Setting Profit Goals
The new year has begun, and with it, the opportunity to set goals for what you and your business can accomplish over the next twelve months. As you identify your business goals for the year, make sure to plan for your PROFIT. While it's difficult to find an entrepreneur without a revenue goal, few have a CEO Pay goal, and even fewer have clear profit goals. Profitable businesses don’t happen by accident and it's easy to get caught up in all the other numbers (Instagram followers, email list size or website visits) and forget the most important one, how much money your business makes for YOU.
Keep reading for everything you need to know to write your profit goal for 2020.
Get Familiar With Your Numbers
First, you will want to look at what it costs for you to run your business. If you don't know already (and you REALLY should know), take an inventory of your business expenses, including software services, team costs, professional development commitments, travel, and any other operating costs. Don’t forget to add in what it costs for you to serve your clients (Merchant fees, retreat expenses + other direct costs)
Then, think about how much you need to pay yourself as the CEO this year. How much does the business need to contribute to your personal budget? There’s lots of different ways you can take money out of your business and a ton of tax strategy around this – but for the purposes of this exercise, just think about how much cash you need to pay yourself this year.
Now identify how you will make money this year. What services or products will you offer and at what price? Take a look at last year's revenue to figure out what your sales were. Were you satisfied with your sales amounts and pricing? What adjustments do you need to make for the upcoming year?
Set Your Goals
Once you have your numbers in order and you know the costs to operate your business, pay yourself and you have planned your revenue sources, it is time to write your sales, profit & CEO pay goals for the year.
How much do you want to profit this year? After you have paid all of your business expenses (and yourself) how much do you want the business to keep? We usually like to see this be at least 10% of your total sales. This is money that stays in your business to reinvest in things for the future & cover any short cash months you may have in the future between launches.
How much do you want to pay yourself as CEO this year? This number is going to vary a lot from person to person, so it’s really a personal goal. I like to set a good/better/best goal for this, where the good is how much you need to pay yourself and then you increase from there, adding in fun things to your personal budget like more vacations, spa days, shoes – whatever you want!
Now you can work backward with the math and add up the business expenses and the CEO pay to see what that means your sales need to be for the year. Compare that to the list of your planned sales and see where there might be some gaps.
Take into account how much time you want to devote to your business. How much of each service or product do you want to sell, and how much time will it take for you to make those sales & deliver the results to your clients? It may be time for a price increase or restructure of your offerings. Plan now for those changes so you can implement them shortly.
Make A Plan and Track Your Progress
Now that you know WHAT you need to do, put together a plan for HOW you will accomplish it. Write out the steps you need to take throughout the year to meet your profit goal and review it regularly. It may be helpful to break down the numbers into smaller chunks, like quarterly, monthly, or even weekly.
We love doing this exercise with our clients and personalizing it to them. Helping them get clarity on their goals and target numbers is part of our great onboarding process with new clients. If you would love to have that kind of support in your business this year and crush your goals, let’s talk!