One of the (many) great things about being a business owner is that you get to decide how much money you want to make. Not in the “I want to make $1 million right now” way, but you do get to choose your revenue, and salary, within reason.
But if you’ve never had experience with pricing, you may struggle with knowing what that revenue should be. It’s easy to forget all the things that go into your salary, because it’s so much more than your accounts receivable.
Unlike a corporate job where you get paid for the hours you work, you need to make sure your business as a whole is profitable. Your expenses to run the business, savings for growth, taxes and any additional staffing needs are all part of your business expenses. And don’t forget that you also need to factor in retirement savings and personal taxes too.
You can’t equate your salary with what you earned in the corporate world. This is probably one of the biggest mindset hurdles for new business owners.
Three Steps for Determining Your Revenue Goal
As a business owner, your salary comes from what you make in business. So we need to start there. Next, we add business expenses, then finally we add extra for savings and growth. We calculate these three numbers by doing the following:
Decide how much you want your annual salary to be. When you think about what salary you want to take home, think about how much you need to make each year that will allow you to feel comfortable. Consider the home you live in (or want to live in), your transportation, vacations, household expenses, etc. Whatever makes up your ideal life, include it in your calculations.
Figure out all the business expenses you have. This includes monthly subscriptions, legal and accounting fees, website maintenance, marketing, outsourced staff, everything you spend money on in your business. A good way to ensure you’re not missing something is to review your business bank statements from the last 12 months and come up with a total amount. You can exclude any one-time expenses (as we’ll account for those in number 2, below). Stick to your recurring expenses for the business expense total.
Next, add your business expenses to your ideal take-home salary, then add extra to account for savings and growth (I recommend about 25-50% of your combined salary and expenses). This is the total amount you need to bill in your business every year.
Once you have these three numbers (salary, expenses, and savings/growth), you add them up to get to your annual revenue goal.
Want to know how to take your annual revenue goal and convert it into your pricing? Schedule a Discovery Call with me today and let’s talk about how I can help you determine YOUR revenue goal.