Once upon a time, I moved house for love, as all the best and worst stories start. I found myself in rural southern Arkansas, with love but no work.
So I found some work as a mystery shopper. These people go to shops, restaurants, etc., buy something, and report to the chain’s headquarters about their experience. They’d reimburse me for what I bought and pay a little extra to cover my time.
And every day, I trawled the listings looking for places I could get to, for jobs I could afford to take. You couldn’t go back to the same place all the time, and everything is spread out there, so I drove quite a bit and got to know that half of the state pretty well. (Arkansas is about the same size as England.)
I visited more Sonic Drive-Ins than I have in the whole of my life before and since. There were music shops, cinemas, and others, but mostly I remember the Sonics. Being able to fill out the 10+ page reports while at the target shop was quite handy!
I mystery shopped for a few months; I carried on even after I’d found a job, just to bring in a bit of extra cash. It wasn’t my favourite thing in the world, but it wasn’t disagreeable work.
Until one day, I crunched the numbers. I’d always been good with numbers, but I hadn’t bothered to check these.
And because of this, I hadn’t factored in all the expenses when deciding whether a given job would make me money. Bringing in any money was a win when I was unemployed, but it had to be more than it cost me to do the job.
Shortly after I’d moved to Arkansas, my car died, wholly and utterly. There was no bringing it back, no further chances, unlike a resigned minister. I used my boyfriend’s car for several months. He’d never had any reason to drive very far, so it hadn’t mattered that his car’s fuel economy was about 12 miles per gallon. Fuel was much cheaper in those days, but it wasn’t free, and with the distances I covered for some jobs, I was a fool for not calculating profit.
Printing, fuel, the odd incidental: it all added up. But you see, what I saw was the deposits, the fact that I was earning money. I didn’t notice how it was all eaten up by the higher fuel bills.
Until I finally started to calculate it, I didn’t realise that in some cases, I was paying to work. And where I was turning a profit, it was far smaller than I’d guessed.
I felt so stupid!
And ever since that day, I became passionate about knowing the numbers.
- Is this product priced profitably, or am I making a loss every time I sell one?
- Is this revenue stream profitable? Should I carry on pouring my time into it?
- Was that market profitable? Should I attend it again?
Looking at your overall figures can mask a thousand problems and victories.
The bare minimum that a sole trader is required to do is add up all your income and expenses once a year to report to HMRC. If this is all you do:
- It means you very well might keep pouring your time and energy into unprofitable products, markets, and revenue streams.
- It leaves you still mystified about what’s working and what’s not.
- It means you don’t have the details to see how to make a particular product, market, or revenue stream more profitable.
You can make a loss even if you’ve made sales of £1k, £5k, £10k, or more; I’ve seen it happen. That’s why I advocate calculating your profit, not just looking at your sales figures. It’s such an easy trap to fall into; I daresay every single one of us has done it at some time or another.
I’d be delighted to help you set up your systems for gauging the profitability of each product, service, market, and revenue stream, so you can make informed decisions going forward. If you’re interested, we can do this in a Power Hour.