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Understand Passive Business Revenue

Oct 12, 2007
Revenue is not the same as income, or wealth. Revenue is the money that comes into a business before expenses are paid, and a percentage of money is saved for growth is removed.

Most businesses cannot increase their revenue because they do not understand the difference between revenue, and disposable revenue. Most business plans do not pay the business owner an income for five years. All profits in the first five years are needed to ensure the company's continual growth.

Unfortunately, most people who start a business need disposable income - now. They start a work at home business to supplement their income. This means that the business owner needs to look at multiple streams of incomes. However, not all revenue is earned from sales.

The important thing to remember is that revenue is money earned. Write up a budget. Calculate the cost of operating the business, and how much money is going out of the business on a monthly basis. Do this for your personal income also.

Revenue is anything that lowers the expenses side, or increases the profit side of the balance sheet.

Income Tax

A work at home business gives the business owner the opportunity of saving on their taxes. Most income tax offices do not allow business write offs if the business operates from a room where the family eats. However, converting a dining room to an office offers several benefits.

The dinning room often takes up 20% of the home. This means that business owners can deduct 20% of every bill, from hydro to lawn care, carpet shampooing to renovations. They can even write off 20% of the mortgage and mortgage interest, insurance paid, property taxes, and levies.

Careful planning can drop the business owner's income tax $1000 or more, depending on how much they usually pay. This is revenue earned, money in the business owner's pocket, that does not come from sales.

Depreciation

Everything a business uses from computers to automobiles is subject to depreciation. This depreciation is deducted from the fixed asset's value, whether it is a portion of the family vehicle, a computer, office furniture, and other equipment used to generate income.

This depreciation lowers the income generated by the company, and in turn, lowers the income tax paid.

Invest In Yourself

Many small business owners fail to realize that they have value. They rarely consider the knowledge learned as an asset. It is an asset, and it can be used to reduce expenses, and increase revenue.

Most small business owners spend a few months researching their business, but few take the time to learn how to become a success. Once they find one or two methods that they understand, they stick with them, whether the methods work or not.

Every time a business owner learns how to save money, the money saved should be considered revenue.

Conclusion

In this way, many business owners save a few thousand dollars each year - even before the company starts earning money from sales. The problem is, most work at home business owners overlook these streams of passive income. They do not keep gas logs on their vehicle, or receipts for their home care, utilities, and taxes. They loose thousands of dollars each year, because they do not view their business as a 'real business.'

However, if a person occupies their time trying to generate sales and earn revenue, then they are in business. There is no threshold that defines a business.
About the Author
Mark Walters is a third generation entrepreneur and author. He offers free training and investing videos designed to speed you towards financial independence at http://www.cashflowinstitute1.com/Articles.html
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