WARNING: We’re getting into the weeds now of solo business design. If you aren’t serious about building a durable, sustainable solo business then you aren’t going to find value.

Today’s Topic - My Original Business Model (and how you can copy it)

Finding Your Top-Line Targets

When I left my corporate engineering job, my salary was $96k (in 2012). Launching my solo business was NOT about making more money.

It was about replacing my income while granting me the freedom and flexibility to live life on my terms.

Here’s an approximation of my original business model mapped out in the Big Spreadsheet.

Back in early 2013, I had determined that to match a $100k salary in solo service business, I would need to:

• Generate ~$140k gross revenue

• Generate ~$128 per revenue-generating hour

• Invest ~$10k in client acquisition

• Generate ~140 leads (3 per week)

• Land ~3 clients per month

This gave me the CLARITY I needed to press forward.

So how did I come up with those numbers?

Using my Four Building Blocks framework:

1. Net Revenue Target - Cash the business produces after expenses

2. Time Targets - How many hours are available to generate that cash

3. Fixed Expenses - How much does your business cost to exist

4. Client Variables - What are clients worth and how much do they cost to acquires

#1 - How much cash do you need to generate?

I’m not diving into the details here, but after budgeting for health insurance, self-employment taxes, retirement, and misc benefits we come up with a Net Revenue Target.

So to have the equivalent of a $100k salary, my business would need to generate ~$120k (after business expenses).

#2 - How much do you want to work?

To avoid working 70 hours weeks, you need to plan your time accordingly.

Your BASELINE revenue targets should be built around a normal work week, inclusive of vacation and holidays.

Once you calculate the hours available, you have to budget those hours. I like to use three buckets:

• 60% - Revenue Generating Time

• 20% - Business Development Time

• 20% - Overhead/Misc Time

You quickly see that a realistic number of baseline hours to generate revenue in your solo business is ~1,100.

#3 - How much does your business cost to exist?

This is the simplest concept of all - budgeting for fixed expenses.

Keep this mind - it’s easy to ignore something like rent and utilities when using a home office. But that’s a BAD approach.

Why? Because it’s the kind of thing that commoditized your services. Is your goal to compete on price and let you hour household subsidize your clients?

Or do you want a business that could exist independent of your household? One that rents a small office somewhere?

Keep this in mind as you come up with a budget.

#4 - Client Value and Acquisition

This is where all the fun is.

Average Client Value (ACV) drives the strategic design of your business.

This Building Block is the most important one to understand conceptually, so we’ll tackle that next week (it gets its own dedicated newsletter).

Why We Focus on the Math First

Over the next several weeks, we’ll dive into the business modeling in more detail. We’ll focus on both the inputs and the outputs. Why do we do this?

Because understanding the math of the solo model is foundational.

To be an electrical engineer, you have to understand the math behind basic circuits. You can’t design the circuit before you know the math.

The same logic applies here. If you don’t know the math, you can’t design the business you want.

Once we understand the math, we can make strategic decisions about the direction we want our business to take.

And the strategy is where the real fun is.

So we all need to take our medicine and understand this part first.

Deal?

Good!

Until next time - LFG.

-Zack

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