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You packed up the last of the costume accessories to send to customers, adding to the mountains of fabric scraps and mailing labels that are invading your kitchen table. The internet craft store of a parent made $2,000 last month, more than the month before, and completed all those orders after bedtime.

However, the financial balance reveals a very different scenario. They need to replenish stock of materials and supplies, pay prior shipping invoices, and cover upcoming ones. Yes, the business is busier than ever, but this increased effort isn’t translating into more income for the family.

So how much of that revenue does your business really keep?

The Sales Total Doesn’t Tell the Whole Story

Revenue after costs for delivery, marketing, and other expenses will be lower than the sales total for online stores such as Etsy. Break this figure down into the individual costs of supplies, packaging, and postage, plus transaction fees for online stores and other advertising expenses.

As your business grows, it may become increasingly difficult to track all expenses for additional orders. Comparing accounting software options through resources like Quickbooks vs. Wave can help you identify the features most relevant to your business. 

The right setup should make it easier to monitor expenses, track payments, and understand how much money you keep from each sale.

For example, a handmade online store brings in $2,000 in sales this month.

Those expenses represented over 50% of the money made from the orders. When you factor in that completing the orders took about 60 hours of work, that leaves $900 to divide by 60 hours, or $15 per hour before you take home income.

Of course, the owner may need to spend money to fix or upgrade equipment to complete orders. Also, there may be expenses not included in this example. So, the profit of a consistently selling product may not be enough to compensate for the time spent creating it. It’s important to know the cost of each order to set an appropriate price.

Why the Money Still Isn’t Available to Spend

When you earn side-hustle money, it isn’t necessarily available to spend because the timing of expenses for the side hustle may not match when you receive payment from clients for the work. This is especially true when one does custom work for a client.

To illustrate, suppose the owner of this handmade business received an order a few days ago for custom accessories from a local theater for $450. The owner immediately purchases $300 worth of materials to complete the order and begins work on the accessories. It will take several weeks, though, before the owner collects the full $450 from the theater.

Withdrawing personal funds from a business account can also cause problems and leave the business without sufficient funds for future purchases. The business owner may have a healthy balance in the business account now, but that does not necessarily mean there will be enough funds for future needs.

The taxes on income from your side job or gig work will also affect how much you can spend. Even if you work part-time, the IRS considers your income reportable, and as a self-employed individual, you may need to make estimated tax payments throughout the year instead of paying only when you file your annual return.

Whether the owner puts it in a separate savings account or not, this money isn’t available for operational expenses or personal spending. Many entrepreneurs make the common mistake of confusing cash in their account with money they can withdraw at will.

Start Measuring What Your Work Actually Earns

You don’t need to get more customers to improve your situation. Start by figuring out which activities are worth your time and which are wasting your resources.

In handmade businesses, it can help to calculate product-level expenses: revenue from each product minus material cost, shipping, and the hours of work put into it. Etsy Shop Manager gives good insight into sales numbers. 

Google Sheets can organize material cost, shipping cost, and hours of work to calculate the average cost and average hours of work for each product. You might be surprised to find that your most popular item isn’t the most profitable.

Similarly, blog owners with multiple ways to earn money online must determine how much profit they generate from each activity after factoring in the associated costs of running it. For example, someone who creates content on their blog to earn from affiliate links, sponsored posts, and digital product sales will want to see how much profit they make from each of these online ventures.

This kind of financial review can be done weekly. You can review payments received, payments outstanding, bills due, and cash required in business accounts regularly. A business’s financial records are separate from a household’s, so they make sense.

Remember to price your work too. Material costs may increase, and so may your delivery fees. Don’t let one busy month erode your earnings by continuing to charge the same rate.

A Busy Side Hustle Should Be Worth the Effort

Finally, a busy side hustle is worth your time only if it delivers real value. So even though you’ve increased your sales, your expenses have gone up too, and you haven’t become any more financially viable.

Do you get more value out of your time working in your business now than you did before? Just because you are doing more business doesn’t necessarily mean you are getting more value out of your time. This is especially true when you work in your business to make it financially worthwhile.