To know how much your business needs to make, add your fixed costs, variable costs, tax, owner’s wage and any profit target, then work back to the revenue required to cover them all. This breakeven-plus-profit figure is the real sales target your business must hit to be viable and reward you fairly.

Most business owners I speak with can tell me what they made last year. Very few can tell me what they needed to make — and even fewer have worked out the revenue target required to get there. That gap is where financial stress lives.

The question “how much should my business make?” sounds simple. But it is not about an arbitrary target — it is about starting from the life you want, calculating what that life costs before tax, and then engineering your business to produce that number. Once you have the target, you need the right measures and activities to know you are on track.

In this guide, I will walk you through a practical business planning framework for Australian small business owners: how to set your minimum revenue target, understand your profit margin, and identify the Key Performance Indicators (KPIs) and Key Performance Drivers (KPDs) that will get you there.

Start With What You Need in Your Pocket

The most useful starting point is not your revenue — it is your lifestyle. How much money do you actually need to take home each year to live comfortably, pay your mortgage, fund your super contributions, and have something left over?

Let us say you are a Melbourne tradie. You have done the sums and you need $120,000 after tax per year. That is your bottom line — the minimum your household needs to function without financial stress.

Now, here is the part most people skip: $120,000 after tax is not $120,000 in business profit. You still have to pay income tax on whatever the business generates for you.

If you operate as a sole trader or receive income through a trust, your business profit is your personal taxable income. Using the 2025–26 Australian income tax brackets (plus the 2% Medicare levy), a gross income of approximately $172,000 produces around $120,000 after tax. Here is roughly how the tax works:

• Income tax on $172,000 ≈ $48,700
• Medicare levy (2%) ≈ $3,440
• Total tax ≈ $52,140
• After-tax income ≈ $119,860

So your business minimum: $172,000 in net profit just to pay yourself $120,000 after tax.

If you have a business partner who also needs $120,000 after tax, you simply double that figure: the business needs to generate at least $344,000 in net profit before the two of you are adequately paid.

A quick note on structure: the calculation above applies to sole traders and trust distributions. Company structures work differently — the company pays 25% tax on profits where it is a base rate entity, or 30% if it is not, and you then pay personal tax on dividends (with franking credits offsetting some of that). If you are unsure which structure applies to you, see our guide on how to structure your business to build wealth.

Work Backwards From Profit to Revenue

Once you know your minimum profit target, the next question is: what revenue does the business need to generate that profit?

This is where your profit margin comes in. Your profit margin is the percentage of revenue that remains after all business expenses are paid.

The formula is straightforward:

Let us take a consulting business as an example. The owner needs $172,000 in net profit to pay herself $120,000 after tax. Her business operates at a 40% profit margin — for every dollar of revenue, 40 cents is profit after all costs are covered.

Revenue target = $172,000 ÷ 40% = $430,000

That is the minimum revenue her business must generate for her to achieve her income goal. Not aspirational — minimum.

Now, if her margin drops to 30% because costs have crept up, the revenue target changes dramatically:

Revenue target = $172,000 ÷ 30% = $573,000

Same income goal. Same lifestyle. But a $143,000 increase in required revenue — simply because the margin fell by 10 percentage points. This is why understanding your numbers matters so much.

For most small businesses, knowing three numbers at any given time is non-negotiable:

1. Your minimum after-tax income goal
2. The gross profit (before tax) that produces it
3. Your revenue target, given your current profit margin

If you want to get better at reading these figures in your own accounts, our article on how to read your profit and loss statement is a practical starting point. For a broader look at the numbers every business should monitor, read our guide on the financial numbers every small business owner must know.

What Drives That Revenue? Introducing Key Performance Drivers

So you have set a revenue target. Now what? Hit $430,000 in revenue is a result — it is not a plan. You need to identify the specific activities that will produce that result. These are your Key Performance Drivers, or KPDs.

KPDs are the inputs — the day-to-day actions that, when done consistently, generate revenue. They look different depending on your business:

• Tradie: quotes sent per week, follow-up calls made, repeat client contact
• Consultant: consultations booked, proposals submitted, referrals requested from existing clients
• Retailer: Google reviews requested, upsell conversations had, repeat customer outreach
• Professional services firm: networking events attended, referral partner catch-ups held, LinkedIn connections made

The reason KPDs are so powerful is that you can control them. You cannot control whether a client says yes — but you can control how many proposals you send. You cannot control the economy — but you can control whether you ask every existing client for a referral this month.

Most small business owners focus entirely on the outcome (“I need more revenue”) without identifying the specific inputs that generate it. Defining your KPDs changes the conversation from hope to strategy.

KPIs vs KPDs — What Is the Difference and Why Does It Matter?

You have probably heard the term KPI — Key Performance Indicator. KPIs measure results: revenue this month, profit margin, number of new clients signed, average invoice value. They are important, but they are lag indicators — they tell you what already happened.

By the time a weak KPI shows up on your dashboard, it is too late to change the behaviour that caused it. If your revenue for the month is below target, that problem started six to eight weeks ago in your sales activity.

KPDs are lead indicators — they predict future results. When you track them consistently, you can see problems coming before they arrive in your revenue figures.

