How to hit your revenue goals

Today, we’ll learn how to set revenue goals that work and wow to hit your revenue goals. We all want to grow and make more money. But how much more? How do we set ourselves up with goals that make sense and grow with our business? This is a challenge for many entrepreneurs, especially when considering their industry, market, and specific business circumstances.

As well as learning how to set revenue goals that work, we’ll also delve into setting revenue goals in relation to profit. Ultimately, we want to understand how much money we’re actually earning and how to ensure we’re on track and effectively measuring our progress. We’ll cover all this and more, so let’s get started.

We all aspire to earn more money. We all desire more money to flow into our business.

That’s precisely why we set revenue goals. We aim to drive ourselves to achieve monetary success with our business daily, monthly, and annually. However, before we set any revenue goals, let’s pause and reflect on our motivation.

I understand it may sound unconventional, but grasping our motivation is paramount. Most of us seek more money because we believe it will lead to retaining a larger share of it. However, this isn’t always the case.

Many businesses overspend their expenses, resulting in a skewed P&L statement with substantial losses compared to profits. Therefore, it’s crucial to consider revenue goals in relation to profit. Before setting any revenue goals, take a look at your P&L statement to assess your current profitability.

If you’re currently not profitable, your objective should be to achieve profitability as swiftly as possible. The initial step is to eliminate unnecessary expenses to reach that profitability threshold.

Some of us, even after making these cuts, may still struggle to achieve profitability. In such cases, revenue goals come into play. How much money do you need to generate in the next month or quarter to become profitable?

This should be your primary objective: generate enough revenue to become profitable. And this goal is attainable if you manage your expenses effectively.

Alternatively, you could consider pivoting, adapting, or customising your business to sell products or services with a higher profit margin. This approach may be slightly easier in the services sector, particularly in e-commerce where you have fixed costs for products. However, you could also review your product offerings to identify which ones are more profitable and increase their sales.

So, our revenue goals will be closely tied to our profitability goals. In business we prefer to work with our clients in quarters because each quarter provides ample time to meet my objectives.

Sometimes, your marketing and sales efforts from one month may not yield significant results until month 2. That’s why we don’t set monthly financial goals; they don’t align well with achieving your overall objectives.

For example, let’s say my expenses are £6,000, and my revenue is £10,000, resulting in a monthly profit of £4,000.

This would put you on £12,000 in profits for the quarter which equates to 40% profit margin.

To achieve this level of profit you would need to hit £30,000 over the quarter.

To increase my profit by 15% for the next quarter, first let’s calculate what that is.

Simply multiply your current profit by 1.15 to get your new target profit figure. So, my quarterly profit target will be £13,800.

Next let’s look at what that would mean our revenue needs to be to achieve that profit level.

Multiply your quarterly revenue by 1.15, in our particular example this would mean you need to generate £34,500 in quarterly revenue, this is an extra £4,500 in revenue for the quarter which is only £1,500 per month which feels very doable even for an inexperienced business owner.

If you have a fixed cost business, such as a software company or an online course, this calculation becomes straightforward.

In such cases, you simply need to generate an additional £1,500 in sales per month on average. However, if you “have products that incur costs during acquisition and sale,” you must understand the profit margin on those products to achieve a profit of up to £4,500 within three months.

This serves as your revenue objective for the quarter. This method is highly effective because it results in a 5% monthly profit growth, compounded quarterly to 15%. This approach facilitates steady growth.

Initially, the additional revenue may seem modest, but let’s analyse the numbers. For instance, suppose your profits for the previous quarter were £12,000. If you achieve a 15% increase, your earnings at the end of the first quarter would be £13,800.

Now, let’s calculate your annual profit by the end of the year. If we maintain the same goal and achieve a 15% profit increase in the second quarter, we would reach £15,870. Similarly, at the end of the third quarter, your profits would be £18,250.

By the end of the fourth quarter, your profits would be £20,988, which is nearly £21,000. This represents a substantial increase of over 40% in total profit over just one year.

Notice how these achievable goals—a 5% monthly increase and a total 15% for the quarter—gradually propel you forward without the constant need to adjust your objectives. Personally, I prefer steady, consistent growth over constantly moving the goalposts.

I also value compounding my interests and ensuring that I stay on track. Staying on track is crucial. It’s more beneficial to consistently achieve your goals and witness your numbers rise month after month than to aim for the stars and experience a single, substantial month followed by a decline.

Therefore, prioritise consistency in setting your revenue goals.

Tie your revenue goals to your profitability. Determine how much revenue you need to generate to increase your profit by 15% every quarter. Work backwards and consistently strive to achieve these goals month after month.

We’re not demanding a 20% increase in profit every month. We’re aiming for a 5% increase, which totals 15% for the entire quarter. Focus on achieving this quarter’s goal, repeat the process in the subsequent quarter, and witness your business’s growth.

Remember, slow and steady progress is key.

It’s crucial to keep things simple so that you can follow the plan, remain committed, and maintain your progress. A well-organised spreadsheet is one of the most effective tools you can use for your business.

Got a burning question? Reach out on our social channels or email me at michael@purpleyak.co.uk

Thank you so much for reading.

Take care.