BFB_Lighter

The following is a chapter from Business for Breakfast, Volume 1: The Beginning Professional Writer.

The ebook is available from Amazon, Kobo Books, Barnes & Noble, iBookstore, and the paper version is available from Createspace.

However, if you’re like most writers (broke!) I will also be posting a chapter a week, so you’ll merely have to have patience to read all twelve chapters.

Chapter Five

Income vs. Profit

So you’ve sold a story to a major short story market. Congratulations!

Quick quiz: Is that income? Or profit?

This chapter discusses the differences between income and profit, as well as delves further into expenses you can expect to incur.

Income

The above is actually a trick question.

The money from a sale may be income.

It may be profit.

The difference between income and profit are your expenses.

Income is all the money that comes into the writer, generally from licensing rights to your property (remember, though we always talk about sales we, as artist/writers, aren’t actually selling stories).

Every drop, every trickle, every stream is considered income that come into a writer’s money bucket.

Expenses

Expenses are made up of the money you spend to run your business.

For example, paying for the services of a copyeditor is a normal business expense for a writer.

If you are publishing your own work, you may pay for a cover. That is another normal business expense.

Perhaps you have a website. The annual expense of registering that domain and paying for web hosting are normal business expenses.

Expenses take money out of the bucket of income.

NOTE: Be careful on how much you spend out of that bucket if not a lot is trickling in! Spending $5000 on a short story cover and advertising makes no sense.

Profit

Profit is what remains of your income after you subtract your expenses.

So you have income, which is money flowing into the bucket.

Expenses are things you purchase for your business, which means money flowing out of the bucket.

Profit is what remains in the bucket after the expenses.

Think about your subdivision of properties.

You need to water the yards there. Or paint the houses. Or build new houses.

All of these are expenses that you spend out of your income.

Businesses are always trying to find legal ways to maximize income and minimize profit.

Why?

Taxes.

The less profit you have, the lower your taxes may be.

Again, I am not a tax professional and I am not giving you tax advice.

However, if you have enough legitimate expenses from your business, you may be able to lower all of your taxes.

Accounting

So, in the last chapter, I talked about intuitive budgeting.

The whole income vs. profit is why you must keep your receipts, and why you must keep track of everything you spend for your business, and possibly for your life.

What sort of expenses do you need to keep track of?

  • Website domain
  • Email forwarder (from your domain to your regular email address)
  • Privacy service on your domain registration*
  • All editing
  • Cover artwork and design
  • Writing computer (more about this in The Physicality of Writing chapter)
  • Office equipment, such as your computer, a printer, your standing desk, etc.
  • Postage (if you’re mailing manuscripts to editors)
  • Scans of signed contracts
  • General supplies, like pens, paper, Post–it notes, etc.
  • Software used specifically for writing and publishing
  • Backup devices

*SIDE NOTE: All domain registration information is public information. Which means that your name, address, and phone number are all easily accessible if you do not purchase a privacy service from your web host.

You may want to set up a home office and declare that on your taxes. The rules are fairly strict, however, about how general area and percentage that it’s used for just your business, so be careful. The rules can be found on the IRS site about business expenses.

In Conclusion

These are the three things you need to remember about income vs. profit and expenses:

  • Income is the money that flows to the writer.
  • Expenses are the services you pay for running your business. Be careful with your expenses.
  • Profit is what remains after you subtract your expenses from your income.

This book is available from Amazon, Kobo Books, Barnes & Noble, iBookstore, and the paper version is available from Createspace.