Massage & Bodywork

MAY | JUNE 2016

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C h e c k o u t A B M P 's l a t e s t n e w s a n d b l o g p o s t s . Av a i l a b l e a t w w w. a b m p . c o m . 25 BUSINESS SIDE SOLE PROPRIETORS First, here's a quick quiz: Do you know the total amount of gross income and business expenses you claimed on last year's taxes without having to look it up? You should know all the important data for your practice off the top of your head. Or at least have that information handy for you to reference easily. ANNUAL HOURLY NET PROFIT While you can calculate weekly and year-to-date hourly net profi t for your practice, you'll get a more accurate fi gure if you calculate your annual fi gure. Why? Expenses aren't consistent and can fl uctuate quite a bit from month-to-month, so if you have a month where expenses are low, your profi t fi gure will look a whole lot better than the month you paid your state license renewal fee, had to buy more lotion and sheets, or purchased a massage chair. Most of you will actually fi nd it fairly easy to calculate this fi gure on an annual basis since you've already done most of the math for your taxes (thanks, Uncle Sam). What was your gross income—total income before any taxes or expenses were taken out—last year? Pull this fi gure from your income tracking system or your Schedule C tax form. Next, let's calculate your total costs. We'll do this by adding your expenses and self-employment tax. Start with the total amount of business expenses you claimed on last year's Schedule C tax form. This fi gure includes every operating expense you incurred for your business: offi ce rent, phone, association dues, continuing education, equipment, Internet, laundry, licensing fees, supplies, etc. Add the amount you paid in self- employment tax last year; this fi gure is on your Schedule SE tax form. Subtract the total of your operating expenses and taxes from your gross income. This gives you your net income for the year. Calculate the total number of session hours you worked last year. If you're not already tracking the length of each session you give, it's a helpful and easy fi gure to add to your income spreadsheet. If you don't have the exact number for last year, take the number of sessions you gave and multiply that fi gure by your average session length to get your total session hours. For this exercise, we're going to vary from the classic profi t margin equation and have you also account for the time you spent marketing and managing your practice. Determine how many hours you spent doing these tasks last year. If you didn't track the hours you spent marketing and managing your practice throughout the year, estimate how many hours you typically spend doing this each week and multiply that fi gure by the number of weeks you worked last year. Add these hours to your total session hours. To calculate your annual hourly net profi t, divide your net income by total hours. We encourage you to calculate your annual hourly net profi t twice for comparison; with the practice management hours and without. But if you're trying to provide an accurate assessment of how much you make from practicing, you should include your practice management hours. You wouldn't have the revenue without those hours, after all. Now, you have your annual hourly net profi t! Is it what you expected? More? Less? Are you disappointed? Let's think about this: • If it's more than you thought it would be—awesome. So, if you're thinking like a capitalist, you're saying to yourself, "Can I grow this?" Think about your hours: can you squeeze in a few more sessions per month? If so, that's one way to make it grow. • If it's less than you thought— read on, my friend. Gross income Business expenses + Self-employment tax paid = Total expenses Gross income – Total expenses = Annual net income Total session hours + Practice management hours (optional) = Total hours Annual net income ÷ Total hours = Annual hourly net profi t

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