So I was thinking this past weekend, as we were booking our flights to Portland for this year’s Family Reunion, the costs to run our business. Now being a sceptical person I keep records for every single expense related to our business and keep a running total to make sure that we are actually making money over what we spend to run our business. I do not include the products we buy because 95% of the products we buy are products that we already bought before. Examples, Multi-Vitamin, Protein Bars, Granola Bars, Water, Energy Drinks, Cleaning products, etc.. That’s all stuff we bought and as a business owner you shop from your own store.
So going back to our hard business costs such as our voicemail system, our digital audio files, books, any business related marketing tools, conferences that we attend, local functions that we go to… ALL of that are for the most parts the cost of doing business. I may break it down at the end of the year but probably not because our costs of doing business will differ from other people’s because not everyone uses all the tools and people build different business’s. However the best thing about all of that, 100% tax write offs. We did our taxes last year and were able to write off every thing that was related to our business. That even includes any samples we gave and KM’s we drove to any meetings that we had. We basically got a cheque back from the government and that cheque covered ALL our costs. So those who say “the tools are a scam”, well I don’t know what to tell you but as a cost of business they were covered by my cheque back from the government.
However having said all of that what business do you know doesn’t cost money to run? Last time I checked it costs traditional business’s like McDonalds, Shoppers Drug Mart, Banana Republic, Gap, etc… TEN of THOUSANDS of dollars a month to operate. They also have employees to manage and pay, lease payments for a building, and a whole whack of other expenses to pay out. We have roughly a FEW thousand dollars to run and 1000% less headache to worry about. Based on that it just makes sense and honestly how can you argue that. I’m sure you’ll try, however this is my own experience and what we are doing. What others do or claim to have done may or may not be what was recommended or advised and if you read it, take it with a grain of salt.
So to wrap it up, does this business cost money to run? Absolutely! Do you get to write it off on taxes? YES. I did it, I got the cheque! Next year when I file, I’ll post the cheque as proof for the seeing is believing folk out there. All business’s cost money to run, just depends on what kind of business your in.
Hi Shaun, I have been following your blog but I have not yet made any comments. This is my first one. First of all, congratulations on making progress towards freeing your wife and getting 100% debt free. Please correct me if I’m wrong, it sounds like you made a pretty good achievement in the business but it also sounds like you still lost some money in the final tally since you are getting money back as a result of your deductions.
Hey Jed, thanks for following the blog.
Not sure where it seems I lost money but we have not. Our business is fully funded and does not touch any of our personal money from our day jobs. You get money back because of your tax deductions. The cost to run your business is deductable against your income so basically I’m getting back most of the money I invested to run the business. Example the kilometers, conferences, etc…
I just wanna say that something being a tax-deductable expense, is not really the best “selling point” on the value of such a thing, because you gotta spend thousands of dollars to get back maybe hundreds (and that’s only if you are generating income–either from that particular source or another).
As an example, here in the States, you can deduct your mortgage interest from your income. And when we first bought our home, people were encouraging us to buy more than we could afford “since you’ll now be getting a tax-deduction on your housing expense (mortgage).” We didn’t go with that plan, since I knew we’d be paying thousands of dollars in order to get a few hundred dollars back didn’t make sense.
Don’t me wrong–I am all for keeping as much of my money as allowed by law. I just don’t promote the tax-deductability of something as a benefit to purchase it.
WWDB’s Executive Planners and their accountants are really passionate about not misrepresenting tax benefits.
I’m not saying you are doing anything wrong. Just thought I’d throw that into the mix for clarification.
Thanks for the comment Bridgett. I just wanted to write really what I was excited about in this area and how the cost of business isn’t a huge “burden” like some people have made it out to be. If I get audited I know 100% I have all the information to back it up. I’m not about to try screwing the government because I know that will end up badly.
Hey Shaun, just wanted to point out that large franchises like McDonalds, Shoppers Drug Mart, Banana Republic, Gap, etc may cost a lot to run, but they have MILLIONS flow through their doors in volume.
