Calculating your Minimum Viable Income (MVI)
A comprehensive guide to affording your missionprenuerial lifestyle
Some people call it a “spaghetti number”, others like to think of it as “ramen profitable”. Whichever posta analogy you use, it all boils down to the question you’re asking yourself right now: how much money do I need each month to support myself and my family?
Naturally, this number will be different for everyone. A student that lives with their parents needs less income than a single parent with two children. That is understandable and perfectly okay, it is important that you objectively look at your personal situation.
This number should be uncomfortable
Your minimum viable income should not be incredibly comfortable. In fact, it should probably be a little bit scary to have to live on this amount. It should be just enough to put food on the table without giving you a panic attack.
But remember, your minimum viable income is temporary. You won’t have to stay here forever, but you will probably have to make some cuts in the beginning.
You’ll be surprised how low you can go
You don’t need as much as you think in order to make this work. “All the expenses in my life” is not a number. You have to figure out what those expenses are, which of those expenses you absolutely need, and cut out the ones you don’t. You have to end up with a number, and that number has to have come from somewhere. Yes, there will be sacrifices to make, but you might be surprised at how possible the missionprenuer lifestyle is once you’ve ironed out all the numbers.
Walk away confident
Use your MVI to build a runway. What is a runway? Say your minimum viable income is $2,000 and you have $10,000 in savings, that would mean that your runway is five months. Building a runway does not guarantee success, but it will give you confidence to focus on what matters.
Using the Calculator
Fixed = Non-Discretionary
Fixed expenses are those that we have little to no discretion with what we spend from month to month. Things like housing, loan payments, utilities, and insurance are in this group.
Variable = Discretionary
Variable expenses are those that we have almost daily discretion with what we spend. For example, although we all have to eat, we have discretion about how we allocate our spending between groceries and restaurants. Do you eat caviar and champagne or ramen and water.
Your ability to adjust your spending behavior makes this the easiest way to lowering your MVI.
Business Costs and Taxes
The final ingredients of calculating our MVI are our business costs and taxes.
Fixed business costs are things like web hosting, advertising and other expenses that are the same whether we sell anything or not. Variable business costs are expenses tied directly to making and selling our stuff. In the MVI Calculator, express your fixed business expenses as a number; express your variable cost as a percentage of (sales) revenue. If you don’t know this right now, make an educated guess–or better yet, spend a little bit of time to figure it out.
If you are employed, and receive a paycheck from a company, then ½ of this tax is paid by your employer and the other half comes out of your paychecks. This tax covers social security and medicare.
Entrepreneurs and contracted employees have to pay this out of pocket (hence the name “Self-employment Tax”) with a price tag of about 15 percent of income.
To be safe, use the same rate (% of income) you have paid during the past few years minus 7 percent for your half of the (US) Self-employment Taxes you have been paying as an employee.
Example: You paid 27 percent of your income as taxes last year. Subtract 7 percent from that, and enter 20% in the cell for Income Taxes.
MVI = (Living Expenses + Fixed Business Expenses) ÷ (1 – (Variable Costs + Self-employment Taxes + Income Taxes))
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Some strategies to hit your MVI fast
Hit your network hard
If you’re working with a time crunch and you need to hit MVI fast, it’s time to dive deep into your network. Reach out to everyone you know and use social platforms like LinkedIn to dig up some work. In these early stages you’ll need to hustle and sell, so take it one prospect at time.
Don’t neglect referrals
Once you do start working with clients (or having conversations with potential ones), always ask for referrals. The difference between having another project to work on or not could lie in simply asking for a new lead, so build this practice into your process.
Consider raising the rest from traditional support
When all else fails and you’re desperate to hit MVI to get to the mission field faster, you might want to consider reaching out to some churches to help raise the rest of the funds you aren’t making on your own.