To quote LL Cool J – “Don’t call it a comeback! I’ve been here for years.”
But for real, don’t call it a comeback. I’m probably not really back for good, but I did feel the urge to write a little bit.
It’s the end of March and taxes are due in a couple of weeks. Back in the day when life was simpler, I filed the “EZ” tax form. It truly was easy to fill out, so I would usually get it done as soon as possible.
Now that I’ve grown, things have become more complicated, so I usually end up putting my taxes off until the last possible moment. Between owning my house, owning a rental property, trading stocks, and my online business – there is a lot more paperwork than there was when I was fresh of out college.
Tracking Online Business Expenses
Over the last few years, my online income has steadily grown. In 2010 for example, I probably earned around $7K total in online income. My expenses mainly consisted of buying and renewing domain names through GoDaddy and paying for a couple of hosting plans with HostGator and LunarPages.
I never kept great numbers and I often overlooked other “minor” expenses such as software purchases and other little things that I do to help increase my profits.
When it came time to do my taxes last year, my tax guy asked me what kind of expenses I had that he could write off. I told him that I had about $200 in hosting (true) and probably a couple hundred dollars in domain fees (I was estimating).
As I said, I didn’t really give him any specific numbers, because it seemed like such a minimal amount. He told me that I should really try to keep better track and find everything possible, to try to deflect all of the extra income that I was bringing in. I said I would do better next year – and then I didn’t.
When I ended up making a little over $13,000 this year, he asked me again where my expenses were. I told him again that it was probably just another few hundred dollars – just as the previous year. He said “ok” – but I was obviously going to end up owing a lot more this year because of my increased revenue. He told me to go back and double check what my expenses were and email him the final numbers.
Sitting Down and Crunching the Numbers
So that’s what I did. Thankfully I pay for 99% of my online purchases using PayPal, so it was fairly easy for me to browse through and filter all of my expenditures from the last year.
Let’s just say that I was SHOCKED by how much I spent last year.
GoDaddy was the big winner. I spent over $800 alone in fees to GoDaddy! I guess all of those $7-$8 domain names really add up. Where they really hit you is with the automatic renewals. At some point, I need to sit down and figure out what domains are really earning me money and which ones I need to cut ties with – rather than continue to pay for multiple renewals for sites that might only be earning me pennies a year.
The next big expense was paying for writing. Between Elance and iWriter – I spent a total of almost $600 on content. Now content is content, and they say content is king, so I consider this money well spent. The content on my niche sites is what helps bring visitors and the content adds value to my sites, so I have no problem with this expense.
Having said that, I can see that I spent a lot of money in some areas that will probably not be needed in 2012. For example, I briefly experimented with creating Facebook ads and Microsoft Adcenter ads. Although these gave me some brief traffic boosts, they didn’t do much to increase my revenue. Therefore, that was about $400 down the train – but at the same time, a lesson learned.
I also dabbled with the whole blogging network thing. As most of you know, the Build My Rank blog network was recently deindexed by Google and that hit a lot of people hard. I briefly experimented with the ABC network – Automatic Backlink Creator. Although it did help me gain some backlinks, I did not see much change in any of the niche sites that I used within this network. So that ended up being a nice little chunk of change down the drains.
Other expenses were much more useful, many of them being essential niche site tools: I purchased the Best Spinner, Market Samurai, Comparipress, and a StudioPress Theme subscription. And of course, my hosting accounts are a yearly required expense.
Oh, and if you were wondering, as I don’t think I mentioned it above – I spent a total of just under $3,000 last year.
Moral of the Story
I don’t really know what the moral of the story is, other than pay attention to your purchases and make sure you are spending money on products and services that are going to help increase your bottom line.
I know I’m going to sit down and analyze this list and these numbers and hopefully trim some of the fat this year. In the years to come, I hope to better figure out what works and what doesn’t work, so that I can hopefully spend my money more wisely.
Although I was shocked that I spent almost $3K – when I thought I was only spending a few hundred dollars – I’m still happy with the overall final results.