How to Calculate Your Hustle Profitability

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Alongside of delivering value, profitability is the ultimate goal of any business endeavour. If you are not profitable what’s the point of making business anyway?

And the same applies to hustles, freelancing and art to certain degree as well. Although art might seem like something completely different, I believe all of them fall into the same category.

I know most artists are not doing it for the money. But most of hustlers neither.

The truth is this game is not about money. It’s all about the value you provide that is represented by money. And everyone cares about value. Or at least they should.

Besides, you might not care about money, but you have to be payable. Thanks to this simple calculation you are able to see if that’s the case or not. 

Ultimately you can judge if the project you are planning has a potential to pay back itself.

And that’s the whole point of profitability and profitability index.

This simple metric is measured with help of income and expenses. Income is what you are able to generate with your regular daily business. 

Just please bear in mind that borrowing do not create income, despite the fact that money do come in 😉

Expenses on the other hand are all costs endured by your business. It can include rent, salaries, marketing, cost of goods sold and all kinds of commissions and operational costs.

Although it’s closely related, profitability should not be confused with positive or negative cash flow.

Profitability is obviously about being profitable. Meanwhile cash flow is totally about liquidity. As you can see those are two different things. Still, both of them are very important.

Due to its nature, profitability index is also called benefit-cost ratio. 

When you are trying to choose the best possible project for your company, or looking for new business idea, always go for the one that has highest profitability index.

Do not get tricked by potentially high income that some “gurus” are “able” to generate.

Always do your due diligence and go for the project that has the highest chances to take-off. Which one do you prefer:

  • 1 million dollars of income and 900 thousands dollars of expenses?
  • 200 thousands dollars revenue with just 50 thousands dollars of costs?
 

Plus you have to consider all the hassle and headache that comes with the first option. Is it really worth it?

Think about it, I already know my what answer would be.

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