Last Updated on 2 days ago by Heyward CPA PLLC
At Heyward CPA, we talk to growth-minded entrepreneurs every day. Whether you’re running a thriving law firm, managing a busy daycare, or building a consulting practice, there’s one question most owners can’t answer on the spot:
How much does this business actually need to make?
Not “more than last year.” Not a round number that sounds impressive. The specific figure your business has to produce for your life to work.
That figure is your Northstar Number. Here’s how to find it.
What Exactly Is a Northstar Number?
Your Northstar Number is the revenue your business must generate to fulfill your lifestyle needs as the owner.
That’s it. It isn’t a growth metric, an engagement score, or a customer-behavior indicator. If you’ve read about “north star metrics” in a startup context, that’s a different concept built for venture-backed software companies. Useful in its place but not the number a small business owner needs.
You need to know what your business must produce to survive. Every other decision pricing, hiring, whether to take on that client gets easier once that number exists.
Why Revenue Alone Tells You Nothing
Gross revenue on its own is a vanity metric. You can post $1M in revenue against $1.1M in expenses. At that point, you aren’t a business owner; you’re a high-stress volunteer for your vendors.
The Northstar isn’t revenue in isolation. It’s a revenue target calibrated to your actual life and your actual margin. That’s what makes it a sanity number instead of an ego number.
Step 1: Map Your Real Personal Expenses
Here’s what catches people off guard: you don’t find your Northstar by looking at your business. You find it by looking at your life first.
The Step: List your monthly living costs honestly: housing, utilities, insurance, food, transportation, childcare, debt payments, subscriptions all of it. Most owners underestimate this by 20 to 30 percent, usually on food and recurring charges they’ve stopped noticing.
Step 2: Add Your Savings and Income Goals
Covering your bills isn’t the same as building something. A Northstar that only funds survival will keep you exactly where you are.
The Step: Add what you want to set aside: an emergency fund, retirement, college, or a real vacation. If you’re currently saving nothing, this step is where that changes. Add the goal, not the current reality.
Step 3: Build In a Tax Buffer
Self-employed income doesn’t arrive taxed. Nobody withholds on your behalf, and the bill is bigger than most first-time owners expect once self-employment tax is included.
The Step: Apply a tax buffer to your total from Steps 1 and 2. The right percentage depends on your entity, your state, and your deductions; this is worth a conversation with us rather than a guess, but plan on it being substantial.
Step 4: Find Your Actual Profit Margin
This is where the surprise usually lives. Margins run tighter than owners assume; for instance, restaurants commonly land between 3 and 10 percent, retail between 5 and 15 percent. The gap between assumed margin and real margin is where a lot of hard work quietly disappears.
The Step: Pull your last twelve months. Divide net profit by gross revenue. That percentage, not the one you hope for, is what goes into the calculation. If your books aren’t clean enough to answer this, that’s the first problem to solve.
Step 5: Reverse-Engineer the Revenue Target
Now the math does the work. Take your annual personal requirements, expenses, savings, and tax buffer and divide by your profit margin percentage.
Say your monthly obligations total $7,850 after taxes. With a 20 percent tax buffer and a 20 percent profit margin, your business needs to generate roughly $588,750 a year, about $49,000 a month, to sustain the life you already have.
We’ve run this with owners who were confident they needed $150,000 a year. The room usually gets very quiet.
The Step: Run your own numbers. Then check them against what your business is actually producing.
If you’d rather not do the arithmetic by hand, our Northstar Calculator walks the same five steps and gives you the figure.
Tracking It: The BYOB Model
Finding the number is half the work. Tracking it is where the growth happens.
Traditionally, you’d outsource your bookkeeping and wait for a month-end report. For a growth-minded owner, waiting 30 days to learn whether you’re on pace is too slow.
That’s why we built the BYOB (Be Your Own Bookkeeper) model a done-with-you approach where you stay close to your numbers, and we stay involved:
- We set you up properly on modern cloud tools, so the system is right from the start.
- Ongoing support from our team whenever something doesn’t look right
- Quarterly reviews where we look at your financials together and measure against your Northstar number
You’re never on your own! The point is to shorten the gap between what’s happening in your business and when you find out about it, with a CPA Firm by your side rather than a report arriving weeks later.
Why This Matters Now
The difference between a business that stays stagnant and one that grows is clarity. When you know your Northstar number, decisions get simpler:
- Should I hire? Does the math still work at the new payroll number?
- Should I take this client? Does the work clear the bar or sit below it?
- Should I raise prices? The target tells you what the price needs to be.
Our team at Heyward CPA is more than accountants; we’re entrepreneurs who understand the challenge of growing a business. Our goal is to help owners make decisions based on real numbers rather than instinct, which is the best practice for reaching goals.
If you want the bigger picture on why a target changes how you operate, start here: Hustle vs. Strategy: Do You Have a Northstar?
Your business should serve your life, not the other way around. Let’s find your Northstar and build the roadmap to get there. Book a consultation →