Are you a small business owner with big dreams? Well then, you’ll need the profit to match! Step 1 is to set a profit goal which is both realistic and aspirational. You want to motivate yourself without the overwhelm to maximise your growth.
Today I’m sharing a super simple way to set profit goals and today, getting your profit on track!
1. Cover All Your Costs
To accurately determine your pricing, you need to calculate both fixed and variable costs associated with your business. This involves meticulously tracking and recording your expenses, so you have a clear understanding of the resources required to keep your business running.
By incorporating your costs into your pricing strategy, you can breathe easy knowing you are covering your expenses AND generating a profit.
You can use a trusty spreadsheet (I’ve got a free Profit & Loss Generator for this very purpose) but accounting software makes it simple and is always my strong and firm recommendation!
2. Forecast & Save For Liabilities
Before you celebrate the cream on top, you need to cover the essentials. As a small business owner, it’s important to understand compliance is not optional—it’s a necessity. So your BAS, Tax, Super and Payroll obligations along with licenses and certifications must be covered. Failure to comply with these requirements can result in hefty fines, legal troubles, and even the potential closure of your business.
To avoid complications, it’s best to forecast and save for your liabilities. You can work with a bookkeeper with peace of mind, or forecast it yourself.
3. Pay Yourself What You Deserve
While it’s really common and sensible when you’re starting out to focus on reinvesting profits back into the business, it’s not a sustainable solution. Neglecting to pay yourself long-term can lead to burnout, and sometimes even the collapse of your business.
Instead, compensate yourself adequately, so you can maintain your motivation, drive, and enthusiasm. This mindset will have a positive impact on the overall health and growth of your business too.
4. Ensure Your Pricing Strategy is On Point
Your pricing strategy directly impacts your profit margins, and getting it right can make all the difference in achieving your financial objectives. A well-defined pricing strategy will steer your business towards profitability.
Simply covering your costs is not enough to achieve your profit goals. You need to consider the unique value proposition of your products or services.. Pricing too low may attract customers, but it could also undermine the perceived value of what you offer. On the other hand, pricing too high may deter potential buyers and result in missed opportunities.
Finding the sweet spot requires a delicate balance.
Grab my free pricing calculator to calculate your best pricing strategy yet!
5. Set Your Profit Goal!
Setting profit goals is not a set-and-forget task, but an ongoing process requiring a bit of number crunching and a pinch of big-picture thinking.
Firstly, get your calculator out because I’m going to show you how to do the sums. Feel free to use your current income or your new and improved pricing to forecast your finances – it’s up to you!
I’m going to keep the figure rounded at $140,000 and base the numbers on generic percentages *
|LIABILITIES – 30%||$42,000||$3,500|
|EXPENSES – 20%||$28,000||$2,333|
|OWNER PAY – 30%||$42,000||$3,500|
|SAVINGS – 10%||$14,000||$1,167|
|PROFIT – 10%||$14,000||$1,167|
Now you have a grasp on the numbers, it’s time to set some goals. What do you want to achieve in the next year? Next five years? Once you know what you want, you can start working towards it!
Here are a few examples of tangible goals you could set:
- Hire a new employee
- Buy a piece of work equipment
- Invest in a new website for your business
- Give yourself a pay increase
Once you have a goal, set a timeline to make it real. How long do you want to take to achieve it? Then, work backwards from there. Break it down into smaller, more manageable steps. Set up a profit bank account and move the amount or percentage aside each week/month.
When you reach your goal, reward yourself! You can choose something simple like a day off or treat yourself to a luxe new handbag. It’s up to you but don’t skip it – a little win for you personally will motivate you in the business.
Remember, the most important thing is to set goals which are realistic and achievable. And don’t forget to celebrate your successes along the way!