Last week, we wrote about how we’ve made finances stress free at Whitebox. Today we thought we’d share how we set about setting and achieving financial goals for the business.
One of the things we’ve noticed, through talking to our customers, is the money beliefs they hold. Beliefs like:
“It’s hard to make a stable and secure living as a trades person.”
“Financially stability and success is for other people, not me.”
We all have stories we tell ourselves about money. Sometimes they’re so deep rooted that we don’t even realise the ways they’re holding us back. When it comes to changing your money story, we’ve found it helps to get super specific about exactly how much you want to make, how much you’re currently making, and how you’re going to achieve your income goals.
This is how we go about setting our finance goals. We hope this inspires and encourages you to go for your goals too.
1. Get Specific
First, we get super specific about how much we’d like to make over the next 12 months, both to have enough to live on personally - and to maintain and grow the business.
Monthly Living Costs: We pay ourselves a wage every month, so it’s the number we’ve decided is sufficient for our living costs multiplied by 12 months for the whole year. This amount covers the mortgage, bills, food and other day to day expenses.
Pension: We set aside a sum to pay into our pension pot because we’re not keen on the idea of an impoverished old age. BTW, did you know that if you’re a basic rate tax payer, for every £100 you pay into your pension pot, you’ll get an extra £25 from tax relief?
Taxes and National Insurance: This is how much you’ll need to set aside for payments to the taxman. We recommend you set up a separate savings account for taxes.
Savings: How much you’d like to add to our savings account that year. We transfer a small amount every single week into a separate “rainy day” savings account. £10, £20, £50, you’d be surprised how quickly it builds up.
Business Expenses: What we need to pay the staff, rent and keep the digital lights on - from web hosting to the software we use.
VAT: We recommend you aside an amount into a dedicated savings account every week. See our recent article on Stress Free Business Finances.
For savings and pensions, Denyse has what she calls core and stretch goals. Her core goal is the minimum amount of money she sets aside each month, come what may. Her stretch goal is one she’d like to hit this year if possible during the course of the year.
2. Add It All Up
Add together each of these sections and you’ll come out with two numbers. First, your core money goal for the year, and second your stretch money goal for the year which includes the extra amount for savings, pensions and any one-off projects you have planned.
Because we like to be super organised, we also have a baseline goal. This is the amount – less savings and pension – that we absolutely have to make this year to keep a roof over our head, feed us, pay the bills and the taxman. This is what’s called your break-even point.
3. Making It Happen
We start off by outlining each of our income streams in the business and work out our sales projections are for each. Mark calls this crystal ball gazing! Something to note here is that we don’t just pluck numbers out of thin air. We draw on our historical sales information. But we also forecast for growth, taking account of how the business is doing.
This gives us specific numbers of how many van racking systems we need to sell every month. For you, this might be number of new boilers installed or rewires completed. Then we track these numbers every week, month and quarter throughout the year.
Just because we’ve set our income goal doesn’t mean we’re going to reach it. We have to take focused and consistent action every single day to support the business to thrive financially. These actions are set out in our sales and marketing plan – whether that’s posting and engaging in social media, writing an article like this, shooting a video or following up with prospects and customers.
This is how we go about achieving our financial goals. We’d love to hear your tips and suggestions. Please do let us know in the comments box below.
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