You want your company to grow, you already have made your goals and objectives clear. You will do whatever it takes to get it there. And that’s a great place to start! But do you know what are the next steps? And more importantly, do you know how owning a business affects your personal life? Unless your company is your side gig and you have another job, you need to know how much revenue your company should generate to support your lifestyle. Because owning a business is not cheap, but nobody wants to live uncomfortably either.
We interviewed Jennifer Hanson, a kick-ass digital bookkeeper, online business manager, and head ninja at Blue Biz Ninja LLC, on our latest Systematic Excellence Podcast episode, where we talked about how establishing early on a “lifestyle congruence number” business owners can maintain a comfortable lifestyle. If you don’t know what we are talking about, keep reading!
Figuring out what is the lifestyle congruence number
Amalie: Let’s start by defining it. What do people need to consider when deciding on the lifestyle congruence number?
Jennifer: You need to consider several things: What are you spending money on now? Is it something that you absolutely have to keep doing? Is it something that is nice, but could you possibly take a little break for a while while you’re getting your foundation set? Is it something that can go away completely? Is it one of those false enjoyment things, but it really doesn’t add to your purpose, your mission for your business and for your life?
Amalie: Have you had any experiences with your clients where they were coming out with their budget, but they left something out that is important to have when they’re trying to figure out what their lifestyle congruence number is?
Jennifer: Probably the biggest one is a savings or an “oops factor” kind of account. Life comes up, pandemics hit and having that little cushion there gives you more breathing room financially and peace of mind. If you’re head down just in survival mode, you end up wasting so much time, so many resources.
Janine: The number one cause of personal bankruptcy is medical bills, and nobody ever really thinks about what goes wrong because they’re so busy chasing that dream. Another thing is how the way people fall into business affects their lifestyle congruence number. Like accidentally developing it from a hobby with no plan at all. Have you seen a client have to go back and reassess their lifestyle congruence based on the business that they went into?
Jennifer: To know why you’re in business helps you achieve your goals. If you are just swinging at the fence, but without any kind of retrospection or introspection, you can end up just wearing yourself out. So really taking the time to kind of regardless of why you got in, but why you’re still in is more important. Taking the time to sit down and come out with steps and a plan will help you end up reaching your goals and fulfilling your mission.
It’s not all about just money
Amalie: With lifestyle congruence comes how much time do you want to invest as well. Not just thinking about what you need to make in order to fund your lifestyle, but also how much time are you willing to invest? Do you have any experiences with your clients where they didn’t consider the hours and they don’t know how to really put the plan to move forward when they have the lifestyle congruence number?
Jennifer: The first step is coming up with that number. Looking at your personal finances, then at your business’ expenses. Is there anything that we can trim? Is there anything that isn’t working a hundred percent? Can we get more out of that and then drop another expense? Is there anything that can share the workload? Then that gives you the total of your minimum goal for monthly sales or yearly sales and helps you learn your cycle. Every business has a cycle, even if you’re open 12 months of the year. It’s up and down and flowing. If you have a lean month, then we need to make sure that you’ve got a buffer in your account so that you can keep paying yourself. Because if you yourself fold, then your business is gonna fold. It cannot work without you.
Don’t be afraid of finances. Spreadsheets are on your side!
Amalie: I think it’s important what you mentioned about the business expenses because when you’re figuring out what your products are, the price of them, you need to figure out how many of them you need to sell in order to get your lifestyle congruence number. You have to figure out what are your prices, what’s our pricing structure, how many of them do you need to sell? If you need to make X amount of money and you’re doing 10 calls a month, and it’s not bringing in that money, you might need to make your goal more than 10 calls. And also add what does it cost for you to just live, groceries, subscriptions, dog food, etc.
Do you find that people struggle to come up with this number or do you find that people don’t even do this part?
Jennifer: They have an idea that things are bad, that things are scary, but put it all on a paper spreadsheet then it’s right in their face and that can get really daunting. However, the first step to resolution is just admitting there’s a problem. And you can’t admit the problem until you actually see what it is. But take one step at a time. There’s a ton of good resources out there: apps like YNAB, Intuit, Mint.
But YNAB does things a little differently where you don’t count the money until it’s in your bank account, which goes in line with Mike Michalowicz and Profit First. And then you spread it out amongst the different accounts and that really helps keep at the forefront what you have in your bank and how you can spend it.
Janine: There’s a lot of emotions tied to finances. So they are super scary if they’ve been neglected or set aside. But getting through the fear is totally worth it.
Amalie: I would never go into business without having a bookkeeper.
Jennifer: Especially now with the pandemic and the new idle loans and everything changing with the IRS. You really need someone to keep an ear on the ground. Having that designated person in your corner is really beneficial to businesses.
Amalie: Anything else you want to share with our audience?
Jennifer: Don’t be embarrassed, everyone, and I do mean everyone has been in this situation before. That was something that I didn’t realize until I was in the situation and talking to people and they’re like, “oh yeah, it’s nothing.” So please reach out to someone.
And that’s it for today! We hope this has been helpful to you.
If you’d like to connect with Jennifer, you can find her at https://bluebizninja.com/ and you can message her there.
If you have any questions or want to reach out to us, message us at Hello@systematicexcellence.com and we’ll get in touch with you.
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See you next time!