Why You Should Set An Income Target For Your Business
Nov. 12 2020, Published 2:15 a.m. ET
Running a business means keeping tabs on a lot of moving parts. Between managing daily responsibilities and being the only one around to put out fires, it’s easy to go through the motions without focusing on scalable growth.
In order to get your business to expand, setting realistic goals will be crucial. That’s why setting income targets may be the best way to measure overall business growth and productivity.
Income targets are profit goals that you can set weekly, monthly, quarterly, or even yearly to keep yourself financially accountable and on-track. We talked to a few business experts and CEOs about what happens when you set (and stick to) realistic income goals.
As the CEO and Founder of the consulting firm Elevate Diamond Strategy, Michelle Diamond knows how income targets can help business owners get more clarity on the future.
“Without a target, [business owners] cannot develop a strategy and roadmap to give their business the focus it needs to achieve it,” says Diamond. “This is when businesses and companies can become ‘all over the place’ with no clear direction. That not only affects the entrepreneur, business owner, or CEO but the entire organization as well.”
Even if you’re just a one-woman show, it’s crucial first to understand your capabilities. How much work can you take realistically take on? How much time can you devote to chasing new clients or drumming up more business? Diamond says using that as a starting point to map out exactly what it takes to reach your goal will help shed light on what needs to change.
“If there is too wide a gap, then the entrepreneur should revisit and adjust accordingly to ensure the income target is reasonable and achievable.”
Alex Azoury, CEO & Founder of the homebrew education platform Home Grounds, has learned firsthand how income targets can provide the necessary motivation entrepreneurs need to keep going.
“In a very practical sense, setting an income target will motivate you to work hard to achieve your financial goals as a company,” says Azoury. “This number should be based on both aspirational and operational factors. How much do you need to cover expenses and be profitable enough to continue operating? Now, in addition to that, how much growth do you aspire to in the upcoming year? How about five years?
This sounds like you need a crystal ball, but it is necessary to make educated and realistic projections as entrepreneurs in order to make decisions now.”
Clearer Business Goals
Entrepreneur, coach, and podcaster Tasha Booth uses income goals to map out the future of her business.
“Revenue goals help us get a clear and full understanding of what we really want,” she says. “Once we set a goal, we can have fun generating BIG ideas to make it happen.”
Booth uses a process called SPACE—strategy, profit, achievements, clients, and energy—to take inventory and determine her goals.
“For example, in 2020, I set the goal to double my business’ income. I needed to look back on the previous year to determine what services to keep, what to toss, and where to increase pricing to meet that goal. Then, I took a ‘living without limits’ approach. I have several questions I ask myself and my team to get crystal clear on where we want to be in the next year. It’s important to dream as big as you can without limiting yourself. Enjoy the process with no guardrails.”
When I first started my freelance writing business, I put all my energy into keeping myself stable. Success was viewed through the lens of a full schedule. It wasn’t until I started setting monthly income goals — and tracking literally every single dollar I earned — that my business started to grow in a way that was sustainable and finically sound.
Income goals have helped me learn how to run my business in a way that makes me money without running me into the ground.