“I think we’re making money” is a stressful place to live when you’re the person responsible for paying everyone. You can see sales. You can see the bank balance. But whether the work is actually profitable takes a little more information. You don’t need to become an accountant today. Start with one completed month and a consistent set of records.
Gather the records for the same period
Collect your sales report, refunds, supplier purchases, payroll, business expenses, and bank and credit-card statements. If you use bookkeeping software, start with a reconciled profit and loss report. Use the same accounting method throughout. Customer deposits, inventory purchases, equipment, and unpaid invoices can be treated differently depending on the method and circumstances. Ask your bookkeeper to help match income and costs to the right period rather than guessing.
For this example, assume revenue and related expenses are already correctly recorded. Sales tax collected for the government is excluded from revenue.
Work from revenue to operating profit
Imagine a simple month with no other income or expenses:
- Revenue after refunds: $10,000.
- Direct costs of delivering the work: $4,000.
- Gross profit: $6,000, calculated as $10,000 minus $4,000.
- Operating overhead: $3,500.
- Operating profit before interest and income taxes: $2,500.
Gross profit tells you what remains after the direct costs you’ve classified against the work. Operating profit accounts for the ongoing cost of running the company. Classify expenses consistently so comparisons mean something.
The operating profit margin here is $2,500 ÷ $10,000 × 100 = 25%. This is an illustration, not a recommended margin for every business.
Check how your labor is being treated
If you performed hours of work without wages recorded as an expense, the report may show more profit than the business would earn if it paid someone to replace you. For pricing decisions, calculate a reasonable labor allowance for your own work. Keep that management calculation separate from your formal accounts when owner compensation isn’t recorded as wages. Owner draws and payroll aren’t interchangeable accounting entries. You deserve to understand both the reported result and whether your prices support paying for your time.
Compare the month with individual jobs
Choose three recent orders. Record the selling price, materials used, all delivery labor, your own time allowance, and an appropriate overhead allocation. Don’t charge the same cost twice. Which jobs looked impressive in sales but left very little? Which were straightforward and paid well? That information can guide your next pricing or offer decision. Revisit monthly. A profitable month doesn’t automatically mean plenty of available cash; payment timing and other cash commitments still matter.
Start with one real job: Use the free pricing calculator to organize its costs and see what your price needs to support. Bring accurate inputs—the calculator can only work with the numbers you give it.
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