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How to Set Business Revenue Goals That Actually Pay You · Profit Points Podcast

• 0:00
  SPEAKER_00: Hey, glad you're here.
• 0:01
  SPEAKER_00: This is Profit Points, and I'm Megan Schwant, your accounting sidekick and certified Profit First Professional in Fix the Snext Advisor.
• 0:09
  SPEAKER_00: If you're a small business owner who wants to actually understand what is happening in your business financially, not just survive it, but genuinely get it, you're in the right place.
• 0:20
  SPEAKER_00: Every episode covers one concept, uses real numbers, and ends with something you can actually do.
• 0:26
  SPEAKER_00: That's the deal.
• 0:27
  SPEAKER_00: Let's talk about today's topic.
• 0:31
  SPEAKER_00: Question of the day.
• 0:33
  SPEAKER_00: Do you have a revenue goal for this year?
• 0:36
  SPEAKER_00: Most business owners usually say yes, but the harder question is: do you know exactly what that revenue goal means in terms of monthly profit, owner pay, taxes owed, and clients needed to get there?
• 0:52
  SPEAKER_00: If the answer is no, your goal isn't quite a plan yet.
• 0:57
  SPEAKER_00: It's really a wish.
• 0:58
  SPEAKER_00: And you know what they say about wishes?
• 1:00
  SPEAKER_00: They are goals without a plan.
• 1:03
  SPEAKER_00: So today we're going to turn your wish into a plan.
• 1:07
  SPEAKER_00: I'm Megan Schwann, your accounting sidekick, founder and CEO of Sidekick Accounting.
• 1:12
  SPEAKER_00: This is Profit Points, where we give your ambition the math it needs to actually work.
• 1:18
  SPEAKER_00: Let's connect your goals to your numbers.
• 1:22
  SPEAKER_00: So goal setting in the entrepreneurship world tends to happen at one of three levels.
• 1:27
  SPEAKER_00: Either it's very vague, something along the lines of I want to grow.
• 1:32
  SPEAKER_00: It's either a very specific about the wrong number, such as I want to hit 500,000 revenue, or there's none at all.
• 1:42
  SPEAKER_00: Revenue is a starting point, but it's not a destination.
• 1:46
  SPEAKER_00: A 500,000 revenue goal with a 6% profit margin and inconsistent owner pay isn't really success.
• 1:55
  SPEAKER_00: And it won't feel like success.
• 1:57
  SPEAKER_00: It's burnout with a bigger top line.
• 2:00
  SPEAKER_00: Real financial goal setting starts with what you want your life to look like, and then it works backwards through the numbers in order to get there.
• 2:08
  SPEAKER_00: So the framework I want to walk you through today is our profit point, which is reverse engineering your revenue target.
• 2:15
  SPEAKER_00: Start with owner pay.
• 2:17
  SPEAKER_00: What do you want and need to pay yourself this year?
• 2:21
  SPEAKER_00: Let's say your goal is$84,000 or$7,000 per month.
• 2:26
  SPEAKER_00: Using profit first and the allocations that are in there, your owner pay should be roughly 50% of your revenue.
• 2:34
  SPEAKER_00: Your revenue target is then$168,000 annually or$14,000 per month.
• 2:41
  SPEAKER_00: Now we want to put in profit.
• 2:42
  SPEAKER_00: So if you're using those target allocation percentages, 10% goes to profit, which is$1,400 a month.
• 2:50
  SPEAKER_00: Taxes should be around 15%, which is$2,100 a month.
• 2:54
  SPEAKER_00: And then operating expenses are the remaining 25% or$3,500 per month.
• 3:00
  SPEAKER_00: Now, with all of those numbers, you have a complete financial model and a plan, not just a revenue number that's random, but one that actually supports what's happening in your business.
• 3:12
  SPEAKER_00: Let's work this a little bit further and go backwards.
• 3:15
  SPEAKER_00: So you need$14,000 in monthly revenue.
• 3:18
  SPEAKER_00: That's what we established.
• 3:19
  SPEAKER_00: Your average client pays$1,200 per month.
• 3:23
  SPEAKER_00: That means you need approximately 12 active clients to hit your target.
• 3:29
  SPEAKER_00: So now you can ask, how many new clients do you need each month?
• 3:33
  SPEAKER_00: If you typically have an 85% retention rate and you currently have seven clients.
• 3:39
  SPEAKER_00: Well, by all of this math, and hopefully this is clicking some gears for you on how to do this, but using this math and working these numbers, you need to grow by five clients total.
• 3:52
  SPEAKER_00: So with an 85% retention rate, 85% retention rate, let's say you lose about one client per quarter.
