Running a business comes with its fair share of challenges. From balancing client demands to managing marketing efforts, it’s easy to overlook one of the most important aspects of your business – the financial side. The truth is, many business owners don’t have clear answers to some basic yet crucial financial questions, and that can hold them back from growth, stability, and success.

So, let’s take a moment to get real with ourselves. Can you confidently answer these four fundamental questions?

 

👉 What’s your profit margin?

👉 Are you setting aside enough for taxes?

👉 How much does it really cost to keep your business running each month?

👉 How much can you pay yourself without stressing over bills?

 

 

If you find yourself hesitating or uncertain, you’re not alone. But here’s the thing: Not knowing these answers is a clear sign that something in your business needs to change.

In this post, we’re going to dive deep into each of these questions, why they matter, and how you can get the clarity you need to answer them confidently. The goal? To empower you to grow your business with peace of mind, knowing that your financial foundation is strong.

• What’s Your Profit Margin?

Your profit margin is a key indicator of how efficiently your business is operating. It’s the percentage of revenue that remains after you subtract the costs of goods sold (COGS) and operating expenses. Simply put, it shows how much money you’re actually making after covering your expenses.

Why it matters:

A healthy profit margin is essential for sustainability. If your margin is too low, you could be working hard without seeing much financial return, which can lead to burnout and even jeopardize the future of your business. On the other hand, if you’re consistently generating high profit margins, it means you have room for growth and reinvestment.

How to calculate it:

 

To calculate your profit margin, you need to know your total revenue and your costs. The formula is:

Profit Margin=(Revenue−CostsRevenue)×100\text{Profit Margin} = \left( \frac{\text{Revenue} – \text{Costs}}{\text{Revenue}} \right) \times 100Profit Margin=(RevenueRevenue−Costs​)×100

 

For example, if your revenue is $100,000 and your expenses are $60,000, your profit margin would be:

 

Profit Margin=(100,000−60,000100,000)×100=40%\text{Profit Margin} = \left( \frac{100,000 – 60,000}{100,000} \right) \times 100 = 40\%Profit Margin=(100,000100,000−60,000​)×100=40%

 

If you don’t have a clear picture of this, it’s time to start tracking and analyzing your financials regularly.

 

• Are You Setting Aside Enough for Taxes?

When you run your own business, you’re responsible for paying your own taxes. And if you’re not setting aside enough money for them throughout the year, you could be in for a surprise when tax season arrives.

Why it matters:

Tax bills can be hefty, and failure to set aside enough money can result in cash flow problems or, worse, an unexpected tax bill that you can’t pay. Setting aside money for taxes is crucial to keeping your business compliant and avoiding penalties.

 

How to handle it:

A good rule of thumb is to set aside around 25-30% of your business income for taxes. If you haven’t been doing this, it’s not too late to start. Work with an accountant or use a reliable software to track your income and expenses, and ensure that you’re regularly setting aside funds for taxes.

It’s also a great idea to speak with a tax professional to see if you can take advantage of any tax deductions or credits that might help reduce your liability.

• How Much Does It Really Cost to Keep Your Business Running Each Month?

Every business has fixed and variable costs. But do you know exactly how much it costs you to run your business month-to-month? From rent to utilities, software subscriptions, inventory, and employee salaries, the list can be long, and it’s easy to lose track of all the expenses.

Why it matters:

Understanding your monthly expenses helps you better manage your cash flow, set realistic pricing, and identify areas where you could cut costs. If you don’t have a solid grasp of your expenses, you could find yourself running out of cash or struggling to cover costs when business is slow.

How to calculate it:

Start by creating a detailed list of all your monthly expenses. Break them down into fixed costs (e.g., rent, salaries, insurance) and variable costs (e.g., materials, marketing spend). The total of these will give you a clearer picture of your monthly operating costs.

Once you have this number, you can compare it with your revenue to determine whether you’re spending too much or if you need to adjust your pricing structure.

• How Much Can You Pay Yourself Without Stressing Over Bills?

Paying yourself as a business owner can be tricky. It’s tempting to take out large sums to enjoy your hard work, but you also need to be sure that your business is financially sound enough to sustain that.

Why it matters:

If you pay yourself too much and don’t leave enough for business expenses, you risk harming your company’s cash flow. Conversely, if you pay yourself too little, you might find yourself stretched thin and unable to meet your personal financial obligations.

How to approach it:

Start by ensuring that your business has a solid emergency fund (3-6 months’ worth of expenses) before deciding how much to pay yourself. A good rule of thumb is to pay yourself a fixed, reasonable salary that doesn’t exceed what you need to cover your personal expenses. Then, allocate any surplus profits back into your business for reinvestment or growth.

Also, remember to regularly review your salary based on your business’s performance. If things are going well, it might be time to increase your pay. If times are tight, you may need to adjust your salary temporarily.

 

• We Can Help You Get Clarity and Confidence!

If you’re unsure about the answers to these questions or you’re feeling overwhelmed by the financial side of your business, you’re not alone. Many entrepreneurs face these same challenges. But here’s the good news – you don’t have to navigate this alone.

When we work together, we will help you get crystal clear on these and many other essential numbers so you can run your business with confidence. Our team specializes in helping business owners like you gain clarity on their finances, optimize their operations, and ensure that they’re on track for sustainable growth.

With the right financial foundation in place, you’ll be able to make smarter decisions, avoid costly mistakes, and build the business you’ve always dreamed of.

 

If you can’t confidently answer these four questions, it’s time to take a step back and assess your business’s financial health. Having a solid understanding of your profit margin, tax obligations, monthly costs, and how much you can pay yourself is essential for making informed decisions and building a sustainable business.

By working with the right support and systems in place, you can answer these questions with ease and move forward in your business with greater confidence and clarity. Don’t let financial uncertainty hold you back – take charge of your numbers today and watch your business thrive!