How to Determine Your Sweet Spot for Monthly Revenue (for Service-based Businesses)

You’re great at what you do. Other people take notice that you’re great at it, and they want to pay you to do it for them, too. But how do you figure out what you should charge for that special thing you do? And how do you find the sweet spot for your monthly revenue where you’re able to pay yourself, pay taxes, and save in your business?

Are these questions you have while running your service-based business? Well, keep reading and let’s break it down!

Step 1: Determine what it costs to run your business.

Do you know the absolute minimum amount it takes to keep your virtual doors open? One you know your cost of doing business, you’ll have the baseline for determining your monthly revenue sweet spot. Your cost of doing business includes all of the expenses related to providing, advertising, and delivering your service.

Step 2: Figure out what you need to pay yourself.

While the exact amount might depend on your profit and cash flow, you must pay yourself something! Your minimum goal should be to develop some consistency in the frequency and amount you choose even when your business sales fluctuate. Then, as business begins to pick up and cash flow is more predictable, you can reassess and increase.

Step 3: Plan for taxes.

Factor in an estimate for taxes. A good tax estimate should be a part of the equation when figuring out your sweet spot for revenue. By planning ahead for taxes, you eliminate the surprise at the end of the year and can properly manage your cash flow now while you have it, instead of later when you might not.

Step 4: Assess the number of clients you’d need to make this happen.

You have a number in mind now for your monthly revenue sweet spot, but is it feasible? Are there enough hours in your work day to serve as many clients as you’d need to meet this revenue goal? Decide if you could you take on more clients, or perhaps charge more and provide more value from your service.