth that the films brought to each event was moving and inspiring.  The storytelling was original and uplifting.

Truth be told, before getting married I didn’t understand the value of the wedding film.  And, not until I was in the industry for a few years did I really understand the need for a good wedding film or what made one different from another.  Now that I know better, I have a hard time understanding how two people could marry and NOT have a wedding film.

Here’s why…

When Andy and I married in 2004, we hired a videographer.  Being naïve to the importance of videography, this was a last minute service we added on.  What I didn’t know before that night that we married was that Andy’s 95-year-old 4’10” granny would stand up and give us the most beautiful impromptu toast about how we found ‘the rainbow connection’ in eachother.  It was the most beautiful thing I’ve ever heard in my life because Granny was one of the most beautiful ladies this world has ever been graced to have.  It meant so much because she and Andy shared the Muppets as an interest when Andy was a ‘small tike’ as she called him and the two of them had a very special bond.  Granny passed away a couple years ago.  I’m so glad we have this beautiful memory preserved on film.

I think we have some work to do.  Many of us in the industry understand the importance of the wedding film.  But, some of us aren’t there yet.  If you fall in the latter category, I want to ask a favor of you.  Spend a little time this week visiting a few of your local (or not-so-local) wedding videographers’ websites.  Learn a little bit more about their craft and their artwork.  Educate yourself on what a wedding film adds to the wedding experience.  It’s important for us as an industry to elevate this segment of the wedding industry in order for the engaged couple to value it also.  It starts from within.

I’m so very inspired by you Poshettes!  Thank you for such the special opportunity to collaborate with you.

Here are steps on collecting payment from non-paying customers:

1 – Make sure all payments are collected PRIOR to the wedding.

If you offer a day-of-the-wedding service, your contract and invoicing needs to indicate final payment BEFORE the event.  The day of the event can be a little chaotic for a bride to be whipping out her checkbook.  And, after the event… well… you’re certainly not a priority anymore as the couple heads off for their  honeymoon in Fiji.  It will become increasingly challenging to collect on invoices after the event has occurred.

If you sell a product, you need to consider how much of your work is at risk in producing that product.  For example, if you sell custom stationery you will most likely be unable to re-sell any client’s canceled orders.  (In my stationery business, I require 50% deposit at contract signing and 50% when production begins.  Once production has begun, the client owns all of that inventory and work we’ve put into it.  I don’t start any work on a job until I’ve received 100% payment.)

Make sure to time payments received with how much work you have put into servicing the wedding.  For example if you are wedding planner, you want to time the invoices with the work you are doing.  If you have only invoiced them for 25% of the fee and have done 75% of the work and they cancel their event, you may have a hard time collecting that 50%.  (See  #4 and #5.)

2 – Remind, remind, remind.

As I mentioned yesterday, the squeaky wheel gets the grease.  If the client has $1000 in their bank account, they’re going to make the check out to the wedding pro that is most insistent on collecting it.  Out of sight, out of mind.  Trust me, the more on top you are of getting paid, the less often you’ll face any problems.

If I’m expecting payment from a client, I have a ’3 strikes, you’re out’ policy.  After sending the initial invoice, I’ll send 3 reminders.  Each reminder has a due date.  If the client misses the due date, we need to have a deeper discussion.

3 – Learn what the problem is and work with the client.

If the client has missed all my reminders, I get that client on the phone.  I’m very sympathetic to people’s problems and I want to learn what is preventing them from paying me.  This sympathy goes a long way.  Ultimately, I want the client to pay me.  So I need to work with them.

If the client is having financial problems, some times it is simple enough to resolve by setting up a payment plan.  Maybe the $1000 bill was too hard for them to swallow in one lump sum.  But, a $200/month payment over 5 months may be a little more manageable.  If I can learn what the problem is with non-payment, then I can work to offer the client some solutions.

4 – If there is no response and the client owes you money…

If the client owes you money, you need to make some tough choices:

• If you are servicing them on the day of the wedding, will you not show?  If they haven’t paid you to render day-of services, this is a very real consideration.  Naturally, you need to let them know that if they haven’t paid you by the wedding, you won’t be showing up.
• If you do show and they have not yet paid you, you need to be at peace with the fact that you may never see that payment.  I’ve heard of too many situations where a wedding pro felt bad not showing up to service the non-paying client’s wedding.  This is business.  You HAVE to get paid for it.  And, if you still service the non-payment client, know that you may be kissing your income on this wedding goodbye.
• If they owe you money for services you already rendered or for a product they purchased, how will you pursue payment?

