Take out the meager fees we pay to web hosts, PayPal, and the odd tech service, there’s still plenty left over to play with. And play we do.

But what does it mean to truly become profitable as a microbusiness owner or solo service provider?

In my own business and those of my clients, this is one place where traditional business teaching falls short of our unique circumstances. What follows below is not something you’re going to find in business books but it’s of utmost importance for understanding the way your business functions:

Being profitable means earning enough money to cover all of your obligations, both personal & business, with some left over to invest as you please.

Click to tweet it, yo!

Becoming profitable should be the goal of every business but the numbers and percentages are always different.

The key to knowing when you are profitable is to understand your obligations.

Megan and I often join forces to talk about actually making money in a passion-driven business. I talk about the psychological and philosophical side of earning more. Then she swoops in with cold hard facts and a proven formula. I’ll let you guess which side of the presentation garners a bigger response.

Hint: numbers & formulas win. every. time.

Megan’s pricing formula is for a product based business, natch. She’s a jewelry designer. She has certain costs for materials & upkeep, much easier to quantify.

Megan’s formula also contains two pieces that often trip people up: labor & profit.

Yes, two different figures. One for labor. One for profit. Separate. Different. Got it?

The time she puts into each piece is not profit. That time is an obligation that must be accounted for with an hourly rate. The hourly rate she figures is often 8-12 times the hourly rate most people figure for themselves.

Hint: if you’re accounting for an hourly wage that is lower or equal to the minimum wage in your state, you’re doing it wrong.

Intellectually, you know this makes sense for Megan and the type of business she runs. But what about your business? If you create or design physical products, this model works for you as well (but keep reading – there’s more!). If you are a service provider, content marketer, or digital product creator, it is much more difficult use this type of pricing strategy to generate a known quantity of profit.

So then what is profit?

Profit comes after accounting for all of your obligations, both personal and business, and having money left over to invest as you please.

Oh crap, she said it again. It must be important! Click to tweet it, yo!

When you don’t have to use part of every sale to reinvest in materials to make new products to sell, it is easy to see every dollar as profit. To see every dollar as flexible.

Your dollars are not flexible. They are accounted for the moment they enter your PayPal account. But do you know where they’re going?

Those dollars might end up paying your web host, your email service provider, your teleconferencing service, your PayPal fees, or your assistant. Those dollars also pay your mortgage, your grocery bill, your taxes, and your electric utility – that’s your labor, essentially.

You also have obligations to your own charitable giving, education, self-care, and – yes – fun.

When considering your own financial obligations, I think it’s important to look at the big picture not just the bare bones. That’s when you really start to get an idea of abundance.

And when you can really start to develop a profit strategy.

How can you earn enough to cover your obligations and have money left over to invest as you please?

There are no easy answers to this question. But you can’t create a strategy until you know your obligations. You can’t understand or plan for profit until you know where the rest of the money is going.

Why consider profit only after meeting personal & business obligations?

Because it’s important that you have that surplus. It’s important that you have the freedom to decide what the very best use of extra money is outside of the obligations (no matter how pleasurable) you face on a daily basis.

Being a profitable business owner means having the freedom, control, and vision to use your surplus money as a tool for growth, be it personal, business, or societal.

***

Understanding profit and your ability to use it for good is all apart of making money beautifully, making earning an art. I’m hosting an intensive, intentional, and intimate workshop on creating a business that serves you. Click here to find out more & sign up for FREE exclusive pre-event training.

Megan & I are starting to get ready for the first roll-out of The Creative Empire. And we’re talking a lot about what subjects the creative community needs to embrace, work through, discuss, and learn to maximize both the profitability & the personal satisfaction we experience with our businesses.

The main question we keep coming back to is:

What should drive my business?

Is my business driven by personal passion? Is my business driven by the market? Is it driven by our competitors – or lack thereof?

What forces determine what products I roll out? What affects how much I charge for them? What determines my audience & client base?