• 4:00
  SPEAKER_00: So you need to add about six to seven new clients over the year, or roughly one every six to seven weeks.
• 4:07
  SPEAKER_00: Okay.
• 4:08
  SPEAKER_00: All that being said, now with this little exercise, right?
• 4:12
  SPEAKER_00: You have your revenue goal and that's become a client acquisition goal, which now becomes a marketing and sales goal, which becomes your action plan for basically what needs to happen in your business in order to make sure you pay yourself, which you need to support your family and your lifestyle.
• 4:30
  SPEAKER_00: That's goal setting connected to numbers, which is connected to metrics to create an actual plan with measurable goals and measurable results.
• 4:40
  SPEAKER_00: And like I said, hopefully this is helping you see the value of how breaking down your numbers actually can serve you in creating the plan of what needs to happen in your business, what activities you should be focused on, all of the things that you could definitely rabbit hole down, but you also need to know as a CEO.
• 4:57
  SPEAKER_00: These are not just the basics, it's really about really digging in.
• 5:02
  SPEAKER_00: From here, you're able to create the systems, the expectations, and the goals needed to not just run your business, but scale, grow, and thrive.
• 5:11
  SPEAKER_00: How's that sound?
• 5:12
  SPEAKER_00: If it sounds good, this week in our action step, I want you to write down your owner pay goal for the year.
• 5:20
  SPEAKER_00: Divide your owner pay percentage by that target percentage.
• 5:24
  SPEAKER_00: So if you're in the zero to 250,000 revenue range, your owner's pay should be 50% of that revenue.
• 5:31
  SPEAKER_00: If you're in the 250 to 500,000 range, your owner pay should be about 35%.
• 5:37
  SPEAKER_00: And if you're in the$500 to million dollar range, then your owner's pay is about 20%.
• 5:42
  SPEAKER_00: These numbers come from Profit First and Mike McAllowitz when he did a lot of research to figure out what the most elite companies are.
• 5:49
  SPEAKER_00: So if you don't fit into those targets, that's exactly that's okay.
• 5:53
  SPEAKER_00: But again, these give us a target of what to move to work towards.
• 5:57
  SPEAKER_00: And wouldn't it be better to set goals that put you in the top elite standing businesses than to just go off of what's currently happening?
• 6:06
  SPEAKER_00: Use that mindset, use that framework.
• 6:09
  SPEAKER_00: These give you your revenue targets, divide that by your average client value, and that gives you your client count goal.
• 6:18
  SPEAKER_00: Write all three of these numbers down.
• 6:20
  SPEAKER_00: So revenue or owner's pay, which has then multiplied by the percentage to give you your revenue goal, and then figure out how many clients or your client goal to be able to reach that number.
• 6:34
  SPEAKER_00: That's your base level financial blueprint.
• 6:38
  SPEAKER_00: And if you haven't ever done any of this, this is gonna put you leaps and bounds ahead of a lot of other people.
• 6:43
  SPEAKER_00: And let me tell you something too.
• 6:45
  SPEAKER_00: It will also help you to identify whether or not your goal is actually realistic.
• 6:49
  SPEAKER_00: Maybe you need to revisit your pricing, maybe you need to revisit your service structure or your product structure.
• 6:55
  SPEAKER_00: Either way, this gives you the actual numbers that you need to be able to advance your business forward.
• 7:02
  SPEAKER_00: So, goals without math are wishes.
• 7:05
  SPEAKER_00: Goals with plan with math are plans, and plans, when followed, become results.
• 7:11
  SPEAKER_00: Give your goal the numbers that they actually need.
• 7:15
  SPEAKER_00: If you want to build out this financial blueprint for your specific business, including a realistic revenue model, allocation targets, and a client acquisition number, let's do it together.
• 7:27
  SPEAKER_00: So book your strategy call with me, Megan at Sidekick Accounting.
• 7:30
  SPEAKER_00: You can go to chatwithmeg.com and it will take you to my website for more information on our services and how to book a call.
• 7:38
  SPEAKER_00: I will see you on the next episode.
• 7:40
  SPEAKER_00: All right, that's your episode this time.
• 7:42
  SPEAKER_00: Don't forget your action step.
• 7:44
  SPEAKER_00: I want you to actually do it, not just add it to the list.
• 7:48
  SPEAKER_00: If this episode was helpful, share it with a fellow business owner who needs to hear it.
• 7:52
  SPEAKER_00: And if you're ready to go deeper on your specific numbers, book a strategy call with Sidekick Accounting.
• 7:57
  SPEAKER_00: Go to chatwithmeg.com, and I'll see you next time on Profit Points.