5 – If this leads to arbitration…

If the client owes you money, you can seek payment by taking them to court. Before going this long painful route, you’ll want to send the client a demand letter.  (Check out Nolo’s guide for writing a demand letter.)  The demand letter essentially tells the client, in the nicest way possible, to “pay up or we’re going to court”.  Most people will want to avoid this, so it’s a fair way to warn someone about the steps you’re willing to take if they don’t pay you.

And, if this doesn’t work, you can seek legal action.  Depending on the county where your business is established, you’ll have a threshold for seeking judgement in small claims court.  For example, in Miami-Dade county, claims of $5000 or less must be pursued in small claims court.  You’ll want to investigate this for your own county.  You’ll also need to decide if this is something you want to put your energy and time into pursuing.  Smaller amounts are generally not worth the time and the expense.

Has this ever happened to you?  What did you do? Share with us by posting a comment below.

Invoicing Tools

You want to keep invoicing as simple as possible.  There are some great invoicing tools which enable you to request payment from a customer in a few simple clicks.  Clients are able to submit payment quickly.  Here are my favorites:

Curdbee

I like curdbee (www.curdbee.com) because it’s not only simple, it’s inexpensive. Essentially curdbee is just a prettier way to send a paypal or google checkout invoice.  (I’m not a fan of those platform’s interfaces.)  You create an invoice with you customer’s name, email address, add a line item services and amount, and send.  Voila!  The client gets an http link that they then open up to view your invoice.  They are given payment options on paypal or google checkout.  (If the client wants to pay by check, you can also give them your mailing address to snail-mail a check.)  The trial is free and then the first plan starts at $5/month.

Curdbee is ONLY an invoicing system.  This is not accounting software and doesn’t integrate with any accounting software.  You’ll still need to input your invoices and payments received into your accounting software.  Revisit our Accounting 101 for bookkeeping tips.

Freshbooks

I like Freshbooks (www.freshbooks.com) because it integrates with 37signals’ Basecamp and Mailchimp.  It offers similar functionality to Curdbee, but has some great add-ons such as time-tracking and expense tracking.  Payments are also collected via paypal or Google checkout.  Paid Freshbook accounts begins at $19.95/month with a free 30-day trial.

Freshbooks has expanded its service to include bookkeeping (accounting software).  I haven’t dug into the bookkeeping features, but I think the bookkeeping features are quite limited and you are probably better off using a more tried-and-true software like Quickbooks.  (I don’t know about you but I’m hesitant to begin systemizing all of my bookkeeping using a system that doesn’t have much history.  Recreating accounting records is a nightmare.)

Quickbooks

Quickbooks (www.quickbooks.intuit.com) allows you to do all of your accounting (bookkeeping) and invoicing in ONE place.  There is no need to invoice a client using one tool and then having to input your invoices using something else.  The latest versions of Quickbooks allow you to create estimates, break up payments, send recurring invoices, and receive payment through Paypal.  Quickbooks also has it’s own credit card processing service.

Other Credit Card Processors

I have intentionally left out the traditional credit card merchant processing.  I think the fees tend to be astronomical for a small business.  I also don’t think it’s the most user-friendly payment form for many of wedding clients, unless they are physically in your office.  (So often I am emailing a client their invoices.)  If you do find that your clients want to pay by credit card in person, then talk to your business bank about their credit card processing options.  You can also check out Square (www.squareup.com).  I love how Square allows you to accept payment from anyone anywhere using your iPhone or iPad.  Again, make sure to read the fine print on the fees here.

Systemizing Your Collections

Streamline your payment process.  If you break up your fees into 3 payments for clients, look into an invoicing tool that let’s you set up recurring invoices.  If you want to have more control over sending invoices manually, create an invoicing and payment schedule whereby you are reminded to invoice clients.  (I put these reminders on my Google calendar.)  Always give your clients a due date and follow up if you haven’t received payment.

I learned something a long time ago in a previous sales job…  My friend was the collections clerk for the company.  She called clients with outstanding payments every other day.  When money is tight for someone, the person that gets paid first is the one that sends out the reminders and the due dates.  Squeaky wheel gets the grease.  YOU need to be ON TOP of GETTING PAID because it’s not always going to be the client’s priority to pay you.

What do you think?  What do you use to make it easy to invoice and collect payment from clients?  Share your tips in a comment below.

The culture of language in any business is fascinating.  It’s also fun.  It creates camaraderie.  It’s our own special language.

