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Complete Your Business Plan in 3 Easy Steps Part 3

12 Health Habits of Business LeadershipWelcome back to our second day of completing your Business Plan for 2016.

For those of you just joining us, here are convenient links to our Part 1, and Part 2 of this 4 part series.

Now that you have an understanding of what your overall revenue goals are and what your current product/service pricing is, we will learn how many products/services or how much time you will need to commit in order to attain your dream.

Step 3: Time Commitment to Produce Dream Income

1. We will use the list of products/services you created in #4 from Step 2.

Now calculate – Subtract the actual cost of creating your the first service/product on your list from the sales price.

Remember, your actual sales price will be determined by what your clients are willing to pay for it. This can sometimes take some trial and error to determine. The best way to determine an accurate price is by investigating your competition’s success at selling the same product/service at the price they are using.

  • This is your profit margin for this specific product/service. Yes, you will need to do this for all of your services or products.

 

2. If you offer a product (for services skip to 3) with a per unit price, such as candles or tractors, then this is how we calculate how many hours you will need to work each week in order to earn your annual income goal.

What is your annual dream income? _______

a.) Divide your annual dream income by the profit margin you calculated in number 1: _____
This is the number of specific products or services you will need to sell per year in order to reach that income (such as a candle or tractor).

b.) How many hours does it take to create this specific item?

c.) How many are you able to make at the same time?

d.) Now divide 2a by 2c: ____
This equals how many times you need to produce your candles or tractors.

e.) Divide 2d by the number in 2b: ____
This equals how many hours per year it will take to earn your annual dream income.

f.) If you were to only work 50 weeks a year (this includes giving yourself 2 weeks of vacation), divide 2e by 50: ____
This equals how many hours you will need to work each week to earn your dream income.

If you just panicked, you may consider selling tractors (bigger profit margin) instead of candles (smaller profit margin).

 

3. If you offer a service that requires an hourly rate, such as building a website or editing a book, then you calculate your income value differently.

What is your annual dream income? _______

a.) How many hours do you plan to work each week on your business projects? ____

b.) Divide your annual dream income by 3a: ____ This equals how many hours you must work each year to earn your dream income.

c.) Next, divide 3b by 50 weeks (this includes giving yourself 2 weeks of vacation): ____
This is the hourly rate you would have to charge in order to earn your annual dream income, IF you have guaranteed work for every one of those hours.

Don’t worry, this is just a basic calculation. Now, remember, this doesn’t include any shipping fees, packaging fees, employee wages, building rental, machine rental, day-to-day business operation expenses, etc. This just helps you get the basic reality of how busy you will need to be in order to achieve your goals.

Don’t be discouraged. This guide is designed to help you learn how to build a strong business foundation. In order to do this, you need to understand the realities of running a successful business, see the big picture, and be able to accomplish the small details to make this dream a reality.

Let’s get to work on building your productive and profitable business!

Congratulations, you are finished with creating your business plan for 2016!

Anna Campbell

I would like to thank my editor, Kari Campbell, for helping me with my grammar and clarity!

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