This week: why the income you want from your business needs to be based on real life rather than a guess, why older proposals should be checked before work begins, and what directors and PSCs need to know about Companies House identity verification.

1. Why £1,000 a week?

Ask a business owner how much they need to take home and you’ll often get a quick answer.

“About a grand a week.”

Fair enough. But why a grand?

Sometimes it’s a number they’ve worked out. More often, it’s a number that feels about right. It covers the bills, with a bit left over. At least, they think it does.

Start adding up what life actually costs and the answer can change. Mortgage, food, holidays, the car, the kids. Then the things that don’t arrive as a monthly bill: replacing that car, helping the kids, building savings, putting enough into a pension.

You also need to account for any other income coming into the household. The business doesn’t necessarily have to fund the whole lot.

That’s how we get to what we call your Magic Number: the amount the business needs to provide for the life you’re trying to fund.

Once you know that number, you can work backwards. Allow for tax, understand your fixed and variable costs, look at your margins, and calculate the revenue you need each year and each month.

Without that first number, a turnover target is mostly a guess. You might hit it and still find the business isn’t giving you what you need.

What to do now: Work out what you actually need from the business each year, including the costs and goals that are easy to forget. Then see whether your current prices and sales target can deliver. We’ve got a free spreadsheet that can help you with this. Let me know if you want it.

2. The Price You Agreed In July Might Look Different In October

You sent a proposal in July. The client has come back three months later, ready to go ahead.

Good news. But before you start, pull out the figures behind the price.

How many hours did you expect the work to take? Who will do it? What will their time cost now? Has the scope grown during all those conversations since July?

It’s easy to remember the price and think, “That’s a decent bit of work.” And because you’ve been trying to get it over the line for three months, the temptation is just to crack on. But things may have changed. The margin might tell a different story.

This matters just as much if you sell advice, design, software or ongoing support as it does if you sell a physical product. Costs change. People’s availability changes. And a small extra request, repeated across several clients, has a habit of becoming part of the service without becoming part of the price.

The Bank of England warned last week that inflation could rise further. You can’t predict exactly what that will mean for your business. You can check whether the assumptions behind your prices still hold.

Sometimes you’ll honour the original price. Sometimes you’ll need to discuss a change in scope. Either way, it should be a decision you make with your eyes open.

Pick a few outstanding proposals and ongoing fixed fees. Compare the price with the time and costs involved today. If the margin has slipped, find out why before agreeing to more of the same.

3. Companies House identity checks have teeth now

Companies House identity verification has felt like one of those jobs you’ll get round to.

Last week, three directors were fined following the first prosecutions for failing to meet the requirements. They had been given opportunities to comply, so this isn’t a reason to panic. But verification is a legal requirement, and it’s being enforced.

It applies to people with significant control (PSCs) as well as directors. Existing directors provide their personal code with the company’s next confirmation statement. PSCs have a separate 14-day window to provide theirs.

If you’re both a director and a PSC, you need to provide the code twice: once on the confirmation statement and once through the PSC verification service. A PSC who isn’t a director has a different deadline, generally the first 14 days of their birth month.

One of the directors fined had verified himself but failed to take reasonable steps to stop an unverified fellow director from continuing to act. That’s a good reminder to check where everyone in the company stands, rather than assuming they’ve dealt with it.