After all how are you supposed to know the revenue you need to get the income you want.
Especially if you are a newer business!
Here are some things you can do to make the process a bit easier and help you feel like you are not just guessing!
When you run a small business you need to be able to make enough to pay your personal bills. Thus at a bare minimum your net income from your business that you can take home, has to be equal to your living expenses.
Do a review of your personal expenses to determine how much it costs you to live every month. This should be your absolute minimum when calculating your companies net profit.
To be even better off you should add in more money for emergencies and saving for retirement.
If you are in a position that your business is not the primary source of living expenses, then I recommend you pick a specific goal that you business would pay for. For example if you are married and your spouse covers living expenses, perhaps your income goes to vacation and paying off the house early. You would pick your number based on how much vacation will cost and a calculation on how much you need to pay off the house early.
Once you have your minimum income needed then begin to create your sales plan. The sales plan is what you intend to sell of each product or service that you offer each month.
If you are an existing business you should pull up last years sales and use that as a base for this years estimates. Then add in any new products or services that you intend to begin offering. Finally make some increases for what you believe you can grow this year to.
After you have a draft of this begin working on your marketing plan, with expense numbers of what it will cost to drive the growth and market your business.
Now take the revenue numbers and the marketing expenses and put them in your profit and loss plan. Add in non marketing expenses such as CPA fees, telephone expenses, business card expenses – everything you will need to run your business.
From this you should get a target net profit.
If this number is not the income you need to live, then it is time to go back and tweak the numbers to make it work!
This is a process that can take a bit to get to something you think you can achieve. Don’t rush it or feel like you should have it done within 30 minutes! Remember business finances when you are a micro business can be very emotional! Give yourself time, space and a bit of forgiveness and you will have an Income Goal you can live with.