How much is enough income? Once upon a time, my answer would have been “how much is there?” Having run a small business for eight years, I’ve mostly learned my lesson – the hard way.
You might be thinking, “Huh? Isn’t more always meant to be better?” The answer is not always. In fact, you might even be achieving “enough” already. Yes really!
You’ll have seen A LOT of stuff on ye-olde interwebs devoted to growing your business and earning more. Books, sites and “systems” have been written on growth-hacking, year-on-year, exponential or stratospheric growth. The sad fact, though, is that achieving double, triple or quintuple digit growth over the long term is nigh on impossible after you’ve been in business more than a couple of years.
And holding yourself to the standard that you should be growing at x per cent consistently is likely to have you beating yourself up and feeling you’re failing as a business owner. Cue: misery, overwhelm and poor decision-making as you chase growth at any cost. Or worse, quitting and walking away – not having “measured up”.
However, going the distance in business is mostly about producing a sustainable level of income for yourself. The key word in that sentence is sustainable – especially in small business. Massive growth isn’t sustainable and neither is the workload required for you to produce it.
But really what are you trying to achieve? When you think about it, often it’s something along the lines of comfort, happiness and/or a sense of well-being for yourself and your loved ones.
But here’s the real kicker, higher incomes after a certain point don’t lead to any higher life satisfaction. And the number is a lot lower than you might think.
A recent study in Nature looked at the relationship between income and happiness in a huge sample of 1.7 million people across 164 countries, including Australians. Turns out people the world over feel considerable pressure to achieve high incomes. And actually, Australia has the highest number in the study for what it takes to feel a solid sense of well-being at $125K a year. Surprised?
And you’re likely to feel “okay” earning just $50K. You will feel progressively better about yourself for every $5K you earn over $50K up to $125K. And you will feel progressively worse for every $5K you earn beneath $50K.
What’s more surprising in the study is that further increases income above $125K were associated with decreases in feelings of wellbeing – i.e. the more you earn, the worse you feel about things. This was explained as the higher the income, the higher the demands (think: time, responsibility, workload, energy), the larger the limits on personal/leisure time and the greater the likelihood of pressure from social comparisons.
Think about how much you really need to earn, not in terms of big round numbers, but really. What does your personal/family budget require of you and your business? If it’s significantly more than $125K think hard about what you might cut out that’s not serving you.
What if I’m not earning anywhere near $125K a year? About 50 per cent of small businesses turnover less than that, so you’re not alone. It’s just a case of putting a new business pipeline process together in a way that’s sustainable. Make sure to look after the customers you do have. It’s so much easier (and cheaper) to sell to them next time.
Kristin Austin, Creator, 1stinbiz.com – the real-life sales revenue game