In this post, we will we talking about minimum viable income and everything that you should know to be able to afford to chase your dreams.
Starting your own business is for many people ultimate freedom. You get to set your own hours, all your work you do for you and your business and when you do things right there are unlimited opportunities. However, it is not all sunshine and butterflies. Contrary of traditional employment, entrepreneurship does not guarantee income.
Now, personally I am very enthusiastic about the online business model and I truly believe that you can create a full-time income with it. As much as we sometimes wish to dive in and focus on our passion, it is important to know what the numbers are that we are working towards. It would be disappointing if you would have to beg to get your old job back.
The good news is that often this number is a lot lower than you might think, to make it even better I have developed an easy to use tool that gives you some quick information about your numbers. So let’s get started!
Minimum Viable Income – An Introduction
The key to knowing your magical number that you need to make to keep your life afloat is called minimum viable income. Minimum viable income means the least amount of money your business or side project would need to make in order to support yourself and those that depend on you.
Now minimum viable income could greatly vary per person. A student that lives with its parents needs less income to maintain her lifestyle than a single parent with two children. That is understandable and perfectly okay, it is important that you objectively look at your personal situation.
A keyword here is minimum, which means the most basic form of lifestyle that you and those around you can afford to live. Now I would, for example, wish to be driving a Ferrari now while starting my business, but that would not really qualify as a minimum requirement.
Often our fears, fears we won’t be able to live, fears we won’t be able to support those around us or fears we simply won’t have enough to eat, are holding us back. Money should not be an argument to not get started and if you actually put a number on your fears you will find that the number is much lower and easier to work with. Yes, you probably will have to cut some corners here and there, but that is a small price to pay (or not) to chase your dreams.
Calculating your Minimum Viable Income
In order to calculate your minimum viable income, there are a couple of steps that you should take. Below we will discuss all the required steps.
Determine Fixed Costs
Your fixed costs are all the expenditures that you have to pay each month, this is always a fixed amount. Examples include mortgage/rent, insurances, tuition fees, loan payments and bills such as electricity, cell phone, internet and cable.
Take some time and write down all your fixed monthly expenses, you can fill them in directly in the Excel file that I shared above. You can also use your own Excel sheet or you can even write it down on a piece of paper.
Determine Variable Costs
Variable costs are all the expenses that are not fixed but that you are required to pay for, your groceries are a good example. You can also approach your variable costs by setting budgets or maximum amounts that you can spend on certain categories.
Run the calculations
Now that you have written down all your numbers it is time to check the final calculations. If you used the sheet I prepared this will be done automatically, otherwise you might need to add some quick formulas. Your total expenses number is the number you will be working towards.
Check your number, is this more or less than you expected? How much money do you have left in your current situation and do you see any potential areas where you could save money? These are important questions to ask yourself now.
Tighten your belt, how far are you willing to go?
Changes are that the number that you have calculated is not the minimum number, more likely this is the number of your current lifestyle. In an ideal world, this number would suffice, you start your business, you make ends meet and that marks the start of a successful entrepreneurship story. However, changes are that in the real world things might go differently.
Minimum viable income is all about finding your absolute minimum, what is the lowest number you could work with. This is all a matter of how far you are willing to go, some entrepreneurs move back in with their parents, some stay with friends and some even live out their car. I am not saying that you should, but you should figure out what is in your situation, the absolute minimum you require.
Making ends meet is easier than you think!
Now say that you have calculated your numbers, you have objectively assessed your financials and determined that your absolute minimum totals to $ 2,000 per month. Next step is to determine how many of whatever it is you are selling you need to sell to make your number, it is easier than you think.
Say you sell eBooks and the profit you make per book is $ 15, that means you need to sell 134 books per month to make your number, which is 4,5 book per day. That is not impossible if you have taken the time to organize your business in the right way.
Say you sell courses and the profit per course is $ 200, not taken into account the time you spend to create this course. To make your magical number you would have to sell 10 courses per month, again not impossible.
If you know your magical number, your absolute minimum viable income, you can start calculating how many sales or referrals (if you are into affiliate marketing) to make your number. Often it is much easier than you imagined. If you do not put a number on it, you do not know, after you set the number and the target, all you can do is make it work!
What if you are not making your number?
Entrepreneurship comes with many uncertainties and it is likely that it takes time before your business starts generating the money you envisioned. Below I will share some tips and tricks that you can implement if you are not yet making your minimum viable income and how you can be independent faster.
#1 Save up your runway
A popular term in entrepreneurship is runway, in other words, how long of a runway can you afford with your savings. Say your minimum viable income is $ 2,000 and you have $ 10,000 in savings, that would mean that your runway is five months.
Saving up enough money before you start your entrepreneurial life is not a guarantee of success but it certainly helps you to focus on your business.
#2 Supportive spouse or partner
Does your spouse or partner has a steady income and does he/she support you in chasing your dreams, a supportive spouse can add that extra financial security that you might need to build a business. It is important to go into this with mutual understanding.
#3 A regular job
There is nothing wrong with having a regular job aside from starting your own business. Having a job would provide you with the financial security and puts less stress on making things work as soon as possible with your business.
#4 Part-time work
Working part-time frees up more time in your schedule and gives you financial security. If you do not want to work full-time because setting up your business is too time intensive, working part-time might be more suitable for you. Having a steady side stream of income takes off some of the pressure to make money as quickly as possible with your online business.
#5 Go freelance
Working freelance provides you with the opportunity to already work in the field of your business. Are you setting up an online design agency, it is great to start building a portfolio by doing freelance work. It helps you to create an additional income, polish and build on your skills while also building your personal business.
Managing your financials and knowing your minimum viable income is a vital step when it comes to building a successful business. Using this simple exercise you will gain the required insights of the numbers that you need to make to be able to live off your online business.
How did you start your business and how did you figure out your minimum viable income, let me know in the comments below! For now all the best and stay awesome!