Last week I touched on some of the ways that your business plan matters to your personal financial situation – as well as your lifestyle, and ultimately your happiness in your entrepreneurial journey.
And since a few people on my email list showed some interest in a series on personal financial planning for entrepreneurs, I’m going to stick with this theme for a little while, setting it up with a little discussion about goal-setting.
One of the most important exercises you can do for your business every year is to set annual goals. My 3 big goals for 2016 are in this blog post, and I chose them with my ideal lifestyle in mind. I went beyond just my aspirations for my business, and considered whether the goals I set mattered to my life.
And taking that perspective forced me to adjust a few things.
I really think you have two goal-setting exercises to do every year. You want to set goals for your business, and then goals for yourself, and then look for alignment, adjusting accordingly.
Wondering how to do this?
Here’s the process I used. It might not be the “right” one or the “best” one, but it worked for me.
3 Business Goals, 3 Lifestyle Goals
The first thing I do is shut my eyes for a few minutes and consider what I would most want to achieve if there were zero barriers. I come up with 3 business goals and 3 lifestyle goals that are viscerally important to me. This isn’t “lose ten pounds by Easter” crap. This is “change my life and my client’s lives” stuff. Deep stuff.
Now, Start with Revenue
I always start with revenue. I’m motivated by money. That’s just how I’m wired. So I start out with a revenue goal that seems achievable based on my previous performance and the amount of time I expect to spend on my business. I use that as my minimum, then double it as a stretch goal. Then I sit down with that stretch goal number and break it down among my various revenue streams. If it doesn’t seem doable, I change something – let’s say I raised my prices 10%, could I reach the goal then? I do this until I’ve come up with a breakdown that seems achievable, but challenging.
Then I look at my costs to figure out what my net profit should look like. Since I’ve been in business for over 5 years, this part is easy; it will be harder for you if you’re new in business. Now I know approximately how much money I’ll be able to keep for myself. Can I achieve my personal goals with that amount? If not, repeat exercise.
Build one House at a Time
As I mentioned before, I have a few revenue streams, and you probably will too. One of them will most likely be stronger than the rest, and make up most of your income. So I like to pick a weaker one, and choose to work on that for the year. This year I chose my one-on-one coaching as an area to work on. I really want to be full up with coaching clients this year. It will help me achieve my mission of helping 10,000 entrepreneurs start new businesses by 2016. It will help me reach my revenue goal. And it will support one of my lifestyle goals too, which I’ll keep to myself, but it involves growing stronger, deeper connections with amazing people.
For the other revenue streams, I try to set up some automation or systems to grow them with minimal effort. That’s because 80% of my efforts must be focused on the one stream I want to build, in order for me to successfully build it. I only have 20% bandwidth for everything else.
Keep Matching Things Up
I stick to 3 business and 3 personal goals, but I think you could have up to five of each without getting overwhelmed. I continue this “matching” exercise – ensuring that each of my business goals aligns with at least one of my personal goals, and vice versa – until I’m satisfied that I’ve laid the foundation for a year I’m going to look back on with satisfaction and pride.
Now, not all of your goals will be finance-oriented, and that’s good – hopefully, you set goals that add considerable value to your life and your customers’ lives. But the goals you set will matter to your personal financial planning, because a lot of them will cost money to execute. There’s also evidence that achieving things that matter – or even just affirming that you deserve these things – will also help you attract more abundance, and that can come in the form of money.
So – go set some goals for this year, and share them in the comments below so we can help you achieve them!