How do I know if my business is actually profitable?

Separate revenue from profit

You might earn $10,000 in sales but spend $9,500 on product, labor, and overhead, leaving only $500 profit. Many business owners mistake revenue for success. Track expenses as carefully as income.

Account for all costs, including your time

If you're not paying yourself a salary, add an estimate of what your labor is worth. Many small business owners work for free without realizing it. Include rent, utilities, insurance, supplies, and delivery—not just direct product costs.

Use monthly accounting, not annual guessing

Review your finances monthly so you catch problems early. Use simple tools: a spreadsheet or basic accounting software. Know your profit margin (profit divided by revenue). If it's below 20%, your pricing or costs need adjustment.