What did you make last week?
For most of you, it’s not what you think it was. It’s not what Grubhub, Doordash, Postmates, Uber Eats, Caviar, InstaCart or Shipt or any of them sent you.
For some of you, what you made is only a fraction of that.
As an independent contractor, as a self employed person, you are a business owner. What a business makes is not the money coming in, it’s the money left over. It’s not the revenue, it’s the profit.
This is the first of six posts in our Courier MBA series that talk about the money side of running your delivery business. If you have been keeping up on the series, you’ve already heard me talk a lot about profit and profitability. This is an incredibly important concept.
In fact, as a business owner you really need to get into this mindset – where you are thinking about profit more than you are the money coming in. You want to think about the bottom line, not the top line. You want to have a profit and loss mindset.
Here are a few things about having a P&L mindset instead of just a payday mindset:
You feel more like a business owner.
Mindset is everything. You feel like more than just a delivery hack, you know? When you start seeing yourself as a business owner, you feel more in control.
You KNOW how you are doing.
You know, because you are really keeping track of how you are doing. As a result, you have a real sense for what you are truly making.
Sometimes knowing how you are doing helps you know if it’s enough.
Knowing what you are really making allows you to adjust.
Are your expenses too high? Is the revenue too low? When you know, you can make adjustments
Knowing your actual profit and loss helps you in income based situations.
Maybe you’re getting a mortgate. Maybe you’re applying for an income based scholarship for you or a family member. Your profit means more in these situations than your income.
It helps you be better prepared for taxes
You get a picture of what you will be taxed on.
Profit and Loss Isn't That Complicated
Like a lot of business terminology, We can feel like P&L is a bit over our head. Maybe even intimidating. It’s not that difficult really. It’s all about adding up the money coming in, and the expenses you have to pay. All it boils down to is you list your income, you list your expenses, you add each up. If you had more revenue than expenses, that’s a profit. If you had more expenses than revenue, that’s a loss.
It really is that simple. As a self employed person, the important figure isn’t the top line, the money coming in, but it’s the bottom line. It’s what’s left over AFTER the expenses.
The Important Thing is: Track It All
So the important thing here is you have to track both income and expenses. Your expenses are anything that you have to pay as part of doing delivery. If you purchase bags, cell holders, cell chargers, the percentage of use on your cell phone. And then, your car.
Your biggest expense is going to be your car if you drive.
There is so much involved in evaluating the cost of your car, we’re doing a separate episode on that tomorrow. Folks, it’s incredibly crucial that you understand what your car really costs, so I really encourage you to listen in (or read in) tomorrow on episode 18. You HAVE to know that your car costs so much more than just the gas.
There are really three levels of car costs:
- Perceived expenses – basically that’s the money that comes out of our pocket right now. Most of us think that way, about all we think about is the gas.
- Actual costs. This is when you throw in EVERYTHING that is involved with your car. Gas, maintenance, repairs, insurance, interest on your car loan, depreciation – meaning how much did the value of your car drop? You want to keep track of all that.
- IRS expense. This year you can claim 58 cents a mile. Now you cannot claim BOTH the actual expenses AND the 58 cents – it’s whichever is higher. If you have a valuable enough car, your actual expenses may be higher. You want to track both of these.
We’ll dig deeper tomorrow into figuring out what your actual cost per mile is, but I’ll say this now: When is the IRS ever generous to us? They didn’t come up with 58 cents to be nice. When you look at the real numbers, many of you will be surprised how close to 58 cents a mile you really come.
As I Was Saying: Track it ALL!
So as I was just saying, you’ve got to track it. Track it all. Track your miles. Record your car expenses, track your other expenses. Track it all. Track it as it happens, don’t wait until tax day because you can forget too many things if you do that. Here’s a few ways you can do it:
Old old school: Use a notebook. Just write everything down as it happens. Use different pages for different kinds of expenses and different kinds of income. Add the totals up.
New old school: It’s the same as above but use a spreadsheet which will add the totals for you.
Use a bookkeeping program.
There are all sorts out there, some are structured more to independent contractors.
- Stride Tax is a neat tool and it’s free. You can track your miles and you can add your expenses. It’s pretty simple to use. If you’re at all intimidated by book keeping I recommend starting with them. It’s a bit more limited than other options.
- There is a paid option called Quickbooks Self Employed. I think it has a better mile tracking option. Usually they’ll start you out at half price for a few months but it settles in around $10 per month. It does a bit more than Stride and is better recognized by tax pros. $10 per month isn’t that much.
- Then you can get into more full blown packages. If you listened to Episode 7 about an exit plan, and if this independent work is kinda becoming a gateway drug into other entrepreneurial ideas, you might want to get to know them. I use one called Wave, it’s more full featured and it’s free.
- One other thing I do. This goes back to Episode 8 where I strongly recommend tracking your performance. I keep a spreadsheet with my daily numbers. Now I don’t include my other costs like my cell phone there, only miles. But it calculates an actual profit for me and a taxable profit, so I can get a quick look at how I’m doing for the day, week, month or year, and a snapshot of what taxes could look like.
Knowing what you really make is huge. Start paying attention, start tracking, then start thinking of what you earn as your PROFIT, not what you get paid for any delivery, or paid by any delivery company.