[Chris R]

In this trade its easy  to fall into the trap of thinking that you are making more money than you actually are.

You do a days work and turnover £200 or £300, the chemical costs may only be £5, plus your fuel cost, so you “feel” that you have made a big profit.

But it can be very interesting to work out your true NET PROFIT!

Get your last set of accounts out and make a note of the Total Expenditure amount ( the total of all of your costs, Chemicals, adverts, van and machine cost, telephone etc)

Then divide your total expenditure amount by your turnover.

This will give you the percentage that your total costs are in relation to your turnover.

The results can be surprising.

So, for example,

Expenditure = £10,000  divided by turnover of £50,000 = (0.2) = 20% costs

So if you turnover £50,000 in a year, but it costs you £10,000 to run the business, then for every £100 that you turnover, £20 is actually gone to cover your running costs.

So that £300 days work actually cost you £60 in costs !

That’s a bit more than most people would have guessed.

On top of that you need to also deduct your years income tax bill ( not included in your business expenditure).

Examples.

Expenditure £10,000 – turnover £30,000 = 33.37%  or £33.37 out of every £100 you earn

Exp £10,000 – T/O £40,000 = 25%

Exp 10,000 – T/O £50,000 = 20%

Exp 10,000 – T/O £60,000 = 16%

Or

Exp £13,000 – T/O £40,000 = 32.5%

Exp £13,000 – T/O £50,000 = 26%

Exp £13,000 – T/O £60,000 = 21%

Work out yours, you WILL be surprised !

Cheers

Chris

[andrew chrysler]

Hi Chris.

That's a very good calculation to use, and certainly makes you think.

You also need to allow for Holidays, time off ill (self employed=no sick pay) and pension contributions.

So after you work out your weekly profit, don't forget all the Bank Holidays and the 4 weeks paid holiday that employees get. So that's another 10% to add to your overheads.

Allowing for maybe 2 weeks off work ill (and just because you haven't had a day off in years doesn't mean you never will..... we all get older) and you still have to pay the mortgage, the lease on the van, insurance, etc, etc, so add another 5% at least.

If you get into the habit of putting say 15% of the week's takings into a savings account, you at least start to build up a "safety net", and while it is nice to be able to work double hard before holidays to earn your spending money, it's not always possible.

But then, who wants to be depressed about profits....... it's still a great feeling to walk away from a hard day's work with a fistfull of cash!

[therapist]

I think most people would be very happy to be earning around 47k per annum  and you would have to extremely naive , NOT to have taken on board some accounting knowledge when starting up.

If you have'nt already done so, find an accountant and make sure it's one you can talk to and be guided by.

Of course there are costs, the secret in any business is having the ability to control costs and this is more down to common sense, than being mean, using poor quality  products and delivering  a low standard of service.

You do NOT have to be turning over two - three hundred pouds a day to be happy and successful in this business.

Some people are never happy and driven by turnover, while many are perfectly happy to make enough to live, what to them, is a comfortable lifestyle, although others might regard them as lacking in drive or business accumen.

Twenty years ago I was taking over two thousand pounds per week from a very successful business (  todays equivilent is about six thousand pounds )  and was being driven by other peoples demands for my service.

This did not make me any more content than a window cleaner who might have been earning 10% of my turnover, but with virtually no overheads to worry about.

rob m