On target to make 7 figures this year

We are past the half way point of 2008, growth is slower than I’ve seen in the past, so how the hell am I on target for 7 figures of revenue.

When you work a day job you get paid for the hours you work but you also gain from experience and maybe training which means if you switch jobs you might be able to command a higher wage. However running your own business is a bit different to that and if you have a number of websites you are likely earning more than you think (hence the 7 figures in the title), this is how I break it down.

Training and experience
When you’re in our sort of business you learn by doing, reading, research etc. It’s difficult to put a figure on what this is worth, but say you went to college or university to do an MBA I’d expect this to cost you to the tune of $10,000 per year, not to mention the loss of earnings from the time spent studying. So I reckon I’m a conservative $10K better off due to knowledge and experience gained, probably more than that as learning by doing is way more valuable than anything you’ll learn in a class room.

Actual profit
I don’t run a business purely for fun I also like to make a bit of money, this year actual cash profit is on track to exceed $500,000. This is a pretty nice amount, a high percentage will be re-invested in business ventures but I’ll also draw enough to enjoy myself some what (I might even replace my old Mondeo).

Investment revenue
For the past few years I’ve been building up my emergency fund, this is made up of various interest bearing investments (ISAa, bonds, savings account etc.). The return from these isn’t great but the money is safe and the returns this year will be a bit over $20,000.

So this comes to a respectable $530,000 for the year, nice but not exactly 7 figures is it, here’s the beauty of working for your own business rather than somebody else’s.

Business Growth
As your revenue goes up so does the value of the business, in fact your revenue doesn’t need to go up provided it doesn’t drop your business is likely worth more this year than it was last (a domain that’s a year older with older links is easier to rank). Scott has written before about valuing websites but I’m going to keep this really simple and base business growth on how revenue has increased.

New websites are often valued at 10-12 x monthly income, however established quality websites can easily go for 5x annual revenue. I think my web portfolio is of pretty high quality, however I’m going to be very conservative again and go for a multiplier of 2. So on to the calculation.

This year annual profit is on target to increase by $200,000 over last year. So multiplying that by 2, means my business is worth $400,000 more than it was last year, pretty cool.

So my annual revenue projection comes in at $500,030 $530,000 + $400,000 = $900,030 $930,000 not quite 7 figures but I aren’t going to quibble over $70K (Edit: though if I could count I would quibble over $99,070, thanks Walt) (Edit: Thanks to Walt for correcting me incorrectly, Carl and Michael for correcting me correctly, phew).

Conclusion
It’s very easy to measure your sites success on how much it makes every month but the real value is from the business that you’re building, the monthly income you take out is something of a nice side effect and often by taking less your business will grow more (losing ads (hence monthly revenue) can result in more loyal visitors which will add more value to your business).

I hope this post has got your thinking and if you’re still in a day job maybe your business already makes more than your 9-5. I’d love to hear your thoughts about this post and how it applies to your business. Have fun.

About Al Carlton

Al quit the 9 to 5 rat race in January of 2007, before then he was a software engineer and systems architect of financial system. Nowadays Al spends the days running his various businesses and experimenting with different ideas and opportunities.
Al can be found on twitter at AlCarlton.

Comments

  1. >>> $900,030 not quite 7 figures but I
    >>> aren’t going to quibble over $70K

    Would you quibble over $99,970?

    • LOL, thanks Walt and I always thought I was quite good a maths, whoops. Looks like I have a bit more work to do πŸ™‚

      • Al… You can buy my Megane off me for 350 quid. Hopefully your maths will be as good as Walt pointed out and I will end up getting a cheque for $29970 πŸ™‚

        Matthew’s last blog post..NES – Built in to a Controller

        • I do need a car for the school summer holidays. Am going to chat to my mate about it down the pub tonight, I was going to go for something decent but have decided to save money towards a ‘nice’ house instead and wll be getting something cheap but hopefully a but sporty instead,

        • I’d go for the nice house if I were you and pick up something at a good price for a car. There are some nice options out there for a car under Β£10k.

          Matthew’s last blog post..Face the Task – Nokia N96

        • Under $10K, LOL I’m going a lot cheaper than that. Looking at an 2 litre old MR2, rear wheel drive an a bit sporty and more importantly a big handful of change. Test drive is on Monday

      • Ummm, surely $500,000 + $20,000 + $10,000 = $530,000, and not $50,030?

  2. I made the same argument a few months ago in “I Made $1,486.70 an Hour Last Year.” You so rarely hear people talk about enterprise value, but we can earn so much more there than we could ever earn in simple profit. That point can’t be driven home enough. I’m so glad to see someone with this large of an audience pointing that out.

    You continue to put out great content, Al. Keep it up.