We also have this in the wedding industry: BEO, STD, DOC, F&B, FIL, MIL, MOH, BM… and those are just a few of the acronyms!  I’ve made the mistake of emailing clients to ask about their STDs.  It usually elicits giggles.  But, it probably causes them sit there for a few minutes, “What the hell is she asking me?”

The problem with the industry language we speak is that it can confuse the client.  We produce weddings 24/7.  These terms are commonplace for us and we often forget that not everyone speaks this language.  For a bride and/or groom, who has most likely never been married before, our terminology can be confusing.  And, worse than that, it can be exclusionary.  Without out knowing it, you may be distancing yourself from your client.

Soooo… wedding pros… keep in mind… this is all new to your clients!  Make sure to get back to basics when explaining how weddings run.  They’ve hired you to guide and educate them along the way.

Image: Creative Commons

Yesterday, I shared my 5 rules for adding revenue streams to your business.  Today, let’s talk about service and product lines that you can add to your business.  Keep in mind that one of my rules is to stay true to your niche and brand. Don’t add revenue streams just to make money.  Make sure that they make sense for your business.

Here are some ideas of ways that you can expand your revenue.  Be creative to find services that meet specific needs for your clients.

Expand to Other Milestone Events

This is a natural progression for many of us in the wedding industry.  We help people celebrate the major milestone of their wedding.  How about other milestones?  Baby showers?  Birthday parties?  Anniversary celebrations?  Many businesses in our industry attempt to do this, but few do it well.  They have a little blip on their website that mentions these other events, but they haven’t found a way to truly market it and price it so that it’s profitable.  (Revisit my rules 4 & 5 from yesterday.)

A couple of businesses that do this very well are Couture Parties in Newport, Rhode Island and Little Posh Parties in Las Vegas, Nevada.  Stephanie Frazier Grimm of Couture Parties is committed to throwing kids parties.  It’s not just a blip on her website.  She blogs regularly about these events and really targets the luxury kid market.  Juliet Douglas of Little Posh Parties (an off-shot of Green Orchid Events) has expanded her kid party services by organizing “A Date With Your Daughter”, a charity tea party for moms and little girls.  It’s a great way for her to give back and build relationships with potential clients.

There is a lot of opportunity for repeat business by expanding into other milestone events if you are committed to developing a marketing plan and financial strategy for making them successful.  I think our industry leaves money on the table by not exploring more “repeat business”.

Sell a Product

This is a tricky revenue stream to add.  I see a lot of “junk” out there that doesn’t really solve the clients’ needs.  Don’t introduce a product to sell as part of your business unless it’s a match for your brand and it’s meeting your target market.

If we listen to the needs of our clients we will see that they will express a need and desire.  It’s our job to provide the solution.  Being attentive to these needs is where innovation is born.

Carla David of Carla David Design did just this when she launched Say Cheese Props.  This off-shoot of her stationery and design business provides props for photo booths and sets.  Brides no longer have to spend time crafting fun gimmicky props for their photo-booth.  Carla’s also meeting the needs of photographers and event planners in our industry.  Win-Win-Win!

Some other products for you to explore as a revenue stream:

• renting out design equipment to your clients for their events (makes use of all those props, vases, linens, and etc that you’ve acquired, particularly true if you are an event designer)
• publishing an e-book for brides-to-be on your expertise (ejunkie.com makes it easy for people to upload and sell their e-books)
• development of a product that matches your brand (explore options in drop-shipping if you don’t want to produce the product yourself; creating a private label partnership with an already established product is also a great option)
• ads (if you have a successful blog, consider selling advertisements in the side column)

Partner With Other Wedding Businesses

Continue to explore ways to think outside the box.  Sometimes a wedding pro may be facing the need of client but doesn’t have the expertise to service their client in a way that you can.  Here’s a great example shared by Kateri Harried, owner of Klover Events.  She has been able to partner with bridal salons to help produce trunk shows.  It’s been beneficial to her business in the following ways:

• Expanding relationships with other wedding pros to promote the event and give them the opportunity to be a part of the “grand gift bag”.  It keeps her in the know of people in her area.  As Kateri said, “it keeps your finger on the pulse and you’re often the “go-to” on new business referrals. “
• She charges a fee to wedding vendors to be a part of the gift bag and promote their business to a high-end bridal audience.   (This added revenue stream is a great bonus for her business.)
• It is a smaller event that provides an opportunity to have direct contact with potential customers.

I love this!  Kateri has found a way to not only solve the needs of brides, but also bridal salons, while expanding her ability to meet potential clients.  Brilliant!

