I hope you find my writing and business tips and observations useful. My business and blog are dedicated to helping businesses communicate clearly and reach their potential. Read, subscribe to my newsletter, enjoy!Tash

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Paying yourself and profit

Yesterday, I wrote about the definition of profit. As a small business owner (that is, a sole trader or partner rather than a company or trust,) how do you get paid – it is an expense or does it come from your profit?

Depending on how you have set things up, it could be either way, or even both.

1. you pay yourself a salary/wage

If you pay yourself regularly as you would any employee, then your pay is an expense – as are the workers compensation, superannuation, PAYG and other employment expenses. Your pay is removed from your turnover before you calculate profit and your profits are in addition to your income.

2. you don’t get paid a salary/wage

If you get money from your business on a less formal arrangement, such as only when there is enough money in the account or as you need it, you take drawings from your investment in the business. Drawings are not counted as an expense so they come out of your profits. The more profitable the business, the more money you can draw upon, but if there is little profit, you can’t access much.


Earning dollars to make profit in your businessEither way, your profits are there for use in the business or for you to take as drawings and spend however you wish. The distinction is important in accounting terms for the following types of situations:

  • you are taxed on the profits of your business
  • calculations based on your profits (eg x% of profits as a donation or as rent)
  • applying for financial assistance (loans, etc) and facilities (merchant accounts, etc)
  • division of profits with a partner (if in a partnership)
  • valuations of your business for insurance or selling purposes

How do you get paid from your business? Why do you manage it that way?

Crucial planning ahead for problems

Contingency planning and being prepared are important steps for a business owner – but steps that are not urgent so can easily be left behind in the day to day busyness of business and making a profit.

I was reminded of this topic today when I read an article called ‘When bad stuff happens’ – being about small business owners needing to think ahead to potential problems. And having procedures in place to cope when problems do arise.

Back in 1999, I had a contract to prepare some contingency plans for a major Australian company. We did various things, but one key task was preparing a checklist and contingency plan for the morning of 1 January 2000 – the day computers were going to fail and planes fall from the sky! The checklist included things such as ‘turn on a light switch. If it doesn’t work, try a second switch. If it still doesn’t work, look at neighbouring buildings and street lights – do they have power?’ We thought ahead and gave staff options to get all the information before emergency procedures were put into place.

So what sort of things do you need procedures for in your business? Obviously, that depends on your business, but some simple procedures you could start with are:

  • make sure someone else has a list of key contacts in case you are suddenly out of action. For example, my key clients and contacts are on a list with my husband so they would not be left wondering about me if I disappeared for a while
  • give someone else access to your PO box, or at least permission to get your mail redirected
  • prepare a list of essential business passwords so someone else can manage things – for instance, passwords for your blog, email and online shop administration
  • if you send out products, writing a procedure on how to package and send them is crucial for another person to be able to pick it up for you
  • if you are a service provider, establish some relationships now so there are people you can refer clients to or outsource work to if you can’t complete promised work
  • give your bookkeeper, accountant or a trusted person the means to be able to complete IAS/BAS statements for you, including how to pay any tax owing, so you avoid fines and problems with the ATO while you are ill or unavailable
  • prepare some standard responses to emails so the same message can be sent out even in your absence. Think about adding some of that common information to your website, too, to reduce how many people ask the same question – much easier for someone trying to fill in for you, but also a great time saver for you in the mean time!

If you start implementing some of these plans into your business, I’d love to hear about it – although I hope it never becomes necessary to use the procedures for a negative problem (using them because you win a trip around the world is a different story!)

Use your words and time wisely!

Saying no…

Did you know that you are allowed to say no sometimes? Even to new clients or a long standing client, it is acceptable for you to say no – politely of course!

It is a little silly, but I was reminded of this through the Rat in the Hat! Melissa Khalinsky often uses children’s TV shows to point out business lessons, and in one of her blog posts, she shows how Rat is quite the entrreperuner.

Melissa wrote “Don’t overextend yourself – this is something Rat does often in his quest to meet the needs of everyone on Cuddles Ave. Unfortunately Rat doesn’t know how to say no ” and I had to nod in agreement, both for Rat in a Hat (yes, I’ve watched him, too!) and for many business owners I know.

As a small business owner, it is hard to turn down a client – there’s that little fear that maybe this was the last work request you’d get for 6 months so how can you afford to not do this project? Or maybe it is a fear that saying no will make that person hate you and bad mouth you to other potential clients?

But let’s look at it the other way:

  • if you take on too much work, you will end up doing inferior work for a number of clients, thereby damaging your good reputation
  • if you continue doing too much, you will burn out and really not be able to earn anything for 6 months
  • if one client has found you and asked for a quote, it is likely others can also find you next week and next month
  • a well managed ‘no’ will leave the client feeling positive about you even if you couldn’t do their work – they may try you again another time, or at least tell others you acted professionally
  • do you really think your clients have the time and inclination to bad mouth you just because you couldn’t work for them?

I will cover the various reasons for saying no, and how to say no nicely in the next few blog posts. But for now, just take on the belief that you can say no and the world (or your business!) won’t end!

Having an about us page

When surfing around sites and blogs, you occasionally come across a site without an About Us page. To be honest, I don’t always look at an about us page anyway, but it really annoys me when I want to and there isn’t one there to look at.

Why do I want to look at an about us page sometimes?

  • I may want to know where they are based, and the contact us page doesn’t give enough information
  • I don’t understand something on the site and want to check a fact. For instance, if I am unsure if they do consultations as well as sell a product/service, I may check the about us page for details
  • if I want to contact the site/business owner (for example to suggest a joint venture or acknowledge something), I like to use their name and an About Us page is the obvious place to find their name
  • An about us page usually gives me an idea of the size of the business which can sometimes be important
  • I can get a better sense of who is behind the site/blog which can develop my trust/their credibility, or at least give me an idea if the person is speaking as an expert in their blog or just sharing their opinions

I also know many people who really like to know who is behind a business before they deal with it – they want personal stories on the about us page and would even prefer a photo of the owner and key partners/staff.

So, do you have an about us page on your site or blog?

As writing About Us pages is one of the most common web content requests I get, I really should post some tips for writing (or improving) your about us page!

Copyright or copywrite?

Blocks of textWriting is always ‘writing’, yet it is amazing how many times I get asked to do some ‘copyrighting’ or asked ‘who owns the copywrite?’ So here’s a quick explanation of these common terms…

 copyright – protection of materials (e.g. articles, books, songs, photos, designs) by giving only the owner the right to copy the materials

copywrite – the act of writing text for a brochure, article, website, ad, etc (copy being a common term for the text in these items)

So I own the copyright of entries in this blog and I can call myself a professional copywriter.