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The blog for ambitious founders.

My blog covers the MANY highs and lows of starting, scaling and selling my business for 7-figures, in just 4 years. If you're an ambitious entrepreneur then add your email below to get a new episode delivered every Wednesday.

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What does 7 (or 8 or 9) figures actually mean.

A 7-figure business.

You can't move on social media these days for people claiming to earn 7-figures, or have an 8-figure business.

I'm as guilty as anyone. I reckon you can read most of the blogs on this site and see me reference my own 7-figure exit.

But what does 7-figures actually mean?

And why won't people just give actual numbers?

Well, this blog will attempt to answer all of your questions.

Why won't people give actual numbers?

This question has two answers really. You have two groups of people that don't display actual numbers for different reasons.

Group 1 - because they don't have anywhere near 7-figure sums of money in their bank account.

Group 2 - they do have 7-figure bank balances or incomes, but can't disclose details due to confidentiality clauses.

There is of course a third group of people that just don't want to share their financial information with the world, but they're probably not the same people that are actively creating content about it on social media.

Why are people saying anything at all then?

Good question. If people don't actually have 7-figure sums, or can't give detail due to contractual issues, then why are they mentioning it at all on social media.

Well, frankly, it helps them sell whatever they're selling.

For the people pretending to be wealthy, it helps them sell their product to people that want to be wealthy.

And for people that genuinely are wealthy, it adds gravitas to the service or course they are selling.

For me for example, I feel that it helps blog readers to know what level of success I had with my business, so they can decide whether to take my advice. If someone is determined to become a billionaire, then they will realise I am a mere millionaire, and move on.

How can I check?

Well, currently it's difficult. People on social media can just rent cars and houses for a day and film a months worth of content.

I suspect that there will need to be some form of regulation introduced, because some of the content that I've seen is bordering on fraudulent.

But if you're in the UK, there is one way you can do your own due diligence.

Search for the person or company by name.

In 'Filing history' you can view company accounts that will give you a good indication of company profits, and confirmation statements that will show you what % of the business each person owns.

Now that's the admin out the way, lets look at the MANY ways that people can justify they have 7 figures.

Now any good experiment has a controlled variable. In this instance it will be whether you could buy a £1m yacht. In cash.

Option 1 - I have a 7-figure business. Pure fiction.

This is the easiest way to get to 7-figures.

Basically a made up valuation.

They will decide that their business should be valued at a similar multiple to Meta (39.9 P/E ratio as I type this) and use the same for their business.

So, if they want to be 'valued at £1m' to justify their 7-figure status, based on the same multiple as Meta, they just need £25k of profit per year.

In theory someone could be earning well below the average annual UK salary, and somehow justify having a 7-figure business.

Yacht check - could barely afford a model boat...

Option 2 - I have a 7-figure business. Including pass-throughs.

So for option 2, we're going to move away from pure fictional valuations and assume that having a 7-figure company means generating revenue of £1m at the very least.

Slightly harder to cheat the system, but not impossible.

Various companies will incur pass-through costs as part of their client work. One example of this might be advertising agencies. Their client will send them the ad spend, and the agency will spend it on their behalf.

In this case, technically the invoice value that they send their clients will include the ad spend. And sometimes, companies will fail to remove this from their revenue line, instead taking it out as a cost of goods, therefore impacting the gross profit rather than the revenue.

So their agency has 5 clients each spending £15k per month on ads. They're making 20% fee on that spend, and charging £3k to each client per month.

Total invoice value each month (ex VAT of course) is £90k.

So their annual invoice value is £1.08m. They have a 7-figure business.

But really their annual revenue is £180k once the pass-through ad spend has been removed.

Yacht check - they could probably temporarily buy the yacht, but then quickly sell it to pay for the ads!

Option 3 - I have a 7-figure business. Realistic valuation.

Similar to option 1, but using a real-world valuation.

Each industry has different standard valuation multiples that you can research online. For this example I'll use a marketing agency as it's most familiar to me.

The standard valuation multiple is between 4 and 6 x EBITDA (profit).

So to have a marketing agency valued at £1m, you would need to be doing at least £167k EBITDA per year.

In this instance you might have a successful and profitable business, and correctly be valuing your business at 7-figures, but feel far from wealthy in terms of monthly income. The founder always gets their pay rise last of course!

Yacht check - not yet, keep going!

Option 4 - I have a 7-figure business. Big valuation.

Option 4 is basically the same as option 3, just bigger.

If you have a business doing £1m per year EBITDA then you have a big business.

Realistically you could sell that business for £10m if you find the right buyer.

But even without selling your business you're very wealthy.

Now you're probably telling people you're in the 8-figure club. Congratulations!

Yacht check - so close! Maintain a few years of this EBITDA, and after tax and other things that life throws at you, you'll have that yacht!

Option 5 - I have a 7-figure bank account.

In all of the examples above, you are claiming to have a 7-figure business. But of course, that doesn't directly correlate to the money you have in the bank.

Firstly, what % of equity do you own in the business. If you have a 50% co-founder then you need to get to £2m value before you have 7-figures of your own.

But option 5 means you actually have a 7-figure sum in your bank. Meaning you've paid yourself dividends/salary over the years, and/or received a capital sum from selling shares.

Yacht check - go for it. You have the cash. But my guess would be that there's a few things higher up your priority list. Better aim for the 9-figure club I think.

Option 6 - I have a 7-figure property empire.

The most common one I see on social media. Or it was until interest rates went through the roof. Seems a bit quieter now...

It's possible to own £1m worth of property, but really just be saddled with mortgage debt.

I think it's rare for people to actually create 7-figure wealth from property, but a great way to store the wealth that you create through other means.

Yacht check - no yacht, but at least you have somewhere to sleep.

So in summary, the term 7-figure is pretty meaningless.

It could be someone making £25k and giving themselves a dream valuation. It could be someone with a few properties and even more debt, or it could be someone who has successfully sold a £5m business, but only actually had 10% of the equity.

So when you see people (me included) talking about it, take it with a pinch of salt, and don't let it distract from your own journey and timeframe.


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