– What To Do With Profit? –
We all work for a reason. The majority of the population works because they have bills to pay, some people work because they want to make more money and others simply like their job. This is exactly the same thing when you are trying to create an alternative source of income; you surely have a specific goal in mind. However, administrating profit from an alternative source of income can become tricky.
You might be tempted to use this money to “reward” yourself for the hard work you did for so many months. This new pair of jeans would just suits you well. After all, this money was never budgeted, right?
While I truly believe that one should reward his efforts once in a while, you must keep in mind what was your goal before you created an alternative source of income. If this additional money was not meant to be “free money”, then you must not touch it otherwise!
The other tricky part is that most alternative sources of income are derived from a little “company” that you created. Therefore, a part of the money earned from it should be use to keep the project rolling.
You will also face the dilemma of not taking any profit out of your project in order to let it grow and make even more money later on. On the other side, we are never 100% that our project will keep growing or lasting for ever. Therefore, taking a few bucks away from your project seems reasonable.
On our side, we decided to split any income generated from our company by the following rule:
– 40% must be kept in the company in order to maintain web sites, design new one, pay for advertising and other maintenance cost.
– 30% of our monthly revenue will be withdrawn by each partner.
We decided to do it this way because the first reason we started this project was to create an additional flow of monthly income. At first, we should be able to make about $1,000 per month so it will leave us $300 each and $400 to be reinvested in the company.
We will surely wait a few months and redesign our biggest site, tennisrulz.com. The site is pretty big but definitely needs some clean up.
As for the $300 a month, this will allow me to get closer to my $1,500 project. With this additional income, I will probably break the $1,000 bar. According to my calculation, I would need an additional $900 before I reach the full $1,500. So I am basically 11K away from giving my wife the opportunity to stay home.
The main reason why we leave 40% in the company is that we strongly believe that we can improve its profitability and probably reach $2,000 per month next year. That would gives us $600 a month more in our pocket 😀
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