Docstoc

Calculating Revenue Needs for Your Business

Brittney Castro is CFP® at Perennial Financial Services (http://perennialfinancialservices.com/). She gives pointers on calculating revenue needs for your business.

  1. Determine current expenses
  2. Incorporate savings for financial goals
  3. Include personal income tax
  4. Add any business expenses & taxes to gross income
  5. The combined total equals gross revenue needs

So, if you're like most small business owners your business revenue needs are very dependent upon how much you need to support your current lifestyle. So that would be a first good place to start, is calculating how much do you need every year to support the lifestyle that you want. You know, your mortgage, your car payments, your child's care, everything that you need just to live.

Then factor in any amount that you need to save for your future financial goals. So, for example you want to build your cash account, you want to save for your own retirement, you want to build a home or travel every year, whatever the number is, there'll be an annual amount that you need to save for all your goals.

Once you have those, add in some personal income taxes, and then you come up with your gross income needs for the year. Then, take that number and plug it in to your business. So, if you're like most businesses you're also going to have business expenses and possibly even business taxes. Add that figure into the calculation. All of these things combined will equal your gross revenue needs for the business.

This is the number that you need to know by heart and this is the number that you need to plug in to your business plan, your marketing plan and work toward every year. Also, it makes sense just to review it. Because every year your needs are going to change, your business was going to be growing, your lifestyle is going to be growing, and you always want to know what is the exact amount you need to produce from your business every year.