What are your additional revenue stream ideas?  Please share a comment with our readers below.

Image: Creative Commons

A couple weeks ago, I covered a series called “How to Make a 6-Figure Income – REALLY!”  We deduced that there are no short cuts.  If you want to make $100k+ income you have to work REAL hard.  I want to pick up where we left off and talk about building additional revenue streams for your business.

What is an additional revenue stream?

You started your business based on a desire to service brides and grooms with your craft.  And chances are that you are offering some wedding related service: wedding planning, design, photography, etc.  An additional revenue stream would be a service or product line that is different from your core service offering.

You may already be offering a few service lines.  For example a photographer that offers wedding photography and portrait photography.  Today and tomorrow, these blog posts will help you think of additional products and services you can sell in order to beef up your income.

My rules for additional revenue streams…

I’ve got 5 basic rules for adding revenue streams to your offering:

1 – Stick to your niche, your brand, and your mission

If you are known for an expertise or specialty, stick with that.  This isn’t the time to become the jack of all trades, master of none.  This also goes for your branding and your core ideology (or mission statement.)  Look back to these 3 things and see how you can bridge an additional service or product offering.

If your specialty is carnival-themed weddings, this isn’t the time to branch out into vintage rustic chic weddings.  Stick with your niche and your branding and grow from it.

2 – Build upon the strengths of your business

Use the strength that you’ve built as a starting point.  If you’ve become known for carnival-themed weddings, maybe there is an opportunity to sell a few carnival related items from your website or publish an e-book on carnival-themed events.  Use your strength to build more strength.

3 – Think outside the box

There are so many opportunities out there just ripe for the picking.  Be creative and resourceful.  What are some of the complaints/frustrations/challenges you hear from engaged couples about the planning process?  Do you have a good solution?  Pay attention to the needs of your clients and you may come up with a great way to service them.

Don’t be afraid to try something and see how it works.  It’s OK to package something as a “beta trial” for a discounted rate until you fine-tune the service or product and can fully launch it.  If you find in the trial phase that it’s not a fit for the client or your business, then scrap it and look for something new.  If it works, find out how to market it and sell it.

4 – Cover your 4 Ps of Marketing

What is the Product (or Service) you’re selling?  How will you Price it?  Where will you Place it to be sold?  (Or – how will you distribute this product: retail, wholesale, direct, online.)  How will you Promote this?

5 – Look at the numbers

Do the math.  How much will it cost you?  How much will it earn you?  Is it worth the time and money?

Tomorrow, I’ll be sharing some revenue stream ideas for your business.  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 before 5pm EST today and I’ll share your tip in our series and credit you and your business.

Image: Creative Commons

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 Tuesday and Wednesday 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.

Image: Creative Commons License

This week I’m talking about the “6-figure income”.  I see a lot of people who want to show me how to make 6-figures in my business.  But, I’m questioning the math this week.  Yesterday, I showed you what 6-figures looks like when you make $100,000 in sales.  (Go back and read the post to see why this is a WRONG way to calculate your income.)  Today, we are working on Example 2 with our sample business.  We will examine how to earn the $100,000 as our NET income (bottom line).

The assumptions that we laid out yesterday for this sample wedding planning firm include:

• Has been in business for about 3-4 years
• Is in a mid-sized metropolitan area
• The business has 3 packages that are priced at $2000, $4000, and $6000 ($4000 being the package that is sold most often)
• Does not have permanent staff members but has 2 event assistants as contractors (These event assistants are paid $150/event and are generally both in attendance at each partial or full planning client’s event)
• The business has $2500 in monthly expenses (which comes out to about $30,000 annually)
• The business is an LLP which means that the owner draws their own personal income from earnings (in layman’s terms: the owner takes a “draw” not a “salary” and typically this is taken after expenses are paid, from an accounting standpoint)

Example #2
Let’s take a look at what 6 figures looks like if you have it as your BOTTOM LINE, your net income.  This is the actual income that you get to draw as an LLP (or sole proprietor) – but still have to pay your 1040 taxes on.  What do you have to do as a business owner to achieve that for your bottom line?

I’m going to back into these numbers, because this is all I know so far:

Income                                           $   ?        (this is what you actually do in sales)
Costs of Services Rendered        -     ?        (cost of labor: 2 assistants at $150/each for 25 events)
Profit Margin                                       ?
Expenses                                     – $30,000 (we know this from our above assumption)

Net Income                                $100,000 (BOTTOM LINE)  (this is what we are trying to hit)

NOTE: I apologize in advance for the algebraic equation… but stick with me!  (If you want the easy-peasy spreadsheet for this where it auto-calculates using your pricing and costs, check out our sales plan download.)

