How to Set Financial Goals as a Service Provider

As a service provider, do you struggle with financial goals?

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Today we are talking about setting realistic financial goals for service providers. We are all in business to make a profit and to do something that comes natural to us. I believe that we can marry these two things together and reach real fulfillment that can lead to a legacy life.

It starts with creating true financial goals, rather than arbitrary financial goals which you don’t end up tracking.

What You Need To Get Started

These things will allow you to create your financial goals.

Track Every Expense

You need to track everything that is coming in (revenue), and also everything you spend (expenses). Make sure you reconcile your expenses at the end of each month, meaning you will categorize them and put them in the buckets in which they belong. Create the categories that make sense for you (example: marketing, gifts, labor.)

You also want to look at your expenses and categorize them based on products or services. When you look at your expenses, do they contribute to a specific client or a specific product? This helps you to understand the cost of goods or cost of services sold. Long term, this will help you see how much profit you are actually making and understand how much profit you make on each specific client.

Centralize Your Systems

In the beginning I was doing all of my expenses on an Excel spreadsheet, but things started to get more complicated around the 18 month mark of my business. I really needed something more powerful and automated so I could spend less time on these tasks. I needed a tech system that could house this info and could be integrated into my payment system. My choice was Quickbooks, which shows me reports month over month, and also trends that are popping up.

Invoicing System

An invoicing system is automated, which will help you reduce your errors in billing on a consistent basis. Speaking from experience, it is painful when you accidentally skip a month of billing because of a manual error on your part. Selecting an automated system will give you peace of mind.

Additionally, these financial tools will help you assess the risk of entrepreneurship, and help you articulate this information to a spouse or other necessary party.

How To Set Financial Goals as a Service Provider

You need to know these four numbers on a monthly basis:

What is your business’s revenue?
What is your profit?
What is your profit margin (as a percentage)?
What are you paying yourself?

These numbers will help you assess what your performance is like, and be fundamental in goal setting.

Additionally, each month I want you to know the drivers for the revenue that month. What products were these numbers coming from? Which products are bringing in active revenue, and are allowing you to be profitable? These numbers might surprise you. Know what is driving your sales and revenue so you can constantly review your services.

How To Set Goals

Ideally, you will have your numbers for the whole of 2020. If you don’t, at least go back to Q1 (Jan 1 – Mar 31) of 2021. You also want to have everything set up that has been previously mentioned, so that you can be on the path to setting goals.

“You cannot set goals without a foundation.”

If you have 2020s records completed, look at the same four things we previously talked about:

your revenue
your profit
your profit margin
your personal income

There is an emotional component as well. When you look at these numbers, ask yourself:

Does this feel good? (If the answer is not a “Heck Yes”, go back and figure out why.)
Is this an honest representation of the work I am doing?
Are you getting closer or further from your vision?

“Honor those feelings of not feeling good”.

You need to get clear on the things that do feel good, and where you can make the greatest impact with an audience that you deeply resonate with. There has to be a combination of hard data, and the emotional fulfillment that allows you to fulfill the dream that you set out for yourself.

Good Better Best (GBB)

I want you to set 3 types of goals.

Good Goal: When you look at the previous years numbers, set your good goal first. Your good goal should be the amount that covers the cost of your business, and your personal bills. This is the amount and that you are bringing home on a regular basis. This goal consistently is met.

Better Goal: Look at your good goal and add 10-30%. This is potentially where you can pay yourself more. This goal is occasionally met.

Best Goal: Take your better goal and add around 30%. The more you set those goals and compare them to your actuals, you will be able to better assess what these goals should be. This goal rarely happens.

When you have the GBB goals set for the entire year, reverse engineer and break those down into quarterly goals. If you have a purely client based business, you may not have trends, but you probably have a cap. Take that info and know the volumes you are working with and break down that big GBB goal into quarterly GBB goals. This allows you to assess at the end of every single quarter.

“Use the data to cast a vision of what you can do!”

Next Level

The next level is investing in a bookkeeper, so you are not doing this every single month, but handing it off to someone who will get to know your business.

You may also think about investing in a tax accountant, which will help you save money so you can optimize your financial goals.

Additionally you can set up a true budget, and a forecast which allows you to have a projection of where you are going so you can compare it to your actuals to make sure your GBB goals are all being met.

I hope this will help you understand the financial implications and the expectations that you have, and that they are grounded and rooted in truth!

I’d like to invite you to our upcoming Masterclass! We will be meeting live on May 18th & May 19th. If you are an operator or service provider we are going to help you zone in on where you should be focusing your energy, what comes most natural to you, and helping you to monetize your natural gifts.

Weekly Ops Activity

Look at your financials and set Good-Better-Best goals for Q2, Q3, & Q4 of 2021. Come on over to The Ops Insiders Facebook Page, and tell us once you have your goals set (no need to leave a number, just let us know that you took action!)

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