"It is a labor to task the faculties of a man -- such problems of profit and loss, of interest...." -- Henry David Thoreau

I believe it is fair to make the general statement that no other concept is understood or appreciated less in the crafts industry, than that of profits. Profits make it all happen -- again and again and again. Without them, everything surrounding our craft endeavors comes to a halt. So, what are profits and what do you do with them? If you have not yet read the FACQs on the Business Cycle and Cash Flow, you might want to review them before going any further.

Okay, so you've sold your craft widgets, you've paid your bills and your employees, and covered your overheads. Hopefully you've even taken a little out for yourself, either as a salary paid by your business, or as company paid expenses of one kind or another. You still have a handful of money left over -- that's profit. It's not a dirty word; you have to have it to keep your craft business going. Just don't rush out and spend it until you've reviewed the following uses for it. Once all that has been budgeted, then anything left over can be considered entrepreneurial profit to do with as you please.

• You have silent partners with their hands in your pocket. Federal, State and Municipal taxing authorities want to talk with you, and have you give them their share of your profits. Don't even try to ignore this obligation. You'll find that the penalties, interest and stress involved in trying to shirk this responsibility far outweigh any fun you could have spending that money.
  
• Next up is your working capital needs. In a growing, excited business they demand a lot of funds. The bigger you get, the more accounts receivable and inventory you have to carry. The more cash that goes through your bank account, the more cushion you have to keep (if you are depositing $500 a week, then a $100 balance is a reasonable amount; if you are running $10,000 a week through that account, $100 probably won't cover the first bad check one of your customers gives you). You fund these working capital needs out of your profits; and in the absence of profits, you must make a further personal investment of funds in your business to cover them or go to the bank.
  
• New equipment purchases and the replacement of worn out or obsolete equipment is another use for profits. As you get bigger you need more and/or better equipment to run your studio. The longer you are in business, the more apt some of your older equipment is to stop working. At some point it becomes more economical to just buy another machine than to keep repairing and maintaining the current one. This, of course, is the subject of a future FACQ.
  
• Philanthropy comes out of profits. We in the crafts community pride ourselves on the ways we give back a portion of our bounty, whether at the local or the national level -- CERF being just one example. You wouldn't be able to do this without profits.
  
• And finally, profits allow us to provide for our retirement. Think about setting up a tax deferred Individual Retirement Account (IRA) and making contributions each tax season to reduce your payments to those "silent" partners.
  

   
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