Building a business is tough work, and sometimes it can be hard to gauge what income goals you should be reaching for. This lack of clarity stems from two places:
1. Business owners aren’t sure what income goals make sense for their business because they’ve never done this before. It’s tough to know how much you should be striving to make when you have no past experiences to compare your business growth to! A lot of times, all a solopreneur has to work with are best guesses on what income goals are reasonable.
2. It can be demoralizing to set income goals (even reasonable ones) as a business owner. Self-doubt creeps in, and it feels easier to not set any goals at all. Negative questions start to rattle around in your mind: What if I don’t hit those goals? Does that devalue my business or my hard work?
The hard truth is that as a solopreneur, you need income goals to guide your business development decisions. To do this, you need to get clear on what a reasonable goal to aim for is, and what you actually need to support your business and your family.
The process of setting goals doesn’t have to be overwhelming! You can get started in four easy steps.
#1: Understand What You’re Building
Simon Sinek said it best: Start with why. When you know why you’re doing what you do, and what your long-term vision is for both yourself and your business, you’re better equipped to set income goals that reflect your “why.”
For example, let’s say you’ve started a small social media management business while your kids are in middle school. You’re passionate about the work you’re doing and the clients you’re able to connect with virtually, but your ultimate “why” is that you want to make enough money to put your kids through college debt-free. You already have some savings set aside for them, but your business over the next several years is going to be the primary contributor to that savings before they graduate high school. Then, when they’re all graduated from college, you plan on retiring.
That’s a big, exciting why!
Even if this example doesn’t resonate with you, don’t be afraid to dig deeper and ask yourself the hard questions about your why and your long-term goals:
Are you building your business to sell and make a profit in the next few years? Are you wanting your business to continue on after you’re gone? Is it a business that was born out of necessity because you had bills to pay? Will your business dissolve when you retire?
Knowing what you’re building, and why you’re building it, can help to guide your revenue goals. Remembering our example above, the income goals of a social media manager hustling to put her kids through college (but will retire after they’re graduated) are going to look different than someone who is building a large-scale marketing firm with multiple employees that will likely be passed on through a succession plan or bought out when the founder is ready to retire.
When you understand what you’re building, you can create a strategy around profit margins, equity, and spending patterns. Every decision you make will ultimately support your short and long-term business development goals.
#2: Understand What You Need
As a business owner, you need to know what you need to bring home for your family that allows you to meet your personal financial goals and obligations. This includes any household spending plus saving for travel, retirement, your children’s college education, and any other goals you might have.
It can be helpful to create two sets of numbers here:
- What you need to bring home to survive.
- What you need to bring home to meet all of your financial goals and obligations.
This information can help to guide your goal setting and gives you both an attainable income goal and a goal that you can “reach” for. It can also help you to set a more reasonable goal for yourself somewhere between these two numbers. Too many people feel the need to always strive for their “reach” goal, and are disappointed with anything less. The truth is, if you’re able to meet all of your family’s immediate needs and start growing toward big-picture savings goals simultaneously, you’ll feel less pressured and could actually find more success in the long run as you grow.
#3: Know Your Business Costs
No business is 100% free to run. Even if your business is low-cost, and all you need is you and your laptop, other expenses will inevitably crop up as you grow.
Some common expenses solopreneurs might need to consider are:
- Accounting software
- A computer security program, like McAfee or Norton Antivirus
- A paid Dropbox account for document sharing with clients
- A logo designed by a professional
- Fees taken out of credit or debit card payments made through your payment processor or invoicing program
- Childcare once a week so that you can take phone calls at your home office without interruptions
- Materials to create the products you sell
- Rent and utilities if you’re renting an office
- Salary for your employees
Again, it can be helpful to make two lists. Your first list should be the bare-minimum expenses you need to run your business successfully. The second list should be the list of expenses that you’d have if you were spending in a way that aligned with your business development and long-term goals. Don’t be afraid to think outside of the box here. Ask yourself honestly: what do I need in order to run my business successfully? What would I spend revenue on if I knew it was going to help me grow?
#4: Build Your Income Goals
Once you know what it costs to run your business successfully, and how much you need to bring home you can start to create a strategy for generating income. For example, if you need to bring home $125,000 to your household and your business operating expenses are $70,000, here’s what your business income goals could look like:
Income Goal / Potential Gross Income: $250,000 (This accounts for the below)
Business Operating Expenses: -$70,000
Potential Net Income: $180,000
Assume 30% Taxes: -$54,000
Take home income to you: $126,000
Keep in mind that this is a very basic example. It doesn’t take into consideration things like salaries, adjusting taxes for qualified retirement plan contributions, and more. However, it does help to point you in the right direction.
If you want to keep with our running theme of creating two gross income goals (one that’s the bare-minimum of what your business and your family needs, and one that’s a “reach” goal), feel free! It can be helpful to know what you absolutely need to make ends meet, and what you’d like to make to help you start living your best life.
A Word of Advice (Or Two)
When you’re setting income goals for your small business, remember that you can’t fall into the comparison trap – even with those who are in your same industry. Your income goals are going to be unique to you. Only you can know what you need personally and professionally to feel fulfilled.
It’s also important to remember that your income goal should be specific! Aiming for a “six figure” gross income for your small business isn’t specific enough. You need to aim for an amount that will net you an income that helps you to reach your personal goals, and live a happy and fulfilled life.
Still struggling? Setting income goals for your small business can be overwhelming, even when you know how to go about it! Finding the motivation to set these goals alone can be tough, especially when you’re a busy solopreneur.
Working with a financial planner who has experience helping business owners create a plan that reflects their personal and professional goals can be a big help. If you’re ready to change your relationship with money and start working your wealth, schedule a consultation by clicking here! I’d love to help you set goals that leave you feeling fulfilled, and build a strategy for achieving them.