How do you know when enough is enough?
When you can stop pushing so hard in your business and take things a bit easier?
As business owners and entrepreneurs, we’re naturally driven. It’s just who we are – that desire is part of our DNA, to create and serve and have an impact in this world.
BUT so many of my clients say they feel like they’re pushing themselves way too hard to maintain £15k – £25K months. A big part of this is because they don’t know how much they really need to pay for the essentials in their life (let alone leaving enough for holidays, gin and their incredible future plans).
So they plough on. They push harder – more sales; more launches; more strategies to bring in more money. Which is not the answer.
I know it can feel hard to get on top of this stuff. So in today’s blog, I’m going to explain the #3 simple steps to work out how much you need (and want) to draw from your business – AND how much your business needs to bring in each month, for that to happen!
You don’t need any complicated tech to figure this out.
You don’t even need a spreadsheet or financial app – just your internet banking, a piece of paper and a pen (although click here for my free PDF budget planner, if it’s helpful!).
Step 1: Get clear on where you are now!
On your paper make 2 lists – ‘essentials’ and ‘extras’.
Under ‘essentials’, write down all the things you pay every month that are ESSENTIAL.
Like your mortgage / rent; utilities; council tax; car / home insurances; protection plans and basic grocery costs.
If you know how much these are off the top of your head, write it down – otherwise wait until you’ve done both lists and then check on your internet banking.
Under ‘extras’, list all the other stuff. Haircuts; books; meals out; cinema trips; Sky TV; money for clothes…all the things that make life fun and allow you to have a great quality of life.
Take some time to think about everything you like to do, buy and have and add it to the relevant list.
Then add on the big things you buy each year like holidays; Christmas presents; school bus passes / uniforms; car servicing etc. Take the amount you’d spend on these each year and divide by 12 to get a monthly figure, before adding it to your list.
For any numbers you don’t know, log on to your internet banking and check. In an ideal world you’d take an average over the last 3 months – but the last month is a good starting point.
How much did you spend on food / petrol last month? What else did you buy? Write it all down (and if you tend to pay for stuff on a credit card to get airmiles or whatever, check the app for that too).
At the bottom of each list, simply add the totals. This will tell you how much money you need to draw from your business each month as a bare minimum and how much you should aim for if you want to buy the nice stuff too.
Now we know what level to set your regular monthly income from your business at!
Step 2: What do you want?
Now the fun part! Go back to your lists and write next to each what you would LIKE to spend, in an ideal world.
Be really honest with yourself – would you like more money for holidays and eating out? Or were you shocked at just how much you are spending on takeaways, when you’d rather spend that money saving for a holiday or a weekend away?
Maybe you want to increase your weekly grocery budget so you can include more premium or organic foods?
Do you need to find some money so you can start investing for your future, building an emergency fund or savings pot?
Again, take some time over this and you’ll end up with 3 lists:
- Must-have essentials;
- Nice-to-have extras;
- And your aspire-to-have list, that you’d be spending in an ideal world!
Let’s say that those numbers look like this:
- Must-have essentials = £2,000
- Nice-to-have extras = £3,000
- And aspire-to-have = £6,000.
We’re left with the big question…
Step 3: How much does your business need to bring in, for you to take that as a salary / income?
This step is where many business owners start to feel overwhelmed or lost and stop the process before it’s become actionable.
Because it costs money to run your business, with staff and freelancers to pay, plus internet and subscriptions and all the other business-related costs each month.
You need to pay taxes. And leave some money in your business so you can re-invest in equipment, training and development.
So if you wanted to draw £3,000 as your monthly salary…how much money does your business need to be bringing in, for that to happen?
I use a variation on Profit First with my clients (an epic book but a bit overcomplicated in places!).
This means when client money comes into my business, I allocate 15% to taxes, 55% to my owners pay account and leave 30% for operating expenses.
And then we use some of the owners pay account to pay your monthly income – but not all of it. Because we want to build up a slush fund that you can use to even out those inevitable rises and dips in income.
So to draw a regular income of £3,000 a month, you’d want at least £4,000 going into your owners pay account – which means using those percentages above, you need sales of £8,000 sales coming in each month.
That way, within 3 months you’ll have saved an extra month’s salary in your owners pay account, so you can take a 2-week holiday and still get paid your full income. And by the time you get to the 6-9 month mark, you have sufficient reserves to pay your salary for a full 3 months if you needed or wanted to.
Imagine the huge sense of security you’ll feel when you KNOW you have those emergency months of salary already put aside!
To give you another example, let’s look at the real figure you want.
To draw £6,000 a month, you’d want £8,000 coming into your owners pay account – which means sales of £14,500 each month.
Which means you may not be far off earning what you really ASPIRE to. You’re certainly earning more than you NEED to!
And which also means you can actually look to take your foot off the gas for a bit, maybe streamline what you have or start to be a bit more picky about the clients you take on or the way you prefer to work.
Isn’t that was being a business owner is all about? Having freedom and choices, rather then endlessly pushing harder?
I really hope the simple steps in today’s blog will help you take one step closer to that business and life you really want!
If you’d love to go deeper into everything we’ve covered today – to get your business and your finances seriously working for you – I’d love to help.
As you probably know by now (but just in case not!), I’m a Money Coach and award-winning Qualified Financial Adviser, featured in The Telegraph, Moneywise and a regular guest on BBC radio as an expert in my field.
I’ve worked in financial services for almost 15 years now – growing my own 6-figure business – helping women like you to take control of your money, sort out all those things you’ve never got round to (like your pension or ISA) and massively grow your wealth.
This isn’t old-school financial planning but straight-talking, real-world support to both live the life you want now AND create all the security and abundance you want in future.
From my signature 1:1 Wealth Builder Experience to courses and programs, there’s several ways we can work together – just click here now to find out more!
Until next time,