Thursday, December 18, 2008

Dealing with Stress

The other small business thing that is difficult is worrying about money.  When you're getting started, it's difficult to predict sales, and lack of experience results in mistakes, often with a financial implication.  I've spent A LOT of money on signing up for shows that I either wasn't ready for, wasn't my niche, or just weren't any good.  They all ended up being good learning experiences.  It let me know that I needed to take more criteria into consideration than what I had been.  I still don't have that down to a science.  But now that I'm unemployed and have time to make appointments with people that can help me, in addition to doing more research and planning, hopefully those things will be minimized.

One important thing to think about when you start stressing about money . . . remember that a profit in your pocket is often still a loss on paper.  So that's a huge benefit.  I use the internet almost exclusively for business purposes.  So I will be deducting probably 90% of my internet bill as a business expense when it's tax time.  Would I still have the internet if I didn't have a small business?  Absolutely.  Same thing with cell phone service.  Also, all of these craft shows and festivals that I do are usually long drives.  So is the place that I buy some of my supplies from.  At the end of the year, if you have good enough record keeping to be able to track it, you can deduct mileage on your taxes.  These are things that make a big difference.

There's another thing that makes a big difference in how you define "profit."  If you've already spent the money on your inventory and supplies, that's known in the accounting world as a "sunk cost."  You've already spent it.  It's already been taken out of your account.  You no longer have that money.  So being able to sell it feels like profit because it's increasing your cash on hand.  It doesn't sound like much, but believe me, when I've stocked up on after holiday discounts one year, then get to sell those things in season the following year, I'm not even thinking about the money I originally spent on it.  So it feels a hell of a lot like profit.  I'm turning a box that was sitting in the basement for a year into a hundred bucks that I can use.  It definitely feels like profit.  

I hope this helps a little.  One thing in particular if you're thinking about claiming business expenses on your taxes for the first time, really look at the rules between determining if it's a business or a hobby.  Realize that business losses make you more likely to be picked for an audit, but if you have good records and err on the side of caution, then you don't have anything to worry about.  That tidbit probably didn't help for controlling stress.  But it might later on.

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