When focusing on business growth the average woman-owned service-based business begins by implementing steps to increase their revenue. In order to increase business revenue, you accomplish this by working backward.
In today’s episode of Say YES To Profits TV, I have identified how you can set realistic revenue goals and not only achieve them but exceed them.
Before you can identify the amount you would like to earn, you first must discover the amount you need to earn to at least remain afloat each month.
Most female entrepreneurs base their desire revenue goal on the amount they feel is best with no realistic data to support this figure. The mistake with this approach is that they did not factor in their average monthly expenses.
Therefore part one of setting a realistic revenue goal is to correct the above mistake by identifying the business total monthly expenses over the last 12 months. Then divide that total by 12 to arrive at the average monthly business expenses. After identifying the average monthly expense total, the next step is to add between 10% to 20% padding to that figure. This is recommended to account for unexpected expenses, such a computer crashing, the need to hire new staff unexpectedly, etc…
But wait, there’s more….
According to the IRS, small business owners should pay themselves a “reasonable salary”. This is the amount of money a small business owner would pay someone else to complete their job. Therefore part two of identifying a realistic revenue goal is factoring in the amount the small business owner should pay themselves.
Therefore when setting realistic revenue goals for your business you must not only factor in the amount of money you need to earn to operate your business you must also include your salary.
Here at Say YES To Profits, we consider this your Monthly Revenue Base. The formula is seen below…
Average Monthly Business Expenses + Profit Margin (at least 20%) + Total Personal (CEO Salary) Expenses
= Monthly Revenue Base (aka Realistic Monthly Revenue Goal)
Once the Monthly Revenue Base has been identified the next step to achieving the revenue goal is to examine the business service line and their prices. For service professionals, the service line should be created in a way that allows the business to earn enough revenue to exceed the monthly revenue goal. To ensure that this is accomplished each service should be priced for profit. Therefore the price should include not only the out-of-pocket cost but it should also represent the value the business offers and the desired end profit amount.
If you need assistance with setting realistic revenue goals and creating a profitable service line request a Discovery Session today.
The author of the bestselling book, Say YES To PROFITS, Octavia “The Profit Maximizer” Conner is America’s Leader in Profit Maximizing for Small Businesses. She is equipped with over 14 years of finances, accounting, and business development experience.
Octavia Conner is a high achieving accountant and financial management consultant who specializes in closing financial gaps, reducing tax liabilities, streamlining business operations and locating hidden money leaks in order to significantly increase small business profit margins. She has a keen eye for helping small businesses improve their financial health and remain in the black.
Octavia has been featured in Atlanta Business Chronicle, YES Magazine, Women Creating Wealth Show, 100 Female Entrepreneurs, Smart Hustle Magazine and much more
For more information contact SayYESToProfits.com