Your own hustle · Module 2 of 3
Is it a business yet?
When a side hustle becomes a business: profit margins, bookkeeping and cash flow.
Key terms in Is it a business yet?
- Hobby
For tax purposes, a hobby is an activity a person pursues mainly for enjoyment or recreation, not to make a profit. The Internal Revenue Service separates hobbies from businesses by weighing several factors, including whether the activity is run in a businesslike way, whether records are kept, and whether the person depends on its income. No single factor decides the question, and the classification affects how income and expenses are treated.
Source: Internal Revenue Service, Hobby or business: here's what to know about that side hustle
- Break-even point
The break-even point is the level of sales at which a business's total revenue equals its total costs, so it records neither a profit nor a loss. Sales above that level produce profit and sales below it produce a loss. The Small Business Administration presents it as a planning tool for judging when a venture can start to cover what it spends.
Source: U.S. Small Business Administration, Break-even point
- Gross profit margin
Gross profit margin is gross profit divided by net sales, expressed as a percentage. It shows how much of each sales dollar remains after paying the direct cost of the product or service, and therefore how much is left to cover operating costs and produce a profit. The Small Business Administration includes it among its basic business financial terms.
Source: U.S. Small Business Administration, Glossary of Business Financial Terms
- Business recordkeeping
Business recordkeeping is the practice of systematically tracking a business's income, expenses, and assets, along with the documents that support each entry. The Internal Revenue Service says owners may use any system that clearly shows income and expenses, whether on paper or in software. Supporting documents include sales slips, invoices, receipts, deposit slips, and canceled checks, and they back up what appears on a tax return.
Source: Internal Revenue Service, What kind of records should I keep
Every term on Lever is in the money glossary.
About this module
Is it a business yet? is part of Your own hustle, one of 15 subjects in Lever. It’s a short run of 8 lessons, about 20 minutes in all, so you can finish it in one sitting.
Every lesson takes one idea at a time. You read it with the math worked out step by step, answer a question that puts it to use, then see why the right answer is right and why the others aren’t.
It’s for anyone who was never taught this, and you don’t need to know anything first. Every lesson is free. Lever works out what you already know, so you can start here or let your path bring you to it.
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It’s part of Your own hustle. Lever will bring it to you when you’re ready, or you can go straight there.