Episode 151: Building a Business That Can Sustain You

On this episode of the podcast I discuss what you need to take your business from hobby to something that can financially sustain you.

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Building a business that can sustain you. What does that mean exactly? We could definitely talk about sustaining your physical, mental, and emotional health, and we will for sure.

But what I mostly mean is that we need to build a business that can sustain us financially. I would argue that the key difference between playing business and running a business is whether you're committed to whether it can financially sustain you.

That means

1. paying bills

2. paying debt

3. saving for emergencies, etc.

How much do we need to make for our business to sustain us and how do we get there?

Let's start with the first question. Consider your monthly personal expenses like student loan payments, rent, etc. How much does that cost you per month?

Now consider that a healthy business (depending on the industry) is going to have around a 70% profit margin, this doesn't include tax, just business income minus deductions. When I say "take home" I mean profit minus taxes.

Let's assume tax savings need to be 30%. Now the leftover is 40%. I also like to consider some cushion. Consider the things you'd like to be saving for that you're not saving for now. Maybe retirement, a vacation, a peloton... So to make the math easy, that's another 15% of income. Now, you're left with 25% of your business income to pay for the stuff you're currently, or hopefully soon will be, paying for.

The way I look at it, you need to take the amount of take home pay you think you need and multiply it by 4 in order to have a business that truly can sustain you.

This is why I've said in the past that everyone should strive to build at least a six figure business. And I don't mean that because I think we should all be money hungry.

It's because after self-employment taxes and business expenses, a low six figure income nets us about $40-$50,000. In most states and cities, that's not a whole lot to work with.

Now this breakdown may be a bit of a buzzkill. I get it. But it's the reality I wish I'd had when I first started my business. If nothing else, it would have prepared me better for the journey. It took twice as long to get six figures myself as I'd originally thought it would.

First, you have to identify what it is that you're doing. Then, you must crack the marketing side of things. And while doing all this you've got to get your mindset and the backend of your business right

You need to have a CEO mindset. Which means focusing on profit, efficiency, and the longevity of your business. You also need to work on the backend of your business including

1. Creating systems to pay your taxes and scale into the right business entities

2. It means paying yourself regularly so that you can build consistency and routine into your finances

3. It means putting together a full cash flow management system to make this happen

Part of building a sustainable business is also your mental, emotional, and physical health.

Consider that you can work much on your physical health if you're working in your business 12 hours a day. Your mental and emotional health are going to take a beating if you're in constant stress mode over finances or debt. 

You may have been dealing with these things a lot over the last year. If so, that's understandable, but our goal is to set up your business so that in the long run, most of your day-to-day is unremarkable. Sometimes, having nothing to remark on is what we hope for in the sense that we've had no negative client interactions or hits to our business.

Let's build a remarkable business and life by making the day-to-day back end operations unremarkable. Deal?