Revenue, profit, cash flow, margins, VAT and paying yourself. Small-business money skills for sole traders, side hustlers and new founders in the UK.
Revenue is sales, profit is sales minus costs, and cash is what's actually in the bank. Your one action: for one week of any side hustle or job, write down money in, money out, and what's in the bank on Friday.
Fixed costs (rent, insurance, subscriptions) stay put; variable costs (ingredients, packaging, per-sale fees) rise with sales. Your one action: list your own monthly costs and mark each one F for fixed or V for variable.
A P&L goes revenue, minus cost of sales, equals gross profit, minus overheads, equals net profit. Your one action: sketch a one-month P&L for a real or imaginary side hustle with those five lines.
Gross margin = gross profit ÷ revenue; net margin = net profit ÷ revenue. Thin margins leave no room for surprises. Your one action: work out the gross margin on one thing you sell or make (price minus direct costs, divided by price).
Markup = profit ÷ cost; margin = profit ÷ price. A 50% markup is only a 33% margin. Your one action: take one price you charge (or would charge) and work out both numbers.
A price must cover ingredients, packaging, overheads AND your time, then leave a margin. Selling out can mean you're too cheap. Your one action: cost one thing you make, including your time at an hourly rate you'd accept.
Contribution = price − variable cost; break-even units = fixed costs ÷ contribution. Higher prices or lower fixed costs bring it down. Your one action: work out the break-even for any idea you've had, even a pretend one.
A profitable business can still run out of cash when money goes out before it comes in. A cash-flow forecast spots the gap early. Your one action: draw a three-month table of cash in and cash out for a job or side hustle.
Register for VAT if taxable turnover passes £90,000 in any rolling 12 months; the standard rate is 20%; you pay HMRC output VAT minus input VAT. Your one action: if you run a business, add up your last 12 months of sales today and diary a monthly check.
Sole trader: simple, but you're personally liable. Limited company: limited liability, Corporation Tax, public accounts and more admin. Your one action: list three questions you'd ask an accountant or a free business support service before choosing.
Keep business money separate, record every sale and cost, keep records for years, and move a slice of every payment into a tax pot. Always check changed bank details by phone. Your one action: set up a 'tax pot' savings space and a simple spreadsheet with date, item, money in and money out.
Sole traders are taxed on profit, not on what they take out. Company owners take salary and dividends, and dividends must come from profits after Corporation Tax. Your one action: decide a fixed monthly amount you'd pay yourself and the buffer you'd leave behind.
Run the numbers in order: P&L, margins, break-even, cash-flow forecast, VAT check, then a steady wage after the tax pot and buffer. Your one action: write a one-page P&L and three-month cash forecast for any business idea you've had.
Free with a codeBusiness Money Basics: quick answers
Mo's month: £1,200 of sales, £850 of costs, and £300 of it not yet paid by a cafe. What's the profit?
£350. £1,200 − £850 = £350. The unpaid £300 still counts as a sale; it just isn't cash yet.
Related topics
- Side Hustles & Self-employmentReselling, gigs and the taxman.
- Business Money AdvancedEBITDA, balance sheets, working capital, runway and what a business is worth.
- Work, Payslips & TaxWhere did 20% of my wages go?
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