Revenue, Profit, Income: Why Your Numbers Don’t Mean What You Think

Welcome to Million Dollar Grit, the podcast that dives deep into the world of entrepreneurship, where tenacity meets strategy and dreams meet reality. My name is Julie, and I explore the raw, often overlooked truths of what it takes to succeed in business and in life. It's not just about the glossy success stories. It's about the grit it takes to get there.

Hey, everyone. Happy New Year. Welcome back to Million Dollar Grit. I hope you had a lovely holiday season. I know I did. And it is Monday, January 5, at the time of this recording, and it really feels like January 1st to me. I don't know if it was the way that Christmas and New Year's fell this year, but even though January 1st was on a Thursday, it really did not feel like the new year until today. I know starting the first Monday in January with an episode on finances may not be the best decision, but I'm feeling really rejuvenated and excited for the year. And I want to talk how to figure out how much money you can make with an offer. And this is an audio podcast, so you're going to have to bear with me. You may, if you're listening to this, want to re listen to it when you can sit down and scratch out some math yourself? Because I find that a lot of people go into the new year and they don't really understand. They know what their offers cost and they know how much money they want to make, but they can't, like, put those two things together right. And that's really important to be able to put those two things together. And I want to just do an example today. Maybe this will help you figure out how to make sure that the goals, the revenue goals that you're setting are attainable with the offers that you have. Let's begin with the example of a business owner who wants to make half a million dollars a year. So that's $500,000 a year. The interesting thing is that when someone says, I want to make $500,000 a year, you really have to ask yourself, are you saying you Want to earn $500,000 of revenue or you want $500,000 of income? There's actually another number in between or another like, yeah, number in between. And that is profit. $500,000 of revenue means total. All the money coming into Your business equals $500,000 $500,000 of income, which is, I would call it money in your pocket, meaning your business does a certain amount of business. Then there's expenses, then what's left over is profit. But then there's Even something we have to consider after profit, which is bum, bum, bum taxes. And then after taxes, we have what's left, which would be income. You might call it a distribution, you might call it an own draw, but it's, it's the actual money that you get to put in your pocket. $500,000 of revenue and $500,000 of income are completely different businesses. If we talk about the number in the middle, the $500,000 of profit, that is not quite as far between revenue and income, but there's still a gap between a $500,000 profit business and a $500,000 revenue business. And when you're looking at online businesses, you can usually expect your profit margin to run somewhere between 30 and 50%. Now, that will be lower if you're services, and it will be higher if you're digital products. The irony is that right now, or I would say over the last six years, there's been all of this, I don't know what the word is, but like, trend towards digital products and passive income. But the irony is those are the businesses that are most at risk with how AI is running right now. So if you're a service business or you're an agency and you do a high level of strategic services that AI is not quickly replacing, even though your margins are lower, you actually might be in a slightly better position now. The tables have kind of turned, which I think is interesting. But for the sake of this example, let's just say we're a coach or a consultant of some kind, and we, when we answer that question honestly, we say, okay, we want $500,000 of revenue. What does that look like? And for the sake of this example, let's just pretend that we have a 50% profit margin, because that's going to be easy. That means that if you're making $500,000 a year, you are spending $250,000 in expenses per year. And if you divide that by 12, right, you realize a business, a $500,000 business, is actually quite expensive because it's going to require about $20,000 a month of expenses. And those could be things like contractors, those could be software tools, those could be advertising costs, project costs. I mean, it's not, not cheap. It could also make you feel a little excited, like, wow, I actually have some, some room to work here. I can actually spend money to make money. If you're asking about a $500,000 revenue business, and that's your goal for 2026, and you operate with a 50% profit margin, that means your profit at the end of the year will be 250,000. That is not your income, that is your profit. At that level of profit, you are going to be taxed heavily in the United States. I believe you're not at the highest tax bracket, but you're close. I believe the highest tax bracket as of right now is 37.5% federal income tax. So about 37%. And then depending on what state you live in, you would have some income tax as well. If you had a business that had presence in any other state. Right. Maybe you hired someone from another state or you have affiliates doing a lot of affiliating in that state, you might have presence in a couple states. And that is why once you get over $400,000 of profit, I highly recommend that you just put aside 50% towards put it in a long term savings account so you're gaining interest. But then you're going to go ahead and put that towards taxes. And then if you don't have to spend it all, great, then you get to give yourself a return. But that's kind of where that philosophy comes from. But at 250,000, you're not quite at the highest tax bracket. But for the sake of an audio podcast, we're just going to go ahead and do simple math and we are going to say let's just divide that in half, right, at 250,000, that means 125,000 is going in a tax account and 125,000 is going in your pocket. That means that a $500,000 revenue business is giving you a salary, or it's not really a salary, it's a distribution of $125,000 a year. Still not a bad gain. But at $500,000 of income, right, you are actually looking at, oof. I mean you're looking at probably a million dollar business. This is why it's so important to get your numbers clear. I find that a lot of people do, you know, do think about that and that is one thing. But now let's, let's go to the