I have worked with many business owners over the years. Typically, by the time they come to me for advice, they’ve existed a while, and may not have even considered how much they need to make each year to maintain their personal lifestyle.
To make matters worse, they are in this spending cycle they can’t seem to break from. I’ve seen it over and over. By the end of the year, the business owner has taken everything they made and plowed it back into the business without giving it much thought.
- They didn’t pay themselves what they should have
- They didn’t set aside enough cash to cover their tax obligations
- Cash for a vacation or retirement fund is nonexistent
With some strategy, this spending cycle can be changed!
When working with a new client, I like to start with the personal income targeting discussion as soon as possible. This way we can plan and implement anything needed before the last day of the year.
You need to know how much income your business needs to provide you to maintain your lifestyle because ultimately, you’re working to support yourself and your family, aren’t you?
The First Three Steps
- How much income does your business need to provide you to maintain the lifestyle you want?
- What other items would you like to fund? (i.e., emergency fund, retirement, vacation, pay off debt, college education funding)
- Once we know what your personal income target is, we can reverse engineer what you need in business revenue to cover your profit, owners’ pay, tax liability, and operating expenses. (Your business revenue should also be enough to cover your personal tax liability regardless of your business entity structure)
By knowing your personal income target, you will have more clarity on how much business income you need to generate to reach your goal. Just because your business generates $500,000 a year in revenue doesn’t mean that all goes to you. You need to take your profit and owner’s pay first, and purposely designate every dollar that comes into your business for everything else.
I can help implement a cash flow management system that will show you what your numbers are telling you and design a plan to meet your personal and business goals. Click on the link here to find out more about Profit First!
Click on the link here to complete the questionnaire to schedule a call.
On Social Media