Is your business making money? Would you know?

Figuring out whether your business is actually making money is no easy task. Most small business owners have a pretty good idea of what their top line is (their revenues), but unless theyre closely tracking and inputting all of their expenses, the bottom line can often come as a complete surprise. Thats why its critical to closely monitor these numbers on a monthly basis. They are the tools you need to make ongoing business decisions.

For example, a client of ours recently started a landscaping service. Although his sales were rapidly increasing, he was frustrated by the fact that it didnt seem to have much of a positive impact on his bottom line. By inputting all of his costs into the proper format, it became immediately apparent he wasnt charging enough for his services.

He thought that by charging his clients $20/hr and paying his workers $10/hr, the extra $10 would be his to keep. However, he forgot about all of the costs involved in actually carrying out the job starting with payroll taxes on the $10/hr, transportation costs, office overhead, and advertising. At his current rates, no matter how much business increased, he would never make any money.

The answer was to raise prices or get out of the business! Fortunately, he was able to raise prices without upsetting clients. Now, he can comfortably carry on his business and keep adding to his bottom line.