STEP 1

Since all we know is this: Profit Margin – Expenses = Net Income

THEN…                               Profit Margin – $30,000 = $100,000

Means that Profit Margin must = $130,000*

(awesome!)

STEP 2

OK… let’s figure out that top piece (income and costs).  We can figure these out by examining our average sale and average cost of services rendered (or, cost of labor) for 1 singular wedding by doing this…

The average package sold is $4000 and we know that 2 assistants attend this event for $300.  So for each singular wedding (on average) there is a profit margin of:
Income from 1 wedding:                     $4000
Cost of Services from 1 wedding:       – $300
Profit Margin from 1 wedding:              $3700

STEP 3

YAY!  We know the profit margin from one wedding!  So, now we can use that to figure out how many weddings we need to do to achieve the $130,000* annual profit (from Step 1).  (If it helps, here is a ratio:  If $3700 is the profit margin for 1 wedding, then $130,000 is the profit margin to ??? weddings?)

How many weddings does this business need to do to make that $130,000* annual profit?

$130,000 annual profit / $3700 profit from one wedding = 35.1 weddings! (let’s round up to 36)
OR
36 weddings x $4000 price = $144,000 in sales (income)

And, on 36 weddings, you’ll have the 2 assistants at $150 each which calculates to: 36 weddings x 2 assistants x $150 = $10,800

What 6 figures looks like:

If I’ve totally lost you… this is what the math looks like after all the calculating:

Income                                            $144,000
Costs of Services Rendered        – $10,800  (cost of labor: 2 assistants at $150/each for 36 events)
Profit Margin                                    $133,200**  (see note)
Expenses                                       -  $30,000

Net Income                                 $103,200 (BOTTOM LINE)

(**Note: $133,200 is the profit margin for 36 events.  The amount we were trying to back into was $130,000* which is for 35.1 events.  We are rounding up so the number results in the $133,200 amount for profit margin.)

CONGRATULATIONS!

You hit the 6 figures!  Wooohooo!  Your Net Income, $103,200 (bottom line) is what you get to take home after all is said and done.  THIS is what you actually draw as the owner of an LLP (or a sole proprietor) before paying taxes.  THIS is a 6 figure income!!!  YOWZA!  You did it!

But – wait – 36 weddings.  Is that realistic?  Is that normal?  Oh – I know it’s possible.  I’ve seen it done. But – REALLY – it’s kinda insane!  It’s especially insane with only 2 weekend assistants who are contracted only for events.

Like I said: making 6 figures takes REAL HARD WORK!  It disappoints me that I never see this math done for people when $ is being discussed with small business owners.  There is no quick way around this.  If you want to make 6 figures, you better WORK super hard!

We all know that business ownership is hard work.  But, if you want it to be a little less hard (LESS insane) you’ll have to adjust these numbers in order to reach the 6-figures.  Increase your price, cut your costs, and cut your expenses.  OR… explore additional revenue streams.  36 weddings may just put you in the grave.

Tomorrow, let’s circle back here and talk about changing your profit margins and what additional revenue streams might be like.

Image: Creative Commons

I see a lot of talk about “how to make a 6-figure income”.  This is not only in our industry but also outside.  A lot of people are playing up to fantasies of becoming rich quickly.  I used to be an auditor and thus have an insatiable urge to validate this with calculations… honest-to-god facts and figures.

This week, I’m going to share what it *REALLY* takes to make 6-figures.  Here’s a hint: REAL hard WORK!  No more, no less.  But, read on for the nitty-gritty details.

The MATH behind 6 figures

Let’s go through some easy-peasy math first.  I want you to really understand what 6 figures looks like from a small-business accounting angle.  First, let’s have some assumptions for the example I’m going to give.  The example business is a wedding planning firm that:

• Has been in business for about 3-4 years
• Is in a mid-sized metropolitan area
• The business has 3 packages that are priced at $2000, $4000, and $6000 ($4000 being the package that is sold most often)
• Does not have permanent staff members but has 2 event assistants as contractors (These event assistants are paid $150/event and are generally both hired for each partial or full planning client’s event)
• The business has $2500 in monthly expenses (which comes out to about $30,000 annually)
• The business is an LLP which means that the owner draws their own personal income from earnings (in layman’s terms: the owner takes a “draw” not a “salary” and typically this is taken after expenses are paid, from an accounting standpoint)

Example #1:
Now when most people talk about “6 figure income” they are referring to the sales made.  (A sale being exactly what you charge your client.)  This means that sales total at least $100,000.

