As a small business owner in Canada, it's important to know how to calculate your profits. This will help you to make informed business decisions and ensure that your company is healthy and profitable.
In order to calculate your profits, you'll need to know your revenue and your expenses.
Your revenue is the total amount of money that your business brings in over a given period of time. This can be from sales, services rendered, or any other type of income. To calculate your revenue, simply multiply the number of units sold or services rendered by the unit price or service cost.
Your expenses are the total amount of money that your business spends over a given period of time. This includes items like rent, utilities, employee wages, and product costs. To calculate your expenses, simply add up all of the costs associated with running your business.
Once you have both your revenue and expenses calculated, subtract your expenses from your revenue to find your profit. This is the amount of money that you've earned after all of your costs have been taken into account. For example, if your business brings in $10,000 in revenue and has $2,000 in expenses, your profit would be $8,000. Congratulations - you're now a small business owner with a profit!
Splitting profits in a small business partnership can be a delicate process. Here are some tips to help make it go as smoothly as possible.
First, sit down and discuss what percentage of profits each partner will receive. This should be based on each partner's contribution to the business, both in terms of money and time. Be sure to factor in things like ownership percentage and how much work each person is doing.
If the business is doing well, it's important to agree on how the profits will be reinvested back into the company. Decide whether you want to put them back into the business as a whole, or divide them up among the partners.
Be clear about what expenses each partner is responsible for. This can help avoid any confusion or disputes later on. Partners should also be open and honest with one another about their finances, so everyone is on the same page.
It's a good idea to draft a profit-sharing agreement and incorporate it into your wider partnership agreement, regardless of what you decide. To avoid issues in the future, all partners should concur and sign.
If there are any disagreements about profits or expenses, try to come to a compromise that works for both partners. If that's not possible, then it may be time to consider ending the partnership.
It's important to keep track of your profit over time so you can see how your business is doing. Ideally, you want your profit to be increasing each year as your business grows. If it's not, then you may need to take a look at where you're spending too much money or find ways to increase your revenue.
Advice and research for Canadian small businesses from our expert team