I just saw a video presentation on Designing An MBA and started crunching some numbers for my own creative biz. I know that we have to figure out these details…but I think the fear of not achieving the goal, deters me from facing reality. I thought it would be nice to open it up and see if I’m just crazy. Please indulge me as I think out loud.
The simplest big picture calculation starts with how much profit you want. I decided to go through this exercise with a hypothetical example. Take the super low end of how much a graphic designer makes – about $36,000 yearly salary according to salary.com. In running your own business, in order to get paid that amount you have to rack in 3 times that amount in total sales. Again, bear with me here for the sake of this example because I know we all try to save on expenses and such. For that salary, it means that you want to shoot for $108,000 in total sales.
At this point, you might already be saying…oh the madness, how can that ever be possible!? Depending if you have a service business or product-based business, the costs of materials and profit margins might differ greatly. Fine, I will indulge myself by lowering the bar. Let’s say a total of $50,000 in sales is the goal for the year. If your average product sells for $20, you need to make 2500 sales a year. That rounds to about 10 products per work day, not even factoring in vacations you might want to take. Not only do you have to be able to create 10 of those products a day…you need to sell 10 a day. For a service provider like a graphic designer, $20/hour would mean working nearly 10 billable hours a day. Yikes! Obviously, there are certain scenarios that just won’t work out – simply look at the numbers.
And let me remind you that I lowered the bar in this example. I’m thinking about a whole lot of crafters and artists out there, who probably have products that are even lower than $20 a sale. How can this possibility work out, right? It’s no surprise that lots of folks are only scraping by.
How do you feel about this?
Have you crunched the numbers and figured out a plan that works for your business? What works for you and your services/products?