Let’s move into the math. Using the average package of $4000, this business needs to do 25 events to achieve $100,000 ($4000 per event x 25 events = $100,000)  VOILA!  You now have your 6 figure income!  NOT SO FAST!  Let’s see what this looks like with your BOTTOM LINE:

Income                                        $100,000
Costs of Services Rendered        - $7,500  (cost of labor: 2 assistants at $150/each for 25 events)
Profit Margin                                  $92,500
Expenses                                       – $30,000

Net Income                               $62,500 (BOTTOM LINE)

This Net Income is what you are left with as the owner of the business.  THIS is what you actually draw as the owner of an LLP (or a sole proprietor.) THIS is your personal income: $62,500 – not the 6 figures of $100,000.  Hell, it’s a really nice income, I think.  But it’s NOT a 6-figure income.

All that matters in terms of your own income is the bottom line.  What happens if this business’s expenses were $7500/month – or $90,000 for the year?  (I know this is a LOT, but play along with me.)  The bottom line would be $2500.  That sure doesn’t look like 6-figures to me.

You see… making 6-figures in your sales doesn’t really matter.  You have to examine your business as a whole.  You have to look at your bottom line.

What do you think about this?

Come back tomorrow… I’m going to do some more math and show what it takes to get $100,000 as your BOTTOM LINE!  HINT:  a LOT of HARD WORK.

Image: Creative Commons

Yesterday, we discussed how quality will always triumph.  Trends will come and go, but over time, it is quality that keeps people coming back for more.

Quality runs deeper than your products and services

Quality isn’t just about the deliverable.  It runs much deeper than what you are actually selling the client.  And, it usually starts long before the exchange of goods.

Here’s a story…

I recently had an inspection by a bug control company on our home.  (I know this is NOT at all glamorous – but it’s the truth about living in humid Florida.  It’s a necessity.  I’m being REAL here.)  Now, a bug company is a bug company – or so you would think.  But, I was VERY impressed with this company. Keep in mind that my opinion on the quality of this company is ONLY based on my meeting with the salesperson inspecting our home.  They have not actually delivered any services to us.  Here is what I liked about this company:

• Punctuality! 
  Delivery on promises
• Friendly Demeanor!  (this should be a given, but hard to keep up when we are stressed – am I right or am I right?)
  Personality match
• Time!  (I felt like he wasn’t rushing me with my questions.  I felt like I was the only client he had today.)
  Attention
• Dressed for Success! (he was wearing the company uniform, complete with his monogrammed name on his shirt)
  Attire = Branding
• Education! (took the time to teach me all about the options and explained what he thought was the best fit for us)
  Knowledge
• Presentation! (great folder with my quote, with education on services, options, nicely organized)
  Packaging = Branding

All of these added up to a huge PLUS in my mind in regards to this company’s quality of services.

There was no pressure tactic.  There was no big sales pitch.  There wasn’t even a powerpoint presentation or slideshow or photo montage.  But, I bought into this company BIG TIME!  {It’s only bug spray! I know – so silly.}  But this nice man walked out of our home and I thought to myself, “Wow – these guys do a REALLY great job!  I don’t even need to compare prices.”  The feeling of quality that I get from this consultation has already won me over.

How do I know this?  How do I know they are going to do a good job? 

I won’t know for sure until they do the job.  But the consistency of all of these factors give me the feeling that they are going to do a great job.  I trust this company.

Consistency –> Trust in the Quality of a Company –> SALE

So… now I trust in this company (that I really don’t even know) because of all the consistencies in the salesperson’s presentation.  He’s got me signed up.  I am a customer!  He’s got my contract and will soon have my money.  Done.

But guess what?  This company could still lose it all…

If the quality of the service does not match up with the promise, I’ll never do business with them again.  They have to deliver.  (It’s like I was saying yesterday with the quality of my gelato.)

Consistency –> Trust in the Quality of a Company –> SALE
+
Consistency –> Trust in the Quality of a Company –> SALE –> Delivery = CUSTOMER for LIFE

Quality begins in the sales consult.  If you can get the customer to trust you, you’ve got the sale.  If you can deliver on that promise, you’ve got that customer for life.

Don’t we all want customers for life?  (Or referrals for life?  In our business, solid quality will lead to referrals.)