Setting goals is one of my favorite business activities. It can give your daily pursuits purpose, motivate you to continue on in the face of challenges, and keep your business organized.
But a big mental block I see form for small business owners is how to make – and reach – realistic goals when your business income varies.
How do you know what goals to set when you don’t even know what your income will be next month?
A fluctuating income does not mean that your business is failing. In fact, you could be hitting it of the park for your industry, but that industry just happens to work in big on-again off-again waves of activity.
One example of a type of business I see that experiences big fluctuations in revenue are coaching businesses. They are often contractors and freelancers who may have a few steady monthly clients, but often supplement their income by offering classes and one-off consultations.
Just because your income varies doesn’t mean you’re doing anything wrong!
Whether you are just starting out or are an experienced entrepreneur traversing a particularly choppy season of sales, knowing how to set sensible but inspiring goals for your business is essential.
I’ve laid out these tips to help you navigate how to make business goals when your income varies.
Tip #1 – Cover all minimums first!
One financial goal that all businesses can set is sticking to your budget. And that means setting realistic goals for your budget, too!
A good rule of thumb when it comes to budget goals: cover all of your minimums monthly costs first before you budget for anything else.
Monthly minimum budget items for your business could include:
· Office rent or mortgage payments
· Utilities like phone, internet, and electricity
· Essential subscriptions like your website host and cloud storage
Get a nice round number that you can safely say covers all the expenses necessary to run your business. You can use that number as a baseline for what your monthly income needs to start at despite fluctuations.
Tip #2 – Analyze your history.
If you are an established entrepreneur, goal setting will be a little easier for you even if you have fluctuating income. But you have to take the time to look at your history to make the best goals for your business. Creating income goals with no basis in reality can lead to some big frustrations.
Take a look back at your historical income data.
Over the last 12 months, what kind of trends are you noticing?
You may want to input your income data on a line graph, with a dot for each week’s income, to get a better idea of what seasons were best and worst for your revenues.
Once you know your top – and bottom – earning periods, you can base your next year’s goals on those peaks and valleys.
Tip #3 – Establish your emergency fund.
Even without knowing what your income will be in the next one, two, or even three months, you can still make savvy business goals when your income varies.
One goal all businesses should have: max out the emergency fund!
An emergency fund is your rainy day savings used for any craziness that pops up suddenly. Your emergency fund should aim to cover at least six months of expenses. Take that monthly minimum from Tip #1, multiply it by six, and start saving!
You should not dip into your emergency fund for little treats or fun splurges. It’s there to save your toosh in the event of a big economic event.
Say a once in a lifetime pandemic brings most businesses to a screeching halt? 👀
Just because it’s super rare doesn’t mean it can’t happen. Your emergency fund is there to cover your financial obligations in case you have very little to no income coming in.
Bonus Tip: Be sure to create 2 separate emergency funds. One for your personal finances and one for your business. While they may be closely related, we always want to be taking diligent steps to keep our business and personal finances separate.
Tip #4 – Be realistic.
We all have goals of being super successful multi-billionaires with 2 private islands and a vacation home in every country. But we don’t add “Buy Tropical Island” to our 2023 goals list, right?**
Same goes for your business.
When goal setting, make sure your goals are realistic and attainable.
It’s good to be ambitious, especially in business, but if you make too many unreachable goals, you’re setting yourself up for disappointment.
Say you had the goal of signing 30 new clients for your service-based business, but you really think you can realistically sign 10. You know your fluctuating income may not give you the bandwidth to do that extra marketing and legwork necessary to snag those 20 extra clients.
Add 2 to 5 to your realistic number instead of 20 to set a high but reasonable bar for yourself.
Setting too many out of reach goals can lead to burn out and feelings of discouragement. Keep your numbers sensible and maintain that positive attitude.
**If you are actually adding that to your 2023 goals list, please add “Buy Beckie from Balanced Office Solutions a Tropical Island”, too. 😉
I hope these tips on how to make business goals when your income varies led you to some inspiring goal setting!
If you want some more tips on this subject – or just want a sounding board for your big goal ideas, book a discovery call with me today.