It Can't Be That Bad: Small Business Financials, Part 2

Getting Down to Business

Share on Facebook
Share on Twitter

By Cathy Yen

Executive Director OPRF Chamber of Commerce

Last week, I created a fictional coffee shop owner, who needs to reach a million dollars in sales to make $50,000.  Some people thought I was harsh. "Depressing," wrote one commenter.

My intent was to illustrate thin margins, not to scare people away. An educated community might better appreciate the challenges facing this important segment of our local economy.  Customers ask for discounts, donations, jobs for their teenagers.  Government increases fees.  All justified by the notion that owners "make all that money."  Indeed, there is money to be had – just not as much as you might think.

When you walk into a business, it is easy to see revenue, not expense.  Investment must mean wealth, right?  More likely it means the owner's savings is tied up.  Yes, the owner gets to be her own boss, but she also is responsible for her employees.  She gets to pay herself, but only when there is money left.

That said, small business ownership can be a rewarding career.  Owners enjoy independence, creativity, the chance provide a unique product or service or even to make the community a better place.  Successful entrepreneurs slave over their numbers and work hard to earn a living.

In my coffee shop example, I assumed a 5% profit margin.  Profit is the money left after all expenses are paid.  In addition to product cost and rent, expenses include the salaries of the baristas and the manager and the money to pay for marketing, social media and financial management.

That money is available to the owner who chooses to do the work himself rather than pay someone else.  The owner might capture three different income streams: money from working production, money from management and money from performing typical overhead tasks.  When everything goes well, there may also be profit that comes from owning the business.  When things aren't going well, the owner absorbs the loss in his own paycheck, allowing the business to survive and hopefully do better tomorrow.

Small business is challenging but not impossible.  Next week we'll talk through strategies to increase the odds of success and profitability.

Email: Twitter: @OPRFChamber

Love the Journal?

Become our partner in independent community journalism

Thanks for turning to Wednesday Journal and We love our thousands of digital-only readers. Now though we're asking you to partner up in paying for our reporters and photographers who report this news. It had to happen, right?

On the plus side, we're giving you a simple way, and a better reason, to join in. We're now a non-profit -- Growing Community Media -- so your donation is tax deductible. And signing up for a monthly donation, or making a one-time donation, is fast and easy.

No threats from us. The news will be here. No paywalls or article countdowns. We're counting on an exquisite mix of civic enlightenment and mild shaming. Sort of like public radio.

Claim your bragging rights. Become a digital member.

Donate Now

Reader Comments

No Comments - Add Your Comment

Note: This page requires you to login with Facebook to comment.

Comment Policy

Facebook Connect

Answer Book 2019

To view the full print edition of the Wednesday Journal 2019 Answer Book, please click here.

Quick Links

Sign-up to get the latest news updates for Oak Park and River Forest.

MultimediaContact us
Submit Letter To The Editor
Place a Classified Ad

Classified Ad