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Overall, the profit is significant.
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I hope you are clear when dealing with Revenue Canada. If they deem that you are not actually generating business volume in such a way that it’s a realistic business (ie. the movement of products) they will simply not allow deductions for trips and fuel, etc as it will be viewed simply as trips. They will also retro actively seek repayment as far back as 7 years if they find this to be the case.
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I guess my message is just because Revenue Canada gave you a cheque, it doesn’t necessarily mean that it’s acceptable, it just means you didn’t get audited….yet. I suspect that if you do a couple years with expenses outweighing profits, you will find yourself being audited.
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By the way – Nothing is a 100% write off. Nothing. If your uplines are accountants, then you’re likely not wrong to do what they do. You may find it worth the money to hire someone to ensure that all of your deductions you’ve claimed are indeed legitimate.
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It would be a heck of a blow to repay Revenue Canada after a few years of that.
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With respect, and concern.
I’m VERY clear when dealing with Revenue Canada. I’ve been audited before as a student with student loans, not a bad audit they just wanted some information on the student loans. Even still that’s very painful and I’ve always been open and honest with them.
If we didn’t move volume and just shopped at wholesale and tried to claim that on tax that would be illegal. You cannot use this business as a tax shelter and like you said you need to have that movement of products to clients. We’ve got some great clients so no issue there.
This past year we used QuickTax software that had a business portion in and basically walked through the wizard on what we could expense. Next year because of the significant different in our business and we will have been in for a year we will be using an accountant. It’s been suggested to me by some good friends I should do this and we were planning on it anyway. They know the in’s and out’s a lot better than me.
I’m not saying you need an accountant for this, Quick Tax will work just fine however I like to be damn sure especially with the amount of money we are planning to get back this year. As you say it would be crappy to have to pay them back for your own errors or false information.
Hi Shaun,
Just to clarify, did you say the Canadian government gave you a cheque for all your business expenses or did you just get to deduct your business expenses from your taxable income? I’m from the US so I’m not familar with how the Candian tax system works. Thanks!
They didn’t give me a cheque specifically for my business related materials. I get to deduct my business related expenses against my taxable income like you said. I did our regular job taxes first and after that I wasn’t really getting a refund. However after I started to add in all our business related expenses that’s where our refund came which pretty much covered our business expenses for the 7 months we were in business last year
Agree 100% that with a new business you need to keep track of everything to ensure that what you’re doing is not costing you more than you are making… well done!
One question… do you keep track of the hours spent on doing “business related” activities and take the profit (after expenses) and see how much you’re getting paid for your actual time? When I was writing my book it was shocking and painful to figure out how much I was getting paid per hour… one of the reasons I probably wont be writing another book anytime soon hehehe.
When people talk expenses it’s usually about money going out vs money coming in… but yours (and Lindsay’s) time need to be factored in as well. It is an important measure to keep because you want to make sure that as your business turns more and more profit ($$$) that the profit outweighs your time.
Hard thing to measure when a portion of your business related activities are also developing your own personal growth but I think it is a worthwhile exercise and might be a good tool in helping you measure your successes over time cause ideally at the end of the day the goal (my goal anyways LOL) is to work less and earn more.
I don’t keep track of the hours we are spend doing business related material because we are not a consulting or charge by hour type of business. Traditionally most business’s would need to do that however I don’t feel that when we are investing time into people to help them become the best versions of themselves and become successful there is a price I need to charge for that.
There are also many ways to build this business in the way that some people build it with as little as 10 hours a week or there are people like us who put in a lot more because we want to achieve things a bit sooner. I’ve heard people take years to achieve the level we have already and quite frankly we don’t want to build it that way.
You are right it’s hard to put a dollar figure on that personal growth or helping others with their personal growth but like I said not something I’m really going to worry about because as we become more successful we will be stepping away from our jobs which will help free up that time during the day so in that way we will be working less. Right now we both have jobs and our side business, we will take it to the point we only have this business.
Great perspective though.