Tallying Your Yearly Financial Results, Part III

Once you've considered income and expenses, you can consider profit. This can be a tricky area. Although from one view your profit is revenue minus expenses, that's not entirely true. Ideally, a business creates a profit over and above the regular income requirements of its owner. If you've made at least your bottom line goals that cover all business, personal, and tax expenses, then congratulations - you can consider yourself in the realm of business profit. Anything above that is gravy that the business brings in. Consider keeping at least some of this out as working capital so that, if clients are late, you can float your needs without trouble.

Another area of profitability is the per client view. You should review how long it takes to do assignments overall and then on the average for each individual client, and multiple the revenue for those assignments by the time it took to do them. That will let you know what you actually make per hour, and not what you think you make per hour. Then, as part of your end of year planning, you can review how your clients stack up and see which ones might be worth replacing with ones that either are more profitable or that offer a chance for personal or professional expansion that might offset a lower than optimum level of profitability.

Tomorrow, looking forward.