The Need and Want Number Framework
Know exactly what your business must earn to support your life
Most real estate investors set business goals based on deal volume or revenue without ever connecting those numbers to what they actually need to live. The Need and Want Number Framework forces you to work backwards from your personal financial requirements to determine exact business targets. Your Need number is your minimum monthly living expenses. Your Want number is at least double that, representing the lifestyle you are working toward.
Once you know your Need number, you can calculate your annual compensation requirement, determine what percentage of business revenue that represents, and then calculate exactly how many deals at what profit level your business must close. This transforms vague aspirations into specific, measurable targets.
The framework also reveals whether your current business model can support you at all. Some investors discover they need to do an unrealistic number of deals to meet their Need, which signals a fundamental business model problem rather than just a hustle problem.
- Your business exists to serve your life, not the other way around
- Work backwards from personal needs to set business revenue targets
- Your Need number determines the minimum your business must produce
- Your Want number should excite you and represent your desired lifestyle
- Knowing your numbers lets you calculate exact deal volume requirements
- Calculate Your Monthly Need NumberPrint personal bank and credit card statements for the last six months. Add all spending together and divide by six. This average is your monthly Need number, the minimum you require to cover your current lifestyle.Pro tipYou can delegate this to a virtual assistant. Just block out account numbers and sensitive information before handing over statements.WarningThe number will likely shock you. Most people spend more than they think.
- Determine Your Want NumberTake your monthly Need number and multiply it by at least two. If that number does not excite you, multiply by three or four. The Want number should represent a lifestyle that genuinely motivates you to build your business.
- Calculate Your Business Revenue GoalAnnualize your Need number by multiplying by twelve. Then divide by your target owner's compensation percentage (typically 35-50% depending on revenue level) to find the total revenue your business must generate.Pro tipUse the formula: Annual Need / Owner's Comp Percentage = Business Revenue Goal. For example: $84,000 / 0.35 = $240,000.
- Calculate Your Deal Volume TargetDivide your business revenue goal by your average profit per deal. This tells you exactly how many deals you need to close per year and per quarter. If the number seems unrealistic, you need to either increase profit per deal or reduce your Need number.Pro tipBreak annual targets into quarterly and monthly targets so you can track progress throughout the year rather than scrambling at year end.WarningIf your deal count target is unrealistically high, this is a signal that your business model needs adjustment, not that you need to hustle harder.
An investor calculates a monthly Need of $7,000, making the annual Need $84,000. At a 35% owner's comp rate, the business must generate $240,000 in revenue. With an average profit of $30,000 per flip, they need just 8 deals per year, or 2 per quarter.
David Richter developed this as the essential first exercise when onboarding new clients at Simple CFO Solutions. He found that the majority of real estate investors had never calculated what they personally needed from their business. They would close deals and hope there was enough money, without knowing their target. By making this the starting point of every engagement, Richter gave investors a concrete anchor for all subsequent financial decisions.