Do you come first when looking at your numbers?
One of the things we talk about a lot with clients is establishing what they want to earn from their business. As a business owner it can be surprisingly easy to lose focus on this or not dive down into the detail of what needs to happen to make sure that you aren’t the poorest paid and hardest working within your business.
There is of course a lot of moving parts when running a business, but we’ve drilled this down to three steps you should be considering when thinking of you as the business owner and what income looks like:
Level 1 – Essential
We all have bills to pay and a stomach (or multiple) to feed – so what does an essential level of income look like to make sure that you are at least treading water.
It’s surprising the number of people that don’t know this figure.
Our tip is to start by adding up your committed personal direct debits/standing orders and track over say a couple of months the other routine spend you have that you can’t do without.
Nobody goes into business (or a job) to earn just enough money to pay bills, so on to level two…
Level 2 – Realistic
As mentioned above, you don’t just work hard to pay bills and have nothing else – so what do you need to be earning to give you a good level of lifestyle. We all have our weaknesses, be it something new and shiny, holidays, meals out, days out with the kids etc.
So, above the minimum figure you need to achieve how much extra do you need to achieve the level of lifestyle you want.
Of course, there may be sensible stuff you consider here as well, such as having some extra to put away for savings or the rainy day.
Level 3 – Aspirational
Often when chatting with people the aspirational may be the move to a bigger house, the flashier car or something you may even not have dreamed of yet. It could also be growing the business to a point where there is some value in the business for potential exit.
What this therefore brings is a focus on what the business needs to do to get you to these steps. What you are doing today in your business is probably different to what you’ll need to be doing as the business grows.
What does your business need to look like to achieve this – marketing, pricing, processes, funding, team, location – just a few considerations.
The great thing about being a business owner is the direction you want to go in is in your hands – is it going to be hard work? Are there bumps along the way? Will the plan change? – yes to all of these but with a plan and direction it will give you the guidance towards what you want to achieve.
Starting with you at the forefront also helps us as your accountant to support you in achieving this, plan for the best way to extract your income from the business, manage the taxable position and identify what you can do to achieve this.
We “watch your back”. We seek to avoid you making mistakes, whether that’s with external authorities or with the decisions that you make yourself. We can’t guarantee that we can stop you falling into the bear-traps but we try on a collegiate basis to work with you to identify risks and opportunities and react to them accordingly.
Have you gone through these steps in your business to identify what you need to be doing to achieve the income level you deserve?
If we can be off assistance in building this plan, please feel free to get in touch.
Dan has put together a video which explains the start of this approach in more detail below.
