MarginWorkshopOwner Income to Required Revenue
What the business needs to bring in this year so overhead is covered and you actually pay yourself the income you want.
Required revenue at other income targets
| Scenario | Owner income | Required revenue |
|---|---|---|
| -25% income | $0 | $171,428.57 |
| -10% income | $0 | $171,428.57 |
| Your target | $0 | $171,428.57 |
| +10% income | $0 | $171,428.57 |
| +25% income | $0 | $171,428.57 |
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Methodology
Formula: required revenue = (annual overhead + desired owner income) / average gross margin. This is break-even revenue plus what's needed on top to actually pay the owner.
Assumption: gross margin is your average across all jobs before overhead, the same non-persisted assumption used in Overhead Allocation & Break-Even Revenue.
Limitation: a single blended margin assumption across the whole business, doesn't account for a mix of very different job types with very different margins.
Guide: The Overhead and Owner Income Guide, why this number is often more than double the break-even figure.
Frequently Asked
- How does this build on the break-even figure?
- It starts from the break-even revenue that only covers overhead, then adds the actual income the owner wants to take home, converting a personal income goal into a company-wide revenue target.
- What if the owner takes a salary already counted in overhead?
- Then this additional required revenue represents profit distributions on top of that salary; do not double count the same income goal in both places.
- Does this account for taxes on that income?
- No, this solves for pre-tax business revenue supporting the stated income figure; personal tax planning on top of that income is a separate calculation.
- What changes this number the fastest?
- Overhead and the income target both move it directly, but so does the underlying billable-hour assumption feeding overhead allocation, worth revisiting if crew size or utilization has changed recently.