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Learn Your Numbers

Make sure your business will be more than just an expensive hobby.

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This story appears in the April 2002 issue of Teen Startups.

(YoungBiz.com) - When it comes to starting a business, you want to choose one you'll enjoy--you figure, if you're going to spend long hours at it, it's important to like what you're doing. But to avoid the trap of remaining at hobby status--and an expensive one at that--your business has got to have the potential for profit. Here's how:

  • Get a grip on hidden expenses. You know that when you make a purchase at a store, the store's owner makes a profit from the sale. But how does he or she determine how much that profit is? Is it simply the retail price of the item minus its wholesale cost?

That's part of the equation. But in order to truly know what your profit is, you must also figure in your operating expenses. Operating expenses are the ongoing costs of doing business each month--costs such as rent, utilities and salaries that do not vary according to the number of sales you make.

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