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Hi everyone, I was having a discussion with a new start up yesterday and it got me thinking, is there a difference between making a living and making a profit in business? I've always believed that the two are separate, depending on how you work out your pricing, would love to hear other people's views on this subject ? Many thanks

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  • PRO

    Hi Harry I think its easy to earn money but it's a quantum leap to make money in this business but others may have discovered the formula . 

  • PRO
    Not sure what the difference is if you're sole trader rather than Ltd. Profit=what you live off. The more profit the better standard of living you can have.
  • Making a living means you probably don't manage to save anything significant. Making profit, to me, means putting away a decent amount, maybe paying off the mortgage early, not struggling to replace a mower/van when it breaks down.
  • PRO

    It's easier to give a simple size example to show a potential view on difference, well at least one of mine.

    If you're a stable,  established, full time, 1 person, 1 van operation, not growing, the business earnings cover all expenses including replacing the equipment and van and your salary etc, then you are making a living. Indeed, some will make a better living than others.

    If your trying to aggressively grow a business, then it (a) needs to earn everyone involved a living, including yourself, plus (b) it needs investment to grow. That investment comes from either cash savings/initial investment (does not last forever), or extra earnings, profit. The profit is either sufficient to fund the growth directly, or can be used to fund loans. In the long term, profit feeds a business and enables it to grow.

  • If you are a sole trader or partnership there is no there is no difference between profit and making a living.  The difference is barely scraping by and making a living.  

    If you are a ltd company then yes you earn a living and the business makes a profit.

    So i think i have said the same as Green Girl Garden Care and Dan has the same outlook as me on it.

    • PRO

      Hmm, I think Andy is spot on. It depends what you choose to do with the profit, take it to make a living, or something else. It also depends on whether you need to make more than a living in order to meet your aspirations

  • PRO

    Some struggle with moving into self-employment, forgetting they've crossed over a 'fence'.

    They've become business owners and now have all the responsibilities, expectations and the need to deliver that they used to fight against or never appreciate when they were employees.

    In past discussions, it's been interesting to see some even view 'profit' as a dirty word.

    Whether self employed as ST or Ltd Co. and/or employing people, you are now a business person (that means foremost a "sales" person - along with all the other hats ).

    Your goal has to be to make sufficient money to support your 'lifestyle'.

    If that means you look to make enough to just cover that lifestyle, then you are 'making a living'.

    If you continually strive to generate work and maximise profits to either live an enhanced lifestyle and/or invest into growing a business then I would say you are "making a profit'

    • PRO

      I agree with that about crossing the fence , It can be a difficult transition into self employment particularly if you had a good employer and equally so when the prospect of finding an equally good employer is remote meaning self employment becomes a logical progression or option .  

      It is a wake up call though , A constant sea of hands which you have to navigate diplomatically before you even start to do the work you enjoy .  

      Time , energy levels ,legalities , finances, logistics, all comes into play 

      A challenge i feel many self employed people face is converting the demand for their services into something constructive and profitable , I truly admire those who take the risk of employing people . 

  • PRO
    Thank you everyone for all your replies, yes i guess I look at it as I want to have excess money, which I class as profit ( for the business or personal use) after making enough money to make a living, many thanks
  • As long as you are covering all the bases sufficiently such as mortgage/rent, bills etc then you are making a living if you charge the right amount. However, if you are running around working long hours to make money then you are not making a living in my opinion. Profit to me is when you have a significant surplus of your essentials outgoings which can be channeled back into the business by replacing a new mower or hedge cutter or for overpaying the mortgage or for funding an expensive annual holiday. The key thing is to charge the right amount covering time, waste and fuel used plus use of expensive machinery such as a scarifier or chipper.
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