Whenever I tell people that I work for myself their first reaction is usually something like "I could never do that because [insert random reason here]". In many cases in comes down to the safety and reliability of a steady pay-check. But for others, they find it difficult to set goals outside of the structure a larger company offers.
How do you set goals when you're the master of your own business? I'm going to focus on one type of goal - financial.
The first step is work out how much money you need to live on and break that to a weekly or monthly amount. Two tools can help you; bank statements and keeping a spending diary.
Look through your actual spending and split the spending into two buckets; fixed costs and variable costs. Once you know those things you can build up a picture of how much money you need each month (or whatever pay period you want to work from) in order to get by. This lets you set your most basic goal - survival.
Survival is nice but it's not living. We all want to earn enough to take a nice holiday each year or just have some time out. That's your second goal.
The third goal level is the BHAG - Big Hairy Audacious Goal. If you achieve this goal you can allow yourself some sort of frivolous luxury like an overseas trip, flashy car or big screen TV.
So - how do you calculate those goals? Here's the process I use.
Start by working out how many working days there are per year. Make allowances for annual leave (20 days), sick days (10 days), public holidays (10 days) and weekends (104 days). That leaves me with 221 potential working days. If you're self-employed, there's some time when you can't be earning money such as professional development/learning time, administration and quiet days when there aren't quite as many clients around as you want. I allow myself a 10% margin for that leaving me about 200 days that I can use for actual earning.
Let's set the survival goal. Given that bills arrive at different frequencies you need to look across a full year to work out the goal. If you're single and live a simple life, this is going to be a very different number to someone that has a mortgage, kids in private education and two cars. Wherever you are on this spectrum, make sure you make the calculation thoroughly. The first time I did this, the number was very scary.
Let's say that the number is $50000. That means that you need to earn $250 per day. However, that's an after tax and superannuation (401k if you're in the US) number. So, the real number is more like $350 per day.
From there, adding some extra dollars to get you to the living and BHAG levels.
If the overseas holiday is going to cost $15000 then you need to find about $100 per day in pre-tax dollars.
How do you set your earning targets? If you're self-employed, what sort of goal setting and budgeting do you do?