We talk about just nearly every aspect of organizing and running a small home business here in the Home Business blog; we talk about budgets and clients and customer service. I thought that we should probably talk about the bottom line here today—let’s talk about that question we may either want to ask or ourselves or are avoiding facing the truth: Are we actually making any money?
I know that money is not the only indicator of success and many of us evaluate our home businesses with other criteria in addition to revenue. We may not be looking to make a lot of profit or we may be afraid to look at how much we are really making for the effort we put out. Regardless, at some point, we DO need to evaluate our businesses based on whether or not we are making any money? The IRS does, our friends and colleagues do, business is, in the end, about generating an income.
The first question to address is whether or not you are taking in more money from your business than you are spending to keep the doors open? I am not talking about whether you are making enough from your business to pay all your bills and family expenses here (although that would be nice), but just looking at the business operation and determining if more money is coming in than is going out or vice versa?
If you are taking in more money than you are spending then you are making a profit. Congratulations! Next, you can look at how much time and labor is going into making that profit and evaluate whether you are utilizing your time well or not. Again, I know that building a business means working many long and hard hours for very little pay—but over time, you should notice that your hourly rate or your overall profit rises. It should be that you are making more for the work you are doing and not less. If you find that you are not only not making a profit but you are working long, hard hours to do it and things are not improving—it may be time to take a hard look at whether or not to stay in business.