Are you making a profit?
Written by Amanda Rose
Just because you are making sales or signing up clients doesn’t mean you are making a profit. In fact, it doesn’t even mean you are breaking even!
I have created multiple businesses, one made a profit within a week but another took 2 years (which I was prepared for but it is still painful).
This is why knowing your numbers is very important when running a small business and also changing your mindset from “making money” to bringing in a profit. This will allow you to plan ahead and also tweak your pricing accordingly.
Do you know how much it costs to create your product or deliver on your service?
Things to consider
- Taxes (company, personal, BAS)
- Employee costs
- Contractors costs
- Supply costs
- Overheads (like electricity and rent)
- ·Time costs (your actual time creating and/or delivering something)
My personal rule of thumb is that I only get 1/3 of what I charge a client. Out of that 1/3 I need to pay myself, invest in the business etc. Now think of what you’re charging. Is it enough?
Your break-even cost should cover all of this. Then anything on top of that PAYS you PLUS gives you a profit to save/store away. Yes, I said pay yourself AND have enough left over to save. That is how you keep growing in your business.
This will allow you to have a buffer in case times are tough and also allows you to invest in your business for growth if needed. You can’t keep going into debt, you need to be alert at all times focusing on the profit margin of all you do.
So take the time to look at what you do/make. Make an appointment with an accountant or qualified bookkeeper and learn what you need to learn to ensure you are charging what you need to be charging.
Business is about making a profit. Not losing money.