Do you know what it costs, what it really costs, to run your business?
Let’s back up. Do you have monthly sales goals for your business?
If not, you should. You should have a target number for how much money you need to bring in each month.
That number should be your benchmark. When you look ahead to the coming months, you should always be asking yourself, what do I need to be doing to hit my income target?
But how do you come up with that number? How do you know what your monthly sales goal should be?
You could start with a guess. Maybe a number that just feels right. Maybe something that just seems bigger than what you’re currently bringing in. Maybe you took your dream annual salary and divided by twelve.
If you’re using one of these methods, there’s a more concrete way. I base my monthly sales targets on two factors:
1. What it costs to run my business each month.
2. What it costs to live my life each month.
What it costs to run my business + what it costs to run my life = the minimum amount of money that I need to bring in each month.
It’s a simple equation that helps guide many of my business decisions.
So how do I determine those two numbers?
By keeping meticulous records. (Ok, that’s a little bit of a lie. I let outright.com keep meticulous records for me.) But I use the data that I get from outright plus my spreadsheet of income, expenses, and living expenses to determine that magic number.
How often do you look at your income and expenses for an entire year?
I keep a master spreadsheet where I chart income by category, expenses, and income from my teaching job, all by month. It’s essentially my version of a profit and loss sheet. At a glance, I know if I’ve made a profit or not each month, and how much. And I have one of these for every year I’ve run my business.
By making this sheet, I can easily get the full picture and spot trends. I start to see what my average expenses are each month. I get a feel for how much I’ve brought in each month. And I compare that to my money situation each month – did I have enough to cover everything? Was I stressed about money? Did I have to dip into savings or ask my husband to contribute more than normal?
All those factors led me to come up with a target monthly sales goal. And when I wanted to hire an employee, I simply added her wage (plus taxes) into that number to come up with a new monthly sales target.
Because of all this, I have a really good idea of what it costs to run my business each month. And I know how much I need to bring in to cover those costs. I know what I need to keep my business (and my life) running. I can set bare minimum sales goals, comfortable sales goals, and, wouldn’t this be great sales goals.
How about you? Do you know what it costs to run your business each month?
If you don’t, how can you expect to run your business successfully?