    Shane’s last blog post..Erimart Scam

  3. Yeah, I have to agree with your thoughts, Even though someone is making $1000 per month, how much is his business worth if he decided to sell it?

    $20.000? $30.000?

    Still it pays a nice 5%-10% per month!!!

    I love this business…

    Truck & Trailer’s last blog post..Toyota 4Runner – Evolution

  4. I’m still amazed by the profits you get from your business Al. Eventhough I’ve read these numbers time and time again they still inspire me to keep going. Thanks.

  5. Al, you were right in your original quibbling of $70,000, as you miscalculated your original figure of $500,030 when it should have been $530,000. $500,000 for the cash profit, plus $10,000 for the learning, and $20,000 for the investment revenue πŸ˜‰

  6. Thanks for the second round of corrections guys, I reckon it now al adds up (though after my last 2 calculations probably worth checking).

  7. Congratulations on building your business to this level. As a newbie starting out it does provide a lot of inspiration and incentive to keep going

  8. well, all this talk of earning more than the 9-5 and here I am about to go back to the 9-5 (well, 9-6) life after 3 years of working for myself. I think this will actually allow me to put more effort into my own web sites, rather than other peoples (I was a freelance web developer) and get some of my evenings and weekends back.

    Maths aside (that’s what accountants are for) the earnings you are generating Al are impressive and still inspiring.

    Garry’s last blog post..Why Digital Compacts Are Great!

  9. As always Al, very interesting and inspiring stuff with regard to business and websites.

    With regard to dropping ads – I’m trying to generate some more regular visitors by using the Who Sees Ads plugin and now only visitors from search engines sees my Google Adsense on the first page they land on.

    I’d rather lose out on the odd adsense click (I still think most people who click Adsense will do on the first page on the site) and get people looking round the site and hopefully they might keep coming back.

    Zath@Technology Blog’s last blog post..Gadgetshop Summer Sale – Up to 75% Off

  10. Nice work Al, how is your revenue increasing by $200k – is that mostly down to increased traffic or better advertising deals

    • It’s a combination. Traffic is certainly up on this time last year but it’s not as high a growth as I’ve seen in the past. I’m doing a lot more with affiliate deals which should really reap rewards in the silly season and also more with CPM advertising.

      It should be an interesting year, though more excitingly I’m planting seeds and starting sites more for next year.

  11. wow, we kneel before your altar and worship thee, lol I’m very impressed and a little envious

  12. It will be good to have a post on your income breakdown for CG for June to see how much progress you’ve made from the last time you showed your monthly breakdown, which I think was in january.

    • Hi Nesa, I don’t often do monthly breakdowns, though I will if there is a big change (like in December). At the moment I’m up on this time last year but not at December levels just yet.

  13. Best of luck to you!

  14. Waw, I’m just on the way to break 4 digit a month and now you aiming 7 digit a year? that’s a great target! Best luck for you, I know you can do it πŸ™‚ Better focused on affiliate that match your topic.. You know, affiliate usually leads better money than PPC, however you will need the targetted traffic for that πŸ™‚

    cowy’s last blog post..Ergonomic and Unique Wrist Rest

  15. Washing Machine Repair says:

    I thought you were making $720,000/year already. 1 million is not really far and hence, it should be an achievable goal. Good Luck. Very impressive work so far.

    Washing Machine Repair’s last blog post..5 Key Vacation Spots in Midwestern United States

    • I don’t make $720,000 at the moment. I did do $60K in December which would equate to an annual of $720K but December is my best month of the year and not the norm.

  16. Wow, 7 figures a year is really impressive and an inspiration to everyone trying to make a living online. I’m just getting going with my websites and you have really inspired me. Thanks Al.

  17. Great stuff, just goes to show if you put in the hard work you will get rewarded. Nice peice of motivation to those of us still stuck in the 9-5.

    I’m on target to hit 4 figures this year, an improvement on last year but some way to go until 7 figures…

    Well done and I look forward to your next years post when you hit 8 figures πŸ™‚

  18. I agree too. The value you are adding to the business is also very important.

  19. John Parry says:

    Guys, have you ever mentioned what your portfolio consists of? Exactly how many sites do you have to make that sort of money? It seems that as most of the money comes from one or two sites maybe the others don’t produce that much at all and are probably the sort of sites that the majority of people have. Just curious!

    Of course if you don’t want to tell that’s ok!
    John

  20. I’ve been doing monthly reviews of my earnings so far, and what I’ve found from doing so is that my subscriber numbers have shot up as a result of said sharing.

    I’m quite impressed with your earnings here, and I know this is an old post, are you still earning the same?

    Checking out the rest of your blog to find out now.

    Cheers!

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