This is the second post in my blog series – planning for 2018. If you haven’t read it already, check out my last post, How to Audit Your Business Budget. In November, we’re going to be sticking with the theme of focusing on your biz finances.
Setting an income goal can be a little scary because you don’t want to feel disappointed if you don’t reach it. I understand. But, it doesn’t need to be like that at all! Don’t worry, we aren’t picking a number out of thin air that you have to magically get to by 2019. This number will be based on what your services/products are and how many you can sell per year. We’re going to be realistic, but aspirational when calculating your income goals.
Start by calculating all of your personal and business expenses. These are the things that you need to have in your life and business, to keep doing what you do. Once you’ve done the math you will have your average monthly and yearly expense cost. These are your must make numbers for the year. Keep in mind that these numbers don’t take your lifestyle into account and are, therefore, not realistic. So, let’s’ change that shall we?
Start listing out things that aren’t necessary to have, but are things that you really enjoy doing, or want to start adding to your life. Things like going out to dinner, grabbing a coffee, the gym, Netflix…you get the picture. Some of these expenses might change from month to month, but try to find a number that you generally stick too. Add everything up so that you have a monthly and yearly cost that you can then add to the number above.
Don’t forget about vacation! How many weeks do you want to take off for vacation? You won’t be able to work on client projects during that timeframe so keep that in mind when setting your pricing for the year. And of course, how much of your income do you want to spend on vacations each year?
A little tip: I recently set-up a separate savings account just for vacations. It’s made all the difference in the world because I feel more comfortable actually booking the trip when I have money set aside for it.
You should set a savings goal for your personal and business accounts. Determine an amount or percentage that you want to set aside every month to meet your savings goals for the year. I go over how to set a business savings goal in my last post in this series.
Definitely, don’t forget about taxes! The amount you pay will differ depending on what country you live in. If you’re in the US, state taxes can vary from state to state. I don’t want to give you any incorrect advice but do make sure to set aside a portion of your income for taxes every single month. I did find this handy tax calculator on the interwebs if you’re US based.
Now you have a pretty good idea of how much you want to earn to live a lifestyle that makes you happy. One last exercise – consider your value. Look at the total from the exercises above and see if it lines up with the quality of work that you provide.
Doing the math isn’t the be all, end all, for finding out your pricing. It’s just a guide to help you come up with an income that would allow you to live the lifestyle that you want. But, at the end of the day, you need to go with gut and charge more if you’re worth it.
Now you have an income goal. Congratulations! Take a look at your services and how you’ve packaged them up. How many do you have to sell in a year to make your income goal a reality?
If after doing the math you realize that you don’t have time to take on that many clients, then you’ve got a problem. If that’s the case you need to raise your prices or consider another income source that is a little more automated. Something like a digital download or course would be perfect!
If you’re selling products or digital goods, how many would you have to sell to reach your income goal? Is that number reasonable? Do you need to raise your prices? Or, do you need to work on marketing to be seen by more people and sell your goods?
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