Since I have opened up the doors to my online business, several readers have asked me about the cost of running online business. Since I run a different business model than most bloggers and internet moguls, considering all the costs of this venture is important. Making 125K in revenue in 12 months is amazing… unless it cost 100K to run it, right? This is actually a good exercise since I haven’t done it for a while now 😉
Are you ready? Here’s the list of my business costs (on an annual basis):
My accountant charges me $180 per month to take care of my books, filing sales tax reports and to make sure everything is in order. Then, it costs about $1000 per year for my income tax report, updating the company’s minutes and producing my financial statements.
Virtual Assistants: $35,000
This is not a “real” cost in my financial statement yet since we just hired a full time VA 2 months ago. So I am obviously expecting to make more money in the upcoming 12 months in order to cover these costs ;-). You can basically see it as:
– Being a huge investment for not working more while assuring the company’s growth
– Being the start of something a lot bigger
In fact, $35K per year seems pretty high. Especially since I expect to make about the same income in 2011 (125K). The difference is that I won’t be selling any web properties and in 2010, I benefited from a one time opportunity by brokering 2 advertising deals. However, when my company income increases from 125K to 200K, I will pay about the same thing in salary while putting 75K more in my pockets and not working any more. This is the plan ;-).
Writers / Editing: $9,800
This has been stable for the past 6 months. We have a great group of writers and we will probably add one or 2 writers for other projects in the upcoming months (so if you are looking for a freelance writing job, contact me 😉 ). I like having several writers so I am not left with a big problem if ever one of my writers moves on to other things. I’m looking for high quality content so I don’t mind paying for it. I am also paying someone to go over my own articles. Since English is my second language, he helps me big time to correct grammatical errors.
Banking and Interest Fees: $6,000
We pay roughly $30 per month for our banking operations along with access to a line of credit. We also have to pay for wire transfers when we purchase web properties. Along with that, we just contracted another loan to make another purchase (I’ll keep it hush hush for now ;-P ). While it seems like a lot in fees and interest, then again, we do it for growth. Last year, we paid less than $1,000 in this category!
Hosting and domain renewals: $1,500
We currently have 3 servers and a huge load of domains to renew from time to time. For security and efficiency purposes, we are going to move all our sites to our own server in 2011. In the meantime, we are using Phatservers, GoDaddy and HostGator services.
Software investments: $1,000
This is the first time ever that we are investing in specific software to grow our business. I don’t know how much we will actually spend this year but I’d say it will probably be close to $1,000. So far, we have bought the following:
Market Samurai (we should have bought it a while ago!)
The Best Spinner (to create more articles)
Internet, Cable, Blackberry, Landline…. all times 2 since we operate from 2 different locations. Definitely a must for our company ;-). The good news is that we can use Internet and our Blackberry for personal use at the same time. So I am actually taking those expenses off my personal budget to switch it over to my company’s budget.
Prizes and Promotions: $2,000
We spent about $2K in prizes and promotions annually. This is good for contests, visibility and to gain readers through our newsletters and RSS feeds. I don’t know if this expense is necessary but I like saying thank you to my readers nonetheless ;-D.
Life Insurance: $1,200
This is one of the most important expenses we have: protect our partner’s value. Starting in 2010, we have a universal life coverage of $250,000 first-to-die insurance policy.
Total Expenses: $66,700
I must put a small comment on the total expense. First off, when we made 125K from July 1st 2009 to June 30th 2010, we didn’t have most of those expenses. We had no VAs, half of the budget for writers and very low interest charges. However, we had several expenses in computer equipment (which won’t be part of our expenses this year). We can also amortize the value of our websites in order to reduce our company income for income tax purposes. The last point we included last year is that I was giving myself an income since I am working 1 full day a week on top of my normal hours in the company. This is how we went from 125K revenue to 40K net profit and 9K to pay in taxes.
We now forecast significant expenses (67K) in the upcoming year but also expect to bring our monthly income to more than 10K without considering any one time deals or the sale of a website. I could technically sell one of my big blogs and bring my company income to 200K easily this year. But we are seeking long term growth right now, not short term results. It’s a good thing to be privately owned, isn’t?
|How I Suck at Not Paying Debts||Hitting 6 Figures Income at 28|
|How I Get a Huge Income Raise Each Year||Making $125K Online in 12 months|
|How I Buy Blogs||Most Debated Articles: The Primerica Saga|
|How I Have Survived My MBA||What is So Wrong With Making Money?|
|How I run multiples blogs and makes money without burning out|