HOW MUCH CASH DO I NEED?

I define profitability as having enough money to cover “the nut” and having a buffer that will allow me to move on to the next zag. Everyone has different needs, or “nuts,” so profitability will be different for each person or each business. I am covering the nut in my personal life when I have enough money to pay all my expenses, such as housing, utilities, recreation, food, clothing, education needs, health insurance, and a little more to take care of those unexpected extras that always crop up.

If a family makes a budget and keeps track of how much it costs to live each month, then that is the family’s monthly nut. In business, the nut would include the building, utilities, the cost of doing business, payroll for any employees, and any other expenses it takes to run the business, including paying yourself. (If you forget that, you’ll destroy the nut in your personal life.) Use the worksheet on page 96 as a guide to determining your nut. Any amount over these expenses is profit. You need to carefully calculate what it’s going to cost you to get to profitability. This can’t be a number you guess at. It needs to be a firm number and one that you write down. Here is some help in coming up with that number.