next piece, which was what I said at the beginning. Do you know that your offers can get you to that goal? Now I would say that if you are getting to spend $250,000, half of your revenue on expenses, the majority of those expenses probably are going to go towards the offers, right? Building the funnels, running the ads, having the contractor, the community manager. Okay, so you do have some wiggle room here to spend some money, let's say. As a Coach, you have three offers, okay? You have a $5,000 offer. That's your actual one to one coaching. It's not scalable, right? You can't do tons of them, but you do like them. You also know that the majority of your audience can't afford it. So it's not like going to be every. That's not going to be your primary business driver. You also have a $1,000 group coaching program that is a lot more scalable. That is actually where you want to make the bulk of your money. And then you have a low ticket offer that totals about $50. What I would say is ask yourself, what percentage of total revenue do you want each offer to pull? So like if this were my business, right, If I am a, a coach and I'm doing the non scalable $5,000 offer, I probably only want maybe, I don't know, let's say 10% of my revenue to come from that. Mainly because I want to have time to do other things. And at 5, you know, at 10%, right, that of this number that we're doing, that means I have to sell 10 units. That's really not bad. That's like one client a month, right? No big deal. The $50 low ticket funnel, I actually don't expect that to earn any of my revenue, hardly. I think I just use it to acquire leads. So that means that the $1,000 offer has to pull in about 75% of my revenue. So let's just do back of the napkin math. This is important to do. Okay? So if I want to make $500,000 a year in revenue and I want 75% of that income to come through my thousand dollar offer, that means I have to sell 375 units. 375 people need to go through that program and that will give me $375,000. I want 10% of my offer, my revenue to come from my coaching. That means I'm going to earn about $50,000 in the year of private coaching. That's 10 clients in the year. And then I think probably the remaining 15% of my income, let's just say it comes from my low ticket offer. That would be driving about $75,000 of offer revenue. And that would mean selling 1500 units at this point. Now I see okay, to hit 500,000, this is how much of each thing I have to sell and I'm basing it on what percentage of total revenue I want each offer to pull. And is that realistic? And as I talk through These numbers, I'm like, okay, selling 375 people in a group coaching program sounds outrageously high to me. I would be nervous to do that. And doing only 10 one on one clients a year seems kind of low. So maybe I would mix that around and I would do, I want 25% of my revenue to come from my $5,000 coaching. I want 50% of my revenue to come from my thousand dollar group program and then I want the other 25% to come from, from my low ticket. That's a little bit more reasonable. Now I only have to sell 250 units, but it's still high. What I'm bumping up against is man, if I can't scale my $5,000 offer, which by the way, if I have 25% of my revenue coming from my coaching, that's like 25 students. I'm like, huh, maybe that thousand dollar offer isn't the offer that should get all my attention. Maybe the $5,000 offer is the offer that should get all my attention. But now the interesting thing when you do this is that you can then say, okay, if this is the offer I'm going to spend most of my time on, then that means this is the offer that I can spend more in ads or more in contractors, right? So if I decide with this math that that's what I'm going to do and I really do want to sell 250 people in a thousand dollar program, well, I should probably be able to spend 50% of my expense allotment towards this offer since it's making 50% of my revenue. Right? So that would mean of the $250,000 of expenses that I am allotting, 75,000 of it would go towards generating that revenue. Okay? And that's actually not so bad because if I take 75,000 and I divide that by 12, that means I'm spending about $6,000. Okay? That's, yeah, that's more than a thousand dollars a week in ads that might actually be doable. And I spend that 75 and I make that 250 and then I do the same thing for the other two offers and by the time I'm done, I've hit 500,000 in revenue. I've stayed within 50% of a profit margin. I've spent about 250,000 and I've profited 250,000 and I've netted an income 125,000. And I really encourage you to do this. I encourage you to sit down and Think about when you set your revenue goals. Are you setting revenue goals, profit goals, or income goals? And are you looking at your offers and thinking about your how much you want to spend on each offer to get the revenue that you want? If you are not an auditory learner and you want to do this visually, I actually have the exact spreadsheet you need it. It's the Million Dollar Grit spreadsheet. If you have not purchased my book on Amazon, it's on Kindle for 99 cents. I would love it if you purchase it and leave a review, but you can absolutely get it free at milliondollar grit. Com. When you opt in for the book for free on the thank you page, there will be a $9 offer for the audiobook and commentary. And then at checkout there is an order bump and that is the Million Dollar Grit spreadsheet. And in that spreadsheet you'll get three tabs. One will help you figure out what you actually want to make revenue versus profit. And then the last one, the last tab is called your Million Dollar year. And this is where you can actually work through those offers and the percentage and everything that I just explained here. If you have already purchased the book and you want to just go check out get the audio in the spreadsheet, you'd go to special Million Dollar Grit. Awesome. Okay guys, if there's anything you want me to talk about on this podcast this year, please message me on Instagram at Julie C. Chanel. Or you can hit me up on Facebook, LinkedIn, or you can email me@julie juliechanel.com I love to talk about things that are top of mind for people and I hope you have a great week.

And there you have it, folks. Another dose of Million Dollar Grit. I hope today's episode has left you feeling inspired, equipped, and ready to face your own entrepreneurial journey with resolve. Remember, until next time, embrace the struggle, harness your grit and keep pushing forward. You're stronger than any challenge you face. I'm Julie and this has been Million Dollar Grand.