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What do you need to earn in your business?

Some entrepreneurs have great financial aims: to earn as much as they can, to be a millionaire, a billionaire…a trillionaire!

Brett Riley-Tomlinson


Uk coins

Some entrepreneurs have great financial aims: to earn as much as they can, to be a millionaire, a billionaire…a trillionaire!

It’s good to have financial targets when you’re running a small business, however realistic they may be. You also need to know your business’s financial standing at any one time, so that you can react accordingly if you don’t meet your financial goals or work out how you can invest your profit if you wish to grow your business (because some people are genuinely happy simply making a wage with their enterprise, with no desire to scale up).

You should be aware of your business’s costs, and what you need to earn in sales each month to meet this figure. What's the minimum you need to earn to cover all your bills, rent and/or staff costs?

I know exactly what mine amount to, and this is the first target I need to achieve when a new month dawns. As your business gets bigger and you incur more costs, this figure will increase, but it should still be your first aim each month.

I then have a second target, which is to earn an additional 20%, i.e. to achieve 20% profit after all my costs. I know that this amount allows me to put some money away for a rainy day as well as invest in new things. Some months, I smash this target; others, I don't, and this is where recognising your business cycle comes in.

Novus Marketing Solutions Website

Novus Marketing Solutions Website

Novus Marketing Solutions Ltd, as a young business that’s still growing, tends to go through a four-month cycle (there are occasions when the cycle is skewed, due to us bringing on a large client, but generally this four-month rotation is consistent).

In month one, we typically earn a good profit. In month two, we achieve a smaller amount of profit, in month three we break even, and in month four, we make a small loss. This cycle occurs, mainly, because our work is project based. Our team is currently small but perfectly formed. I therefore have to be careful as to the amount of work that comes in, as we want to fulfil everything we do to an exceptionally high quality, which we wouldn’t be able to do if we were rushing it all and taking shortcuts. We have a capacity level, and it would actually be detrimental to the company to bring on more business without the necessary staff and structure in place to deliver it.

By month four, we’ve usually finished the work from month one, then it’s all hands on deck to bring more in.

Because I’m used to this cycle, I don’t panic when it’s the fourth month and Novus makes a small loss. It’s not an issue because I account for it in month one.

If Novus’s operations continually unfolded like this, it would be easy to plan future work and implement growth strategies. As a fellow business owner, you’ll know, though, that things don’t always run smoothly.

Problems can often occur in month four, when month one is due to start again in a few weeks. If a couple of larger, planned projects are postponed or work is pushed back a month by the client, this may not be a big deal to some companies, but it has repercussions for me, in that I’m left with a £6000 hole I need to fill.

This may be a paltry amount to some business owners, but £6000 is a lot of money to me and not something I can easily stomach after losing 16 months of business because of Covid. That said, there’s no point crying about the situation as it wouldn’t change anything—I instead use it as the impetus to get up, go out and drum up shorter-term, small jobs that can be completed quickly.

I know that, eventually, though my costs will rise, Novus will grow. There will come a tipping point where it won’t be a disaster if a client stalls or pauses work they’ve discussed with us; we’ll have various income streams in place and ongoing, additional projects to work on in the interim. We may not take a step forward in those months, but neither will we take a step back like we’re forced to do at the moment.

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