A really good way to track to see if your business is making money is to start looking at the full picture. You want – it’s traditionally we’re taught about the cost of goods sold, which means that you take this much of money to make, you know, this cupcake or this computer part but what you really have to concentrate on is the cost of doing business across the board because all of your time and energy and dollars has spent trying to attract new business, you know, mileage to get to a meeting or the cost of a network lunch.
Those are all the costs of doing business that have to go against any income or revenue that’s generated and it’s really important to document all of these expenses. I think as entrepreneurs we get so bug down and wanting to get that sale and wanting to get the revenue and do things that are revenue generated but we don’t think back – think to ourselves, are we making money?
So it’s really important to document whether you hire CPA or an accountant or you got quick books and have somebody entering in all of these things. You want to get a full picture where your businesses at. So not just how much it cost to make your product and sale your product but how much it cost to run your business overall including e-mail systems and auto-responders and your website maintenance.
I mean all of these things go into it. So, a clear idea of everything that goes out for your business will give you a better idea if you’re really making money.
Melissa Lanz is the Founder & CEO, The Fresh 20 (www.thefresh20.com). In this video she discusses how you measure the amount of profit your business generates.
- COGS - Cost of Goods Sold
- Cost of doing business
- Document all expenses
- Consider the full picture