What is your current income providing for you? Enough to scrape by on the bills or a comfortable lifestyle? Perhaps you have a desire to move house, or to book an exotic holiday, and are hoping at some point you will be able to do so. What if you had a better understanding of the 4 Key figures for your Personal Income, and whether your business can support those dreams.
Let’s start with your NEED figure.
Your ‘Need’ figure is the minimum income you need to cover your basic bills (mortgage, utilities, insurances, food etc.) – the minimum to keep you housed and fed. If you don’t already know what this figure actually is then find out. Look through your recent bank statements. What are your regular standing orders or direct debits, and calculate the average over the last 3 months for variable things such as food. Calculate your stripped back Need figure.
Then consider your ‘Comfortable’ figure. This is the amount that includes buying a few niceties, having a meal out or a take away, browsing around the Farmer’s Market rather than the reduced aisle. Not having to scrimp.
Next comes your ‘Desire’ figure. The income that lets you enjoy life without feeling guilty. Doing the things you want to do. Holidays, days out, new home. The life style you want to lead, and having the time to do it in.
Finally there is your ‘Ultimate’ figure. The figure you dare not think of. The one that will let your ultimate desires become reality. The dream holiday, house, car. Chartering a yacht, moving abroad, retiring early. Not putting your dreams off to ‘someday’, but actually doing them now.
Where are you on the above scale with your current monthly income?
Instead of looking at an annual salary to a long off goal of £20K, £30K, or £60K needed, break down your monthly Need, Comfort, Desire & Ultimate figure into weekly targets. Base these on billable hours if you are service based, or quantity of products sold.
Your Need of £2000 per month may be:
10 billable hours @ £50 per week
Or 5hrs @ £100
Or 5 widgets @ £100
Or 50 widgets @ £10
A Desire figure of £5000 may be 12.5 hrs @ £100 per week, or 125 £10 widgets.
By knowing your weekly figures, it is so much easier to see whether or not you are on track. If you only have 8 billable hours booked you know how many more you need to get in. If it’s only 50 widgets sold by end of Wednesday, then you need a push to keep the sales on track.
It can also provide a good reality check on your business. If your Desire figure is £5000, but your industry only fits £25 per hour, then are you going to be able to work 50 billable hours per week plus admin time and get that number of clients? Does your business model fit the lifestyle you want to achieve?
If not, you need to do something to bill above the industry norm, change your business model, or change your business. It is better to know that now, then trudge on hoping that your business will reach an unattainable figure.
By knowing these 4 Key figures, and what they actually represent as tangible hours or products, you give yourself a focus and a better chance of achieving them.
If you are interested in calculating your 4 Key Figures but need some help email me at [email protected] and I’ll send you a spreadsheet to help.