Here is a practical example. Say your consulting business needs 4 new clients per month to hit your revenue target. Your enquiry-to-client conversion rate is 25%. That means you need 16 qualified enquiries per month to convert 4 into clients.

Now reverse-engineer how those 16 enquiries are generated:

• 6 from referrals (you need to actively ask existing clients)
• 5 from your website and Google Business Profile
• 5 from LinkedIn outreach and content

Your KPDs this month become very specific:

• Ask 10 existing clients for a referral
• Publish 3 LinkedIn posts this week
• Respond to all website enquiries within 2 hours
• Follow up on all outstanding quotes within 48 hours

None of those KPDs say “get more revenue.” They are specific, controllable, trackable actions. That is the difference between a business that drifts and one that has a plan.

KPIs — Lag Indicators (outcomes)	KPDs — Lead Indicators (activities)
Monthly revenue	Proposals sent this week
New clients signed	Consultations booked
Net profit margin	Referrals requested from existing clients
Average invoice value	Upsell conversations had
Client retention rate	Client check-in calls made

Watch: Strategic Planning and Growth for Business Owners

Prefer to watch rather than read? Mina covers business growth, tax strategy, and financial planning for Australian business owners in this BusiHealth session:

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Building Your Simple Business Dashboard

You do not need expensive software to get started. A spreadsheet reviewed once a month is enough to begin. The discipline matters more than the tool.

Here is a practical dashboard structure for a service-based small business:

KPIs to track monthly:

1. Total revenue for the month (vs. target)
2. Net profit margin (%)
3. New clients signed
4. Average invoice or job value
5. Cash in bank vs. cash target

KPDs to track weekly:

1. Quotes or proposals sent
2. Follow-up calls or emails made
3. Referrals requested from existing clients
4. Consultations or consultations booked
5. Google reviews requested

At the end of each month, review both lists together. If your KPIs are below target, go back to the KPDs: were you sending enough proposals? Were you following up consistently? The answer is almost always in the activity data, not the outcome data.

A proper business budget ties all of this together — without a budget, you have no baseline to measure your actual performance against. If you have not built one yet, our guide to business budgeting for small business owners is the logical next step.

If you want to take this further — with proper financial modelling, cashflow forecasting, and monthly strategic review built into your business — that is where a Virtual CFO makes a significant difference. Rather than reviewing numbers once a year at tax time, you have someone actively working with you to track performance and adjust the plan as the year unfolds.

Frequently Asked Questions

How much profit should a small business make in Australia?

There is no universal benchmark, but as a starting point, your business should generate enough profit to pay you a fair wage for your time plus a return on your investment in the business. As a general guide, service-based businesses in Australia typically target a net profit margin of 20–40%, while product-based businesses often target 10–20%. Your personal income goal should drive the minimum profit target — use the calculation framework in this article to work backwards from what you need to take home.

What is the difference between a KPI and a KPD?

A KPI (Key Performance Indicator) measures an outcome — something that has already occurred, like monthly revenue or new clients signed. A KPD (Key Performance Driver) measures an activity that influences that outcome — such as proposals sent or consultations booked. KPIs are lag indicators; KPDs are lead indicators. Tracking both gives you a complete, forward-looking picture of your business performance.

How do I calculate the revenue my business needs to make?

Start with your after-tax income goal. Use the current Australian income tax brackets to calculate the gross income needed to achieve that figure — that gross income is your minimum profit target. Then divide your profit target by your profit margin percentage to find your required revenue. For example: if you need $172,000 in profit and your margin is 40%, your revenue target is $430,000. If your margin is 30%, that target rises to $573,000.

How many KPIs should a small business track?

Less is more. Tracking 20 metrics creates noise; tracking 3–5 creates focus. Choose the KPIs that most directly reflect your revenue and profitability goals, and pair each with 1–2 KPDs (the specific activities that drive those outcomes). Review them monthly and adjust your strategy quarterly based on what the data tells you.

What are good lead indicators for a service business?

Strong lead indicators for service businesses include: number of proposals or quotes sent per week, consultations booked, referrals requested from existing clients, follow-up calls made on outstanding quotes, and new enquiries generated via website or Google. These are the activities that reliably predict future revenue — which is why they are worth tracking weekly, not just monthly.

Do I need an accountant to set my business revenue target?

You can do the basic maths using the framework in this article. An accountant adds value in two ways: first, by accounting for your specific tax structure (sole trader vs. trust vs. company), which changes the calculation; and second, by helping you model the impact of different profit margins, pricing strategies, and growth scenarios on your bottom line. If you would like help building this out for your business, you are welcome to book a consultation with Mina.

Setting a revenue target is step one of meaningful business planning. Once you know the number — and the activities that produce it — you have something real to manage each week. If you would like to work through this for your own business, get in touch with Pinnacle Accounting & Advisory and we will build it together.

Knowing the number you need to make is the first step. The second is making sure that money actually reaches your bank account rather than sitting in debtors and stock, which is the subject of our guide to working capital.

Frequently Asked Questions

This article contains general advice only and does not take into account your specific circumstances. Please speak with a qualified accountant or tax adviser before making financial decisions.

Answering this with confidence is what a Virtual CFO in Melbourne delivers through forecasting and reporting.

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