Did You Really Make a Profit?

Balancing your books at the end of the quarter or year may seem like a daunting task. You review your numbers and ask yourself - did I really make a profit? What about taxes? Employee benefits? Downtime for your technicians? Even though your initial numbers are in the black, you might be missing the small aspects of owning a business that crucially determine your actual profit or loss.

So where do you start? First, plug your numbers into this basic formula.

Revenue - Expenses = X - Corporate Income Tax and Bank Interest = Loss or Gain.

Simply put, you have to earn enough money after all your expenses to cover income tax and interest from the bank; if you're still in the black you've still made money. Easy enough, right? Unfortunately, your initial calculation might be missing some of the finer details.

Here's a list of finances you may have forgotten to include while calculating your profit:

  • Corporate taxes - The U.S. has the highest rate of corporate income tax in the world at 39.1 percent. Make sure your margins include a rough estimate (about 50 percent) to cover your income tax costs.
  • Benefits - Don't forget the cost of benefits when estimating your overall expenses. Add another 25 percent to your employee's hourly rate to calculate the real cost of employment.
  • Missed opportunity - If the service department is running a lot of no charge calls such as warranty and callbacks, then you are losing revenue opportunity and all of that potential revenue would fall to the bottom line. Another source of profit leakage can be in travel time if it's not properly managed to be held to a minimum such as sending a tech from one side of town to the other when there is already a tech in the neighborhood.

Still Hungry?

More Information, Training, and Tips