Are you making a profit or just a living?

There seem to be a number of people in business who are unclear on exactly what it means to make a profit. To me it’s fairly simple.

Profit is money you have “left over” at the end of your job. After you have paid your rent and your utilities, after you have bought your materials and hardware and screws and sandpaper, after you have paid your help (and yourself!), and your taxes and the fees for your business license, after you have paid for your tool maintenance and sharpening and blades and special tooling needed for the job at hand, after you have covered every expense no matter how small or seemingly insignificant, after all of that, if you still have money left.

That’s the profit. You can do whatever you want with the profit. Take a vacation. Pay for a second car or a rental property. Reinvest it in your business. Whatever you want. But if you need this money for anything having to do with the running of your business, it’s not profit. And if this money that’s left is needed for your personal expenses because you have not paid yourself a “living wage” … it’s not profit.

D.D.

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