How to Set Your Business Profit Goals

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Setting Profit Goals for Business Success

This section focuses on how to set clear, realistic profit goals for your business. We discuss the importance of setting achievable targets, provide tools to calculate your profit margins, and offer tips on adjusting your business strategies based on these goals.

How to Set Your Business Profit Goals – Transcript

So you know that you want to be in business for yourself and that the 9 to 5 grind isn't for you, but you need help figuring out what type of business you want to start. 

Well, one of the variables that you'll need to figure out is how much money you want your business to make you. This can be a little harder than you think. Luckily, that's exactly what we're going to be talking about in this video. 

Hey everybody, Will Scheren here from Small Business Startup Guide by TRUiC. This video is part of a large course dedicated to helping small business owners cut through the noise and get to the essentials of starting and operating their business. If that sounds like it would be really useful to you, be sure to like and subscribe. 

In the last video in the course, we identified that a great mission statement takes the form of “I want to accomplish X by Y by doing Z,” where X is a quantitative description of what you want to accomplish, Y is a finite date in the future by which you're looking to have your goal complete, and “by doing Z” is how you plan to accomplish your goal. But filling in these variables may not be as easy as it seems. 

Let's start by discussing the first variable, “I want to accomplish X.” We mentioned in the last video that this variable does not need to be filled in with finite dollar amount goals. You could, for instance, have a quantitative humanitarian goal that measures how many people's lives you've improved. But for the sake of this video, let's focus on the bottom line dollar amount that your business will make and add to your — the business owner’s — pocket.

It's easy to be lazy about deciding how profitable you want your business to be by just saying you want your business to be as profitable as possible. But that definitely isn't what you want, especially if you're running your business yourself. The more money that you require your business to make you comes at a cost. You either have to find ways to provide more value to your customers or incur more risk to increase your business's bottom line. So any value provided or risk incurred beyond what's required to have the owner of the business have their needs met and their comforts paid for, including the comfort of having safely secured future cash flow, is either wasted effort or risk that need not be taken. 

So what should the business's quantitative goals be? We have three ways that we recommend you think about this as the owner of a business. 

If you're currently unhappy with your living situation, you can paint a better picture for your life and budget for that plan. Where do you want to live and how much will it cost you each month to live there? What needs and comforts do you want in life and how much will it cost you each year to have those needs and comforts met? Who in your life are you responsible for and how much does it cost to care for them? How long do you want to work for? And do you need to set up your business so that it takes care of you after you've completed working on it? If so, how? 

If you're currently unhappy with your living situation and the task of planning out your whole life seems a little daunting, you should know that a major Princeton study found that making $105,000 a year was the sweet spot for happiness, finding that taking in a higher amount didn't make any difference in a person's happiness while finding that decreased amounts reported lower levels of happiness and increased amounts of sadness and stress. So if you're looking for a quick recommendation of an annual income goal, $105,000 a year would be a great place to start. 

If you currently are happy with your living situation and comforts and you just want this business to be able to afford you that lifestyle, you can go to your bank statements and find the total amount of money that you've spent while you've been comfortable. Divide this amount of money by the number of years that you tracked your expenses to get your average annual living expense. 

The quantitative goal that you want to set for your business is different for everyone, and we strongly recommend that you pause the video now and figure out how much money you need each year to satisfy your needs and comforts. 

So that takes care of the variable concerning a quantitative goal. Next, we recommend you move to the third variable, which would describe how you plan to go about accomplishing your goals for the business. And we'll be discussing how to do that in the next video. 

This video is part of a step-by-step course that gives business owners all of the essential information to start and operate their business. We've provided a link for you to get access to all of the free and discounted business tools we mentioned in this course below this video. 

Be sure to like and subscribe to get more of this content. We'll see you in the next video, and if you have any questions, let us know.