As a creative woman entrepreneur, your passion fuels your work—whether you're crafting beautiful designs, writing compelling stories, or providing unique services that leave a lasting impact. But when it comes to understanding the financial side of your business, things can sometimes feel a bit overwhelming. One of the most common questions I hear is, "What was my profit last year?"
This question might seem simple, but if you're not closely tracking your finances, the answer can be elusive. Let’s break it down and make it more approachable, just like the creative work you do every day.
1. Understanding Profit
First, let’s clarify what we mean by "profit." In the simplest terms, profit is what’s left after you’ve deducted all of your business expenses from your total income. There are two key types of profit to be aware of:
- Gross Profit: This is what you have left after subtracting the direct costs of producing your goods or delivering your services. These costs could include materials, supplies, or subcontractors who help bring your creative vision to life.
- Net Profit: This is the real bottom line—the money left after all expenses, including your salary, marketing, studio/office rent, taxes, and interest, have been deducted from your total income. It’s the true measure of your business’s financial health.
2. Calculate Your Total Income
Start by calculating your total income for the year. This includes all the money you’ve earned from selling your products, offering services, or any other revenue streams you’ve created. If you’re using accounting software, this figure should be easy to find. If you’re not, you may need to gather information from invoices, sales receipts, and bank statements.
3. Deduct Your Expenses
Next, you’ll subtract your business expenses from your total income. For creative entrepreneurs, these expenses might include:
- Cost of Goods Sold (COGS): The direct costs associated with creating your products or services. For instance, if you’re an artist, this could include canvases, paints, and framing materials.
- Operating Expenses: These are the costs that keep your business running—rent for your studio, software subscriptions for design tools, marketing expenses, and even the cost of attending networking events or workshops to hone your skills.
- Taxes and Interest: Remember to account for any taxes you’ve paid or interest on business loans.
4. Review Your Financial Statements
Your financial statements are your best friends when it comes to understanding your profit. The profit and loss statement (P&L)—also known as an income statement—summarizes your income, costs, and expenses over a specific period, typically a year.
If you haven’t already, pull up your P&L statement for the last year. This document will give you a clear view of your gross and net profit, helping you understand how your business performed financially.
5. Analyze the Numbers
Once you have your profit figures, take some time to reflect on them. Are you satisfied with your profit margin, or did you expect to earn more? If your profit was lower than expected, consider what factors may have contributed. Did you invest heavily in new tools or marketing? Were your prices too low for the value you provided? Understanding these details will help you make better financial decisions in the future.
6. Plan for Growth
Knowing your profit isn’t just about looking back—it’s also about planning for the future. If you’re not happy with last year’s profit, now is the time to set goals for improving your financial performance. Think about strategies like adjusting your pricing to reflect the true value of your work, cutting unnecessary expenses, or finding new revenue streams that align with your creative passion.
Final Thoughts
Understanding your profit is crucial to running a successful creative business. It’s not just about knowing how much money you made—it’s about understanding the financial health of your business and making informed decisions to ensure growth.
So, next time you ask yourself, "What was my profit last year?" you’ll have the tools and knowledge to find the answer quickly and confidently. And remember, you’re not alone in this journey. As a creative woman entrepreneur, you have the power to take control of your finances and build a business that not only fuels your passion but also brings you the financial success you deserve. If you need a little extra guidance, don't hesitate to reach out—understanding your finances is the first step toward building a fearless, thriving creative business.
We are developing a low cost membership where together we can implement all these solutions into your business using your own numbers. It's called Fearless and the link below leads you to the details. Tell me what you would ideally like in your membership.