Calculating Home Business Income

From previous posts, you’ve learned that starting a home business is not expensive, competition is easy to research, and help is available from many sources.  But what about revenue?  I need to make money too!  In this post, we provide a simple way of roughly calculating what your income needs are and compare them to expenses.  Thanks to Jeff Williams of bizstarters.com for providing the general calculation example.

1) As with any budget, the first step is to write down minimal personal income needs.  Take this figure and multiply it by 1.5 to cover taxes, expense, and the unexpected.  A great free source for budgeting and related tools is http://www.mint.com.

2) The next step is to figure out how much money is gained per sale of product or hourly fees from consulting.  This exercise requires personal experience, market research, and contact with industry peers and colleagues in similar positions.  Search engines such as Google and Bing are great resources for general wage or sales ranges.

3) Take the above amount per sale and divide it in half to account for taxes, benefits, and any other miscellaneous expenses related to receivables.  The extra expenses might include travel costs, subcontractors or technology.

Compare #1 above to #s 2 and 3.  This will provide a rough estimate of how many sales are required – or consulting hours worked – to determine if the business idea is practical.

A Simple Consulting Example:

Monthly Expenses:   $2000 (personal and business)

Multiply by 1.5:         $3000 (ongoing total monthly cost)

Consulting Fees:        $100/hour (we will use 30 hours per week)

Total consulting:       $3000/week

Divide by 2:                 $ 1500/week or $6000/month (income after taxes)

= $6000 (income) – $3000 (expenses) or $3000/month after taxes and expenses to live on.  Is this doable for you?   It certainly can be for many!

We assume many numbers here, expenses, income, number of hours worked, etc.  Each situation, position, and individual is unique.  Run your own set of numbers to determine if self-employment is feasible.  This rough estimate is also useful for part-time work.  If a “regular job” covers living expenses and a desire exists to supplement income, use only business expenses in step 1.  You may determine that an extra $200 per week is adequate for a nice safety cushion or extra toward retirement income.

Remember too, that benefits – medical, dental, IRA – are not included in this basic calculation.  You might consider a part-time job with benefits in addition to the business you are planning!

By Dion  D. Shaw

Dion D. Shaw is the founder and owner of Homepreneurs

Homepreneurs.  New Day.  New Opportunity.

Disclaimer:

Homepreneurs does not represent itself as a professional finance or accounting entity.  The numbers and examples provided above are for illustrative purposes only.  Actual figures may vary significantly and research for each situation should be performed in all cases.  Homepreneurs accepts no liability, assumed or otherwise, for statements made above.

4 Responses to Calculating Home Business Income

  1. onlineghostwriterforhire says:

    You always give awesome advice! More people need their own home based businesses!

    • homepreneurs says:

      Thank you. I agree completely with your thoughts. If nothing else, on a part time basis to guard against that inevitable layoff and economic downturn… :)

      • onlineghostwriterforhire says:

        One day, while taking a break from my own business, my local grocery store had nice candles in glass jars on the clearance rack for only two bucks each. I bought ten of them, and then went to see some people in the area where I would usually take my walks.

        I told everyone that each candle was a twenty dollar value, but I was selling them for only ten bucks each…I sold most of them before going back to buy the rest from the clearance rack, and luckily they still had fifteen more, so I bought all of them.

        By the end of the afternoon, I had converted those 25 candles into $250 in cash! Two hundred dollars for a few hours work…that’s why I would rather be self-employed!

      • homepreneurs says:

        Awesome – a true capitalist. Love it! :D

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 22,654 other followers

%d bloggers like this: