Set Your Revenue Goal From Your Life, Not Last Year

Most practice owners set next year's revenue goal the same way. Take this year's number, add ten percent, call it a target. Or pick a round number that sounds impressive. Or match whatever the owner down the road claims to be doing.

Every one of those is backward.

They all start with the practice and work outward. But the practice was never the point. Your life is. So the goal should start there, with the life you want, and work back to what the practice has to produce to fund it.

A Number From Nowhere Is Easy to Quit On

Here's the problem with "last year plus ten percent." It isn't tied to anything. It's a number pulled out of the air, and a number from nowhere is one you'll abandon the first hard month. There's nothing underneath it to fight for.

Now picture a different target. This one equals your mortgage and your household, plus what you want to put toward your kids' college every year, plus the trips you keep saying you'll take, plus enough set aside to retire at the age you have in mind. Same size number, maybe. Completely different pull. One is an arbitrary bar. The other is your life with a price tag on it, and you'll show up for that on the hard months.

How to Build It Backward

You reverse-engineer it. Start at the end and walk back.

Begin with the life. What does it cost, per year, to fund the household you want and the future you're building toward? That's your real number, and most owners have never put it on paper.

From there you work back through the layers. That's the after-tax income you need in your pocket, which sets the owner pay and the return on ownership the practice has to deliver, which sets the profit and the collections the practice has to generate to make all of it real. By the time you're done, you don't have a goal from nowhere. You have a revenue number with your actual life sitting underneath it. I walk through the front half of this in building a revenue goal around your life's purpose.

What Working Backward Tells You

Here's what makes it worth the effort. The number surprises people, in both directions.

Sometimes it comes in lower than they feared. They've been grinding toward some vague "more," piling on days and stress and patients, and it turns out the life they want costs less than the practice already makes. They could stop chasing a bigger number they don't need and start enjoying the one they have. If that might be you, this one is worth a read.

Sometimes it comes in higher. The life they want costs more than the current path will ever fund. That stings to see, but seeing it now, with years to adjust, beats finding out at 60 that you undershot your own life. Either way, you stop guessing. You know whether you're on track, over-built, or short, and you can plan from there.

Start at the End

That's the whole idea behind planning with purpose, and it's where we're spending October. You don't build a life around whatever the practice happens to throw off. You decide the life first, then build the practice to fund it on purpose.

Over the next few weeks we'll take that life number and turn it into a real plan. What it demands of the practice, whether your current setup can carry it, and what to move on before the year ends. But it all starts with the one question most owners skip. What do you want this practice to pay for?

Answer that, and you've got a goal worth chasing.

Want Help Building Your Number?

If you've never worked backward from the life you want to the number your practice needs to hit, that's one of the first things we do together. Click here to Book Your Financial Clarity Call and we'll build a revenue goal with your actual life underneath it.

To your abundant practice,

Eric Levenhagen, CPA CTS

Eric Levenhagen, CPA CTS, is the only financial consultant who helps private practice optometrists improve the financial health of their practice with a simple process called Financial Harmony, designed to reduce their taxes and increase their after-tax profits so they can reach their personal goals faster.

ProWise Tax & Accounting LLC Disclaimer: This blog is intended for educational purposes and provides general information about tax, accounting, and small business topics. It is not professional advice, and using this blog does not create a client/CPA relationship between you and ProWise Tax & Accounting, LLC dba ProWise Financial Consulting, or its owners and employees. Blog posts are based on tax rules in effect at the time they are written, and older posts are not always updated for changes. Tax rules change frequently. Always check with your CPA or accountant regarding the most current rules and how they apply to your specific situation.