Knowing Your Numbers – Income and Overheads

How are you doing with your online business?
Have you made a profit or a loss in the last year, and how much?
What about in the last month?

We all need to know these numbers if we are to have successful businesses.

Do you have the figure for your monthly overheads? You can’t possibly know if you are making a profit if you don’t know how much you are spending on your business.

Let’s get down to basics with this:
Your overheads are amounts of money that you will spend regularly whether you do any work or not. These will include telephone and Internet access charges. It will include charges for your autoresponder account and tracking service, your website hosting costs and the annual fee for your domain names. It will also include any monthly or annual upgrades that you pay for. If you are paying an accountant or bookkeeper these are also overhead costs.

All of these costs are happening whether you are working your business or lazing around on the beach. You need to know what this figure comes to every month (for annual bills simply divide them by 12 so that you have a monthly figure). You have to earn this amount every month just to break even!

It is wise to keep these costs as low as possible, but not so low that your business growth is stunted. You will still want to upgrade in certain programs to improve your advertising reach.

Other costs are linked to you actually working, such as the electricity you use to run your computer for business use. PayPal charges and other bank charges may also come into this category. If you are a program owner the commissions you pay will also come here. These costs will usually vary from month to month.

The other figure you need is the amount you received in commissions and other payments. This figure less any costs incurred directly in earning this income is your “Gross Profit”

Subtract your monthly overheads from your monthly Gross Profit to find your Net Profit (or perhaps Net Loss).

If you are making a net loss or of you are making a net profit and you want to increase this profit
you can do one of two things (or both): You can find a way to reduce your overheads or find a way to increase your gross profit.

My suggestion is that you have a look at your overheads and remove anything that is unnecessary, but don’t obsess over this. It’s far more productive to grow your business by increasing sales and commissions. In the next post we will look at some more figures that will help us to do that.

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