At the end of the day, your business boils down to money. The money you take in, and the money you spend. Every business owner knows this, but too many of the business owners I’ve known over the years never take the time to get to know their numbers. Specifically, a business owner should know where each dollar comes from. He should know which costs are critical and which are not. And he should know how much money will be left over after covering his expenses each month. Tracking this information allows the owner to know exactly where his company stands financially—enabling him to set goals and make adjustments in order to achieve these goals.
As I always tell my clients, if you do not have your final destination in mind, you are not going to reach it. If you do not have a map, you are most likely going to get lost. This applies to all elements of your business—how you position yourself in your market, how you hire, how you market. But it also applies to your finances.
You need to have specific and measurable goals, covering both the short and the long term. Start with your desired take-home pay. What is your long term target? How much money do you need to achieve the freedom you desire? Now, what would you like your income to be in two years? What would you like it to be in six months?
Now that you have identified these targets, work backwards. How much revenue does your business need to generate in order to provide your desired take home pay? Make sure to account for increasing expenses as you scale up your business. Do this for both the long and the short term, just like you did while projecting your personal income.
Guess what: if you have taken the time to identify these numbers, you have just created your road map to meeting your financial needs and desires.
Of course, it doesn’t stop there. You have now identified how much revenue you need to generate six months from now, but where will that money come from? It is not enough to simply create a goal… you need a plan to reach it. The increase in revenue may come from hiring another employee and increasing your output. It may come from a marketing campaign. It could come from entering a new market. We’ll have more on these ideas in future blog posts.
Stop leaving your income to chance. Create specific, measurable financial goals—and then create a detailed plan to achieve these objectives. Commit to executing this plan, and you will be well on your way to making your financial dreams a reality.
Have you identified your financial goals for the short term and long term future? Do you know your key numbers on a daily basis? Knowing this really will make a difference in your success!