Picture This:
Your wife left her corporate job 2 years ago when your son was born. Your daughter will arrive any day now.

Great time to dive in headfirst on your solo business right?

That’s what I did… Real risk = Real urgency

Today’s Topic - Planning Your Financial Runway

Born on the 4th of July

My daughter arrived on Independence Day, 2013 - three weeks early via an “emergency” C-section.

The doc was concerned with my wife’s amniotic fluid levels and my daughter’s small size.

It was possible she had stopped growing.

We negotiated a night’s reprieve and returned at 5:00 am the next morning to prep for the Cesarian.

We had our moments. It was a wild 36 hours. But everything worked out. My daughter will turn 10 this summer.

Two weeks later, I formed my LLC.

On August 6th, I would process a test payment.

On August 13th, I got paid by my first client.

From forming the business in July through the end of the year, I would generate a total of $14,438 (including my $1.20 - lol). That’s before expenses.

A far cry from the $90k+ salary I left as a senior mechanical engineer.

→In 2014, I’d generate $87,542.
→In 2015, I did $118,137.
→In 2016, I did $147,967

I’m sharing these numbers for two reasons:

1 - They’re realistic
2 - They help us imagine a financial runway

$14k over 6 months is not a lot. But it was something. And it was from absolute zero. No network. No clients. Nothing.

Two Revenue Goals - Saturation and Break-Even

Saturation Revenue Target

We haven’t dove into our business-modeling lessons yet. When we do, you’ll learn that we model our business based on a normal work year.

That assumes 40-hour weeks minus vacation and holidays ~ 1,840 hours per year.

The revenue you model your business to generate in that number of hours is what I call “saturation.” Without overtime, this is the capacity of your business as modeled.

Break-Even Revenue Target

This is personal.

We all have different lives. Some have a family and a mortgage. Others live rent-free in mom’s basement.

All of us need to be responsible and take calculated risks.

But the right answer for one might be dangerously irresponsible for another.

So we need some kind of framework to personalize this.

That framework is what I call the Break-Even Revenue Target.

It works like this.

You and any other key stakeholders (like a spouse) sit down and determine what level of monthly income keeps you afloat.

Whether that means eating ramen or eating out 5 times per week is up to you.

Your goal becomes:

Get the business to this break-even level as fast as possible.

But what does “fast” mean? What is realistic?

Planning your runway

Truth is this - a well-positioned, well-marketed, well-launched solo-service business can scale out quickly.

Or it can take months and months of trial and error.

While we can’t guarantee success, we can map out a plan and track ourselves against it.

Our assumption is slow and steady growth.

Your Inputs:

→ Starting month revenue ($)
→ Monthly growth ($)
→ Fixed expense estimate ($)
→ Variable expense estimate (%)
→ Risk capital (cash you are prepared to lose)
→Monthly break-even cash flow needs

The Outputs:

→ 12-month cash flow
→ Max drawdown in capital
→ What month did you break even

Use this type of analysis to:

• Set goals / KPI for your early months

• Negotiate with your spouse on failure points

• To plan out savings targets before diving in

The Value of Urgency

Urgency is hard to fake - and it’s the ultimate difference maker.

If you think I was crazy to start my solo biz from zero with a wife and two small kids at home, I’m not going to argue with you.

I’m also not going to argue with the results.

I had a limited time window to prove to myself and my wife I could do it (and a super supportive spouse).

If it failed, I would have been a corporate lifer. At least that’s what I told myself.

I’ll admit to you right now - this new thing here? CubeBreakers? This newsletter? Selling a course? The 1-on-1 stuff I plan on doing soon?

Low urgency.

Why? Because my engineering business takes me 20 hours/week and pays the bills. My kids are 8 and 10. My wife has a good job and also works from.

We’ve got a fantastic situation.

There’s no pressure.

That’s both a blessing and a curse.

But it’s only possible because of the urgency I had 10 years ago.

Runway + Urgency = A Calculated Risk

That’s the takeaway. Success comes from taking calculated risks.

You can dive in headfirst not knowing how to swim, with no life preserver, and no one there to help you.

Or, you can dive in headfirst with a financial runway, a strategic plan, and a clear understanding of your business model.

One is a gamble.

The other is a calculated risk that creates a true sense of urgency.

In the coming weeks, we’ll be talking about the other key tools you need to launch your solo biz.

Until next time - LFG.

-Zack

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