If you were to paint a canvas, you’d start with the goal in mind: What is it you want to capture? As business owners, we have a blank canvas — we own the paintbrush and can create a business to support our vision of our ideal life and work so we can operate at our highest energy level and thrive.

In order to create the ideal business to support your vision, you need to understand your financial metrics and goals. As a business owner, no one is going to determine your salary, so it is up to you to figure out your magic number — the number that compensates you for your worth, the value you bring to your business and the income you want in order to be able to live the lifestyle you desire.

So let’s break out the components of the “lifestyle number.”

Step 1: What are your fixed expenses? 

Think about the necessities:

  • Mortgage
  • Utilities and bills
  • Medical Insurance (yes, you absolutely should have medical insurance as a business owner)
  • Car payment
  • Food
  • Property taxes

We’ll call it $5,000 a month for our example.

Step 2: Think about the cost of the lifestyle you’d like to lead. 

This includes whatever makes you happy and you enjoy spending money on. For example:

  • Vacations
  • Shopping
  • Outsourcing some chores around the house

Let’s say you spend $2,000 per month on these expenses.

Step 3: Think about when you’d like to stop working — or at least make work optional. 

How much should you save and invest monthly into a retirement account or other investments in order to eventually make work optional? If your business succeeds, you may be able to sell it for a large sum, but for the sake of simplicity we’ll leave that out of our example.

To get an idea of how much income you’ll need to replace:

  • Add the numbers in Step 1 and Step 2. In our example, the necessary and desired components of your lifestyle total $84,000 a year.
  • Assuming a withdrawal rate of 4% of your portfolio per year — a common rule of thumb — you’d need about $2.1 million to maintain your lifestyle through retirement.
  • The amount you need to save and invest to get there depends on your age and how much you already have saved. We’ll call it $2,000 per month for our example.

Step 4: Don’t forget the tax man! 

As a business owner, if you need $9,000 a month for your fixed expenses, desired lifestyle and savings, you need to pay yourself $108,000 a year.

Your taxes will vary depending on how your business is structured and how you file. For the sake of our example, I’ll oversimplify and call it 30%, including federal, state and self-employment tax.

That means you need to “bring in” roughly $154,000 per year gross — before taxes — in order to live the life you want.

We can break that annual sum into smaller chunks.

$154,000 is roughly $13,000 a month, or roughly $3,200 a week if you want to work 48 weeks per year (because in order to thrive you have to take time off.) That equates to about $640 per day.

Of course, if you have other business expenses (rent, employees, supplies) in addition to personal expenses, you’d have to add that number to the $154,000 to figure out your overall revenue goal for the business.

Knowing that number is the first step to creating a business that helps you thrive. Without a specific target and revenue number, it’s very difficult to know how to structure your products and services — it’s the equivalent of throwing darts at a bull’s-eye blindfolded. It’s important as a business owner to start with the end goal in mind.

As a fellow business owner, I feel your challenges, for they are my challenges. Working in our business sometimes doesn’t leave enough time to work on our business and certainly little time to worry about our personal finances.

But remember, you set out on this difficult journey because you have a passion for what you do. You deserve to be compensated well to help you thrive and deliver that much more value to your customers!

And remember, often in business, to delegate is to elevate. If you need help with taxes or financial planning, there is help around the corner — you don’t have to go it alone.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.