Ever feel like you're running your business backwards? Most owners do. They work hard, pay the bills, cover wages, and then just hope there's something left at year-end. But what if you could flip that? What if your business was designed to deliver the exact income you want, every year? 

Your business should be a vehicle that funds the life you want, not something you're endlessly working in just to keep the doors open. That means your ideal income shouldn't be an afterthought — it should be the number you build everything else around. 

First, ask yourself: if I weren't in this business tomorrow and had to hire someone to do my job, what would I pay them? That market-rate salary (not whatever drawings you've been taking) is what should sit in your numbers as a genuine cost. Once that's done, what's left over is your true EBITDA: your profit before interest, tax, depreciation and amortisation. That EBITDA is your ideal income — your passive return from owning the business. 

Once you know the income you want, you can work backwards to figure out exactly what your business needs to achieve. It comes down to three key percentages: 

• Cost of Goods Sold (COGS) % — your wages or stock costs as a percentage of revenue. This is usually your biggest expense and the single most important lever you have. 
• Overheads % — the cost of running the business day to day. 
• EBITDA % — your ideal income, as a percentage of revenue. 

These three always add up to 100%. Once you know your target EBITDA percentage, you can work out exactly what revenue you need to generate. 

A worked example: say you want $250,000 in ideal income. If your industry benchmark for overheads is 35% of revenue and cost of goods sold is 40%, that leaves 25% for EBITDA. On that basis, $250,000 is 25% of your required revenue — meaning you'd need to generate $1,000,000 in revenue to hit your number.  Suddenly "grow the business" isn't a vague aspiration; it's a specific, measurable target with a clear path. 

To start, calculate your ideal income. Get clear on a fair salary for your role, the EBITDA you want, and realistic COGS/overheads for your industry. Once you have those, your revenue target becomes a clear plan, not a guess.  If you'd like help working out these numbers and mapping out your path to ideal income, let's talk. It's exactly the kind of conversation we love having with our clients. 

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Please also note that many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances. Should you have any further questions, please get in touch with us for assistance with your SMSF, business, bookkeeping and tax requirements. All rights reserved. Brought to you by RGA Business and Tax Accountants. Liability Limited by a scheme approved under Professional Standards Legislation.