Calculating Expenses

• Total the recurring costs associated with your business, such as marketing, franchise fees and rent. Until your business earns enough to pay your business associates and the government, you won't earn any money. So even if your business earns $2 million annually, if costs total $1.5 million you actually earn no more than $500,000. From this $500,000 you must also pay your employees if you have any.
  
  

Setting Sales Goals

• In theory, high-priced items allow you to make a profit more quickly than low-priced items. Yet in reality, expensive items can translate to fewer sales as you lose customers to your competitors. The key is to set competitive prices and then market your items based on quality rather than on price. Your items must truly be of a higher quality than your competitors' for this strategy to succeed. Using your financial records for a given time period, subtract your typical business expenses from your typical sales to determine how much you usually earn. If the result is negative, your business is losing money and you aren't earning anything, regardless of how things may seem. If the result is less than you need to cover living expenses and pay employees, develop a plan to increase sales.
  
  

Accounting for Taxes

• Multiply your profits by 0.867 to account for self-employment tax, which is 13.3 percent as of 2011. The result is how much money you actually keep after taxes. A profit of $4,000, for example, amounts to $3,468 after taxes.
  
  

Developing a Personal Budget

• Whether or not you earn enough to meet your expenses, a budget helps you weather the feast or famine nature of owning a business. Review your business expenses to determine where you can cut costs without compromising quality. Doing so widens the gap between your costs and sales, allowing you a larger profit. Decrease your living expenses as much as you can to further widen the gap.