We have our ideas. And I really can’t wait to tell you about them. If you’re not on the list for The Creative Empire yet, sign up below! List members will, well, be getting some downright awesome information & opportunities over the next two weeks.

If you are on the list, tell me: what is driving your business right now?

And if you’d like to know a little bit more about what Megan & I think of “creative empires,” be sure to check out the video discussion we posted about a month ago!

After you hit subscribe, you’ll receive a confirmation email. Click the link in the confirmation email to get yourself on the list!

Building a Creative Empire from tara gentile on Vimeo.

If you’re reading this on a feed reader or via email and you don’t see the video above, be sure to click through to the original post!

well, i may not have a web empire *yet* but i’m on the fast track. and part of having a web empire, is knowing awesome people who do awesome work. megan auman is one of those people, and so, i’m excited to tell you about the resource she’s just released.

megan is a trained craftsperson. working from a bfa to an mfa, to creating a business based on retail craft shows then transitioning to a business based on wholesale accounts. now her goal is to help others do the same. she’s released her first ebook, the crafting an mba guide to wholesale & trade shows.

value is information all in one place

if you’re a business owner, you know that real value comes in information that is timely, helps you make more money, and is convenient. the crafting an mba guide to wholesale & trade shows is all of those things. this guide will help you take that step from individual retail sales to fulfilling orders from galleries & boutiques.

in part 1, megan explains how to jump into wholesaling: products, pricing, line sheets, contacting potential stores. in part 2, “all the information you need to tackle trade shows with confidence.” in discussing the book with megan, i told her what i liked the best was how much information she provided on topics that i wouldn’t have even known how to google!

the crafting an mba guide to wholesale & trade shows is $39 – and could save you lots of money in mistakes, lots of time in research, and make you money via a whole new aspect to your business.

by using the links above, you’re helping to support 3 indie businesses: yours, mine, and megan’s. thanks!

necklaces by foundling – jewelry swoon.

ceramic earrings by sofia masri – total etsy crush.

megan auman at the beehive kitchenware booth – networking.

just a tiny sneak peek of the goodies i’ll have late next week at scoutie girl! megan will also have great posts inspired by great conversation with amazing artists, crafters & designers over at crafting an mba. a very productive trip!

Are you cheap? There’s a difference between being broke and being cheap.

Are you cheap? There’s a difference between being thrifty and being cheap.

Are you cheap? My answer is yes, we all are.

And it’s killing our society.

You may have great taste, understand the value of a dollar, even know the worth of an hour’s work – but you’ve been programmed to be cheap. American culture dictates that spending less is better – that getting a “thing” is better than getting what you pay for. And American business knows it – they source inferior supplies, they outsource their labor, and they decrease the bottomline.

And we’re left with junk.

Luckily, the handmade movement, the slow food movement, and a general backlash against consumerism is starting to turn the tide. But it’s pretty ingrained in our collective psyche. And so those movements – perhaps without even realizing it – adopt the same philosophies. Bigger is better, less $ is more $.

I don’t have any answers but what I do have is a strong desire to change this cultural instinct. I’m trying to start with me but I need others to come along for the ride so that I can lean on you for support (heck, I never said I wasn’t a bit selfish!).

If you want to start to change this as well, think about this one thing when you go to the store. How long would it take you to produce something similar to what you’re about to buy? An hour – 2? 5? Sure – it doesn’t work across the board but think about it. Now take that amount of time and multiply it by what you get paid hourly. Look again at the price tag – anywhere close? No? You’re being had, my friend. There’s something wrong in that supply chain.

This post isn’t meant to be a downer – and it’s certainly not going to dramatically change the way you shop. It can’t. But, it was inspired by a fabulous discussion going on at Crafting an MBA, a blog written by my friend Megan Auman who is not only a phenomenal craftswoman and designer but a pretty savvy businesswoman, too. Please check out the conversation and add your two cents – or whatever you’re worth.

{image credit: sharon montrose via etsy}