Boss babes, are you ready to quit your job...like yesterday? Wondering how much money you need to earn in your business before you can resign from the 9-5 for good? Before calling it quits, let’s make sure your financial ducks are in a row first.
Everyone has a different comfort level and risk tolerance when it comes to money. Personally, before I became a Corporate dropout, my goal was to earn the equivalent of my monthly expenses in my blog biz.
If the blog biz completely flopped, I had at least a 12 month emergency fund saved in the bank to live off of. So I felt comfortable not needing to raise the bar on my biz goal beyond earning the equivalent of my monthly expenses.
But for you, it may be higher. It may be lower. Here’s are some ways to figure out the numbers.
Business Breakeven = Profit - Expenses and Savings
Many times entrepreneurs are so busy working in their biz that the only time they see if they are making a profit is at tax time. There’s an easy way to track your monthly expenses and create savings goals.
Calculating your business breakeven number will show you what you’re financially responsible for every month. In turn, you can use the number to make sound money decisions for your business.
Whether you’ve been in business for a decade and your profits well exceed what you need, or you’re just getting started with no money in the bank, your breakeven is the same equation.
To get clear on your business breakeven, know what your business expenses and savings goals are first. Even if you’re making plenty of money to cover everything you need, it’s still important to understand what your expenses and goals are.
This way, you know where you may be able to make adjustments and improve your biz finances. Remember, sometimes even the smallest adjustments can greatly improve your numbers!
What’s considered expenses?
1. Fixed Expenses
The bills that don’t change each month. Some fixed expenses may include your office rent, business insurance, internet, and so forth.
2. Flexible Expenses
The bills you have every month but don’t know the exact amount. Some flexible expenses may include electricity, office supplies, VA hourly tasks. Put an average amount for each of these. It’s better to over estimate on unknown expenses so you’re prepared.
3. Budgeted Expenses
Similar to flexible expenses, budgeted expenses are items that aren’t necessarily required to keep your doors open. So if money gets tight in your business, this is the first place you’ll start cutting expenses.
Include things you budget for every month from investing in education and dinners with potential clients. If you don’t have a budget for these kinds of things, now is a great time to start so you don’t overspend.
What’s considered savings?
If you don’t already put money aside every month for business savings, here’s why you may want to start doing that now.
Things happen in your business that you’ll need your savings account for like your laptop unexpectedly dies. My Not A Bond Girl business savings account is a priority. If you want to save up for a laptop or an online course you’ve had your eye on for awhile, divide the cost over several months and save for it strategically.
Dream as big as you’d like here. A healthy business has savings in case of emergencies, to reinvest back into your business when the right opportunity arises and for peace of mind.
Items to exclude:
An expense you don’t include in your business breakeven calculation is the cost of the products you sell to clients. These are considered a product expense, not a business expense. The things you put in the equation will be business costs that happen whether you make a sale or not.
For example say you’re a wedding photographer and sell albums. The sell of that album is part of your business but it’s not a guaranteed expense every month. It’s directly related to your product sale. You only buy that album when your client orders it which varies every month.
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Yes, it may take some time to get familiar with your numbers but it’s worth the time. Get the very best monthly break down you can to make sure you’re profitable and set up for success!
Once you’ve tracked everything down and created goals, total up each category. Then, add all of the category totals together for the total business breakeven.
This is your monthly breakeven including your savings goals. It’s the amount you need to profit to breakeven in your business. With a clear picture of your monthly business needs, you can start aligning your sales goals accordingly.
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Before you quit your 9-5, ask yourself a few questions...
Does seeing the numbers all laid out surprise you? Is it about what you thought it was? Now that you have everything written out, are there places you could cut cost? Could you increase your savings or treat yourself to more fun money?
As a fellow online biz owner, it’s tough to be 100% sure all my business finances are squared away with the constant changes in tax regulations. I was floundering my first tax season and I swore never again to put myself under that much unnecessary stress.
Since then, I’ve been working with a Certified Public Accountant. Her name is Amy Northard and I’ve sharing all the great biz finance tips I’ve learned from her throughout my blog.
Amy is a CPA and a business owner herself! She works with creative entrepreneurs to make taxes and bookkeeping less stressful.
If you need to understand the ins-and-outs of your business financials. Bookkeeping and taxes are not optional. But you’re in luck!
Amy has saved me hours each year on business taxes and bookkeeping! If you are interested in getting support on your biz finances, schedule a free chat with Amy here!