Before you finalise your revenue goal, make sure you’ve done this

There are plenty of ways to set a revenue goal for your business. You might have chosen a number out of thin air, you might have added a percentage on to last year’s revenue figure, or you might have chosen a nice, round arbitrary number that you’d love to achieve. Regardless of how you’ve chosen your revenue goal, before you finalise your revenue goal, make sure you’ve done this.

 

 

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BEFORE YOU FINALISE YOUR REVENUE GOAL, MAKE SURE YOU’VE DONE THIS.

 

1. Worked out whether your offer suite can enable that revenue goal to be achieved

 

This might sound super obvious, but given that numerous times I’ve had to tell business owners their goal isn’t physically possible, please bare with me. The first thing you need to do is check that your revenue goal can be physically achieve based on your current offer suite and pricing.

 

Actually map out exactly how your business could achieve the goal. Depending on your offer suite, it might be that you can achieve a goal in multiple ways or there is only one way it can happen.

 

 

2. Worked out what you personally want to be able to take home

There is a big difference between the revenue a business makes and the income a business owner receives. There are plenty of business owners who are making multi-six figures in their business, but aren’t taking home anywhere near that much. So the first thing you need to get really clear on is how much do you personally want to be able to take home.

 

This may require you to do some thinking. How much do you currently need per year to maintain your lifestyle? How much would you like to make so you can live a “better” life? These might be figures you know instantly or it might require you to think more about the different aspects of your life and then add them up to create a figure for the year.

 

 

3. Know what it costs to run your business (at that level)

There are costs associated with your business and to ensure your revenue goal is high enough, you need to consider all of the costs of running your business. This could include costs such as:

• Employees / Contractors
• Marketing / Advertising
• Insurance
• Accountancy
• Professional Services
• Tech / Software
• Equipment
• Office Space

In the first instance, you can look at the past year to give you an idea, but if your revenue goal is higher than revenue was in the past year, then you’ll want to take that into consideration, how are you trying to achieve the extra revenue? Will it be through growing your team, running more advertising or something else? Take into consideration those costs, so you have estimated costs that reflect trying to achieve your revenue goal.

 

CREATE A STRATEGIC PLAN TO GROW YOUR BUSINESS OVER THE NEXT YEAR – IN JUST ONE DAY! I’m the Annual Planning Queen and I specialise in helping solo and micro service-based business owners to create a growth plan for the year ahead – no matter what revenue goal they want to achieve. By booking a Strategy Day with me, I’ll ensure you have a powerful and productive annual planning day where we consider all the major elements, including the financial forecasting mentioned here, to ensure your business grows and you achieve all your goals for the year ahead. For all the information and to book a Strategy Day click here.

 

4. Factored in tax 

 

Benjamin Franklin stated that “In this world nothing can be said to be certain except death and taxes”. Paying taxes is part of running a business, and before you finalise your revenue goal, you should calculate what the predicted taxes would be.

 

Taxes vary drastically depending on the structure of your company, where your company is registered and where you are based, so you should also seek professional advice. It might be that increasing the revenue or gross profit of your business can move you into a different tax threshold or you are required to pay an additional type of tax.

 

 

5. Consider the amount of net profit your business needs

 

At this point, you are able to calculate your net profit.

 

Income – Expenditure = Gross Profit 

Gross Profit – Tax = Net Profit

 

Knowing what net profit you can expect to have based on your revenue goal and predicted costs is important. For some business owners, they will be personally taking money out of the net profit and so knowing that figure is vital to ensure if they will be able (at least on paper) to take home the amount of money they’d like. Also, net profit is what is used for building reserves and reinvesting in the business, which once again is important for a growing business.

 

As your business grows, you are likely to have rising fixed monthly outgoings and make bigger investments in your business. Therefore, it makes sense to increase your reserves too. This will help you to minimise potential cash flow issues. So work out what net profit figure you would like and then compare that with the prediction.

 

 

6. Check whether the numbers work 

 

Hurrah, you’ve done the main number crunching bit. Now you should have

• A revenue goal
• A take-home pay goal
• Estimated costs for the year
• Estimated tax
• Estimated net profit figure

 

Look at these numbers and see if they work and you are happy with them. The main two things to ask yourself are “Is the net profit figure high enough?” and “Do you believe you can achieve your take-home pay goal?” If you answer yes to both those questions ,then you can move on to the last, and final, step. If you can’t answer yes, then it might mean your revenue goal isn’t high enough and needs changing. You might have to see if there are any ways you can reduce costs. Or you’ll have to decide whether you are happy to accept a lower take-home pay or net profit figure.

 

CREATE A STRATEGIC PLAN TO GROW YOUR BUSINESS OVER THE NEXT YEAR – IN JUST ONE DAY! I’m the Annual Planning Queen and I specialise in helping solo and micro service-based business owners plan for the year ahead. Success in business is a result of having clear goals and a plan to achieve them and my annual planning day will help you to have both. By booking a Strategy Day with me I’ll ensure you have a powerful and productive annual planning day where we consider all the major elements to ensure you can achieve your goals for the year ahead. All you have to do is secure your date, block it out in your diary and get ready to be guided through my signature annual planning framework that guarantees by the end of the end of our time together you’ll have a clear roadmap to achieve your goals and be excited for the year ahead. For all the information and to book a Strategy Day click here.

 

7. Double-check the business has the capacity to achieve that revenue goal

 

You’ve now got to the point where you have a revenue goal that financially makes sense. But before you finalise that revenue goal, put it on your vision board, change your screensaver and everything else, double-check that your business has the capacity to achieve that goal.

 

Right at the beginning, you should have checked that your offer suite technically could mean your financial goal was viable. But now you’ve thought about the other aspects of running a business (because the time people are working in a business isn’t all dedicated to delivery), as well as the fact that you might be growing your team, it make sense to double-check.

 

Map out the combination of offers that will mean you can achieve your revenue goal and then think about the time required for marketing, delivery, admin, customer support etc. Does your business have the capacity? And the capacity without you working a 60-hour week for 52 weeks of the year.

 

That’s it. You now know what you should do before you finalise your revenue goal. 

 

Whether you’ve chosen your number randomly or you felt you chose your number quite strategically it always pays to ensure you’ve gone through the steps I’ve outlined above. Going through this process will mean you have complete confidence that the revenue goal can be achieved, but also have a solid understanding of what achieving that revenue goal will mean for your personally and the financial position it will put the business in moving forward. 

 

If you’ve found this blog post useful, please do let me know over on Instagram or LinkedIn.

 

Helping service providers to strategically grow, and scale, their business on their terms is what I love to do.

 

If you’ve got big goals for your business and what to ensure you are being the strategic CEO needed to make those goals a reality then I would love to help you. You can check out my current services here.