Profit

[jowensphoto]

What do you consider profit? Obviously there is CODB, but do you consider YOUR pay rate as part of the profit?

What do you consider a good profit margin?

 

[12sndsgood]

What's profit? lol

 

[ronlane]

I wouldn't count my pay as part of profit. The profit would be return on equity. To me you have to factor in a salary for yourself into the codb. This will help with pricing. So that if you decide on a 5% profit margin, you have room to work with and still be able to pay your bills without loosing money. When biding on a job, you then know that you have 5% of the cost to work with a customer.

 

[amolitor]

This is probably a good question for your accountant. There may be tax implications, for instance. It might be more or less complex, for instance, to purchase new gear out of "profits" than "salary". If you have a day job which (for example) contractually restricts you from earning too much outside that job, there may be other considerations.

It probably doesn't matter much, I am pretty sure most of the legal machinery for small businesses treats all the money the same way whether you paint it profit colored of salary colored. Still, it's worth a check with the accountant. You might have special circumstances.

 

[jowensphoto]

This is probably a good question for your accountant. There may be tax implications, for instance. It might be more or less complex, for instance, to purchase new gear out of "profits" than "salary". If you have a day job which (for example) contractually restricts you from earning too much outside that job, there may be other considerations.

It probably doesn't matter much, I am pretty sure most of the legal machinery for small businesses treats all the money the same way whether you paint it profit colored of salary colored. Still, it's worth a check with the accountant. You might have special circumstances.

Considering what it pays - that would just be cruel and unusual

Luckily, I have some friends in the accounting biz

 

[ronlane]

What day job (other than a photographer) would limit the amount of money you could make outside of that job? And why would you want to work for someone that would want to limit your income?

 

[amolitor]

For one, being on faculty at Old Dominion University. A surprising number of employers would prefer that you focus on working for them!

 

[ronlane]

I could see where a university may want faculty to focus on research or writing for text books and stuff like that. I also understand that companies wanting that from a employee at work.

However, for me, I would have to question whether I would want to work for someone that is wanting to limit my earnings potential/power. [maybe that's just me]

 

[amolitor]

It's definitely a question worth asking

On the other hand, it seems to be pretty easy to get around. "My company earned $750,000, but only paid me $2,999.99, which is co-incidently one penny under the limit in my contract. Go suck it."

 

[cgipson1]

When running a business.. I have an account (Salary) and the business has an account (Positive = Profit / Negative = Loss). That was pretty much the way my accountants always had me set it up.

 

[Gavjenks]

It doesn't really matter which is which if you have your own business that only employs you. You just get money coming in.

Then, if you spend that money on groceries, you pay full tax on it. If you spend it on photography business related stuff, you get a tax writeoff on that portion. That practical difference is essentially what determines what counts as "wages" versus "profits"

The IRS isn't going to care if you arbitrarily decide to call it "business profits" or not. They care what you spend it on. "You are what you receipt" as they say.



As for just your own personal decisions about whether you are making enough money to be "worth it," don't look at it in terms of profits and wages. Just look at the entire amount of money you have coming in per year minus your expenses. Then consider your opportunity costs. In other words, how much more or less net money could you have made in OTHER PROFESSIONS, or with OTHER PRICING? If any of those amounts are higher than what you got, that's an "opportunity cost" and you have to make a decision about whether to change to that lifestyle instead, or whether the cost is worth it for some sort of "fulfillment" or whatever intangibles.

 

[jwbryson1]

From a financial accounting standpoint, your profit or (loss) is simply your total revenues - total expenses. So let's say you ran your business for 1 year and were paid a total of $40,000 by your clients during the course of the year. Let's then assume that you had total business expenses of $10,000, including supplies, insurance, depreciation, interest, etc. Your "profit" would be $40,000 - $10,000 = $30,000.

From a tax perspective, it is a bit different because some of the expenses that you claim for "financial statement purposes" are treated differently for tax purposes. For example, on the above hypothetical, let's assume your equipment costs are $15,000 (camera body, lenses, lighting equipment, etc.). For financial accounting purposes, you may depreciate the equipment over a period of 5 years, so you would claim a deduction of $3,000 per year for financial accounting reasons ($15,000 / 5 = $3,000 per year). For tax purposes, however, you may depreciate the same equipment over a different period of time. Assuming a 3 year useful life for tax purposes, you would claim a tax deduction of $15,000 / 3 = $5,000. So your tax depreciation is different from your accounting depreciation.

Make sense?

 

[tirediron]

Dunno... but I'm hoping I'll recognize it if I ever come across any!

 

[ronlane]

^^^ me too.

Personal:

Equipment = $1,500 / 3 years = $500.00 per year. (Depreciation)
Revenue = $200

Cold hard facts = -$300 on the first year depreciation without paying myself anything or counting all the time I spend working on getting better at photography and post processing.

NOTE: I am not a professional and realize that I am not ready to open my own shop. The revenue I made was because the person I was shooting wanted to pay me and we agreed upon a little something.

 

[imagemaker46]

I consider anything that doesn't cost me money as profit, unfortunately my profits don't always look so good.