How to Create an Income Statement for Your Side Hustle in Canada (2024)

Just like a beaver builds its dam one branch at a time, success is built through consistent effort, no matter how small the steps may seem

Pre-Requisites:

Pen & Paper or Microsoft Excel
Knowledge of business related expenses & revenue

Get Organized

As a business-owner, you need to have a clear view of how much is coming in and out of your business referred to as Cash Flow. The quickest way to maximizing efficiency is figuring out where you can reduce costs by an x amount of Basis Points

1a. Calculate Business OPEX(Operating Expenses):

Fixed Expenses	Variable Expenses
Materials & Supplies	Employee salaries & Benefits
Rent	Subcontracting fees
Licensing Fees	Costs associated with business-related meetings
Insurance	Marketing, this could encompass a variety of things like promotional content, social media ad campaigns etc
Utilities	Shipping & Delivery of your services or travel costs
Miscellaneous Expenses	Software Subscriptions

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1b. Assess Your COS (Costs tied directly to services or goods sold):

I know we just covered expenses, but we want to be detailed in how we track our finances as this gives us the foundation to scale, not only is measuring OPEX extremely important, it’s also crucial to know how much each of your services cost.

You’d find out the COS by figuring out what goes into each service, for example a haircut might have these elements going into the COS:

The fee paid to the barber or stylist
Consumables that are required for each haircut like shampoo, or replacable blades

You can also go one step further and take a look at your OPEX and fragment those costs into the COS, for example if your rent is $1000 that is shared amongst all of your employees and services, you can still allocate a portion of the rent to the COS by using one of these methods:

Use SQFT, e.g. if your rented facility is 300 sqft, and the average style station needs 30sqft - each barber would be responsible for 30sqft of rent per month:
Rent = $1000 / 300sqft = $3.33 per sqft

So in this example, each barber would be paying $99.9 a month for their station

Time based method can be done by figuring out how much time per month is spent on your services
- rent of $1000/month divided by an average of 8 hour working days x 30 = 240 hours on services per month.

In this example, an hour of service would correlate to $4.16

1c. Figure out Total Service Revenues:

Total Revenue	Month	Year
Amount received for services rendered		Date

2. Draft Your Income Statement

Now with the above information, we’re finally ready to put together something that looks official, combine it with a folder that has a label and you’re on your way to wall street.

We would recommend doing a yearly income statement, but for this example we will do it for the month of October, 2024

2a. Let’s imagine we’re a hair salon and we do $15,000 of daily revenue on just haircuts:

Income Statement	For the month ended October 31st, 2024

in thousands, unless otherwise stated

(for our table, we will denote with (in thousands of dollars), this is common in income statements to make it more clear, so we would denote $15,000 as $15)

Item	Revenue
Revenue(Haircuts)	$465

2b. Next, we would write down the COS and you’ll notice that I’m surrounding numbers in brackets that are a loss, which is the direct cost of the services for the above revenue, which for our salon is:

Item	Revenue
*Revenue(Haircuts)*	$465
*Cost of Services Sold(COS)*
- Labour(Wages for staff)	($252)
- Consumables(Things like shampoo, etc)	($18)
*Total COS*	($270)

2c. Now, we’re getting somewhere. Next we calculate how much our gross profit is, which would be Revenue - COS.

Note: we don’t include OPEX in our calculation for Gross Profit.

Item	Revenue
*Revenue(Haircuts)*	$465
*Cost of Services Sold(COS)*
- Labour(Wages for staff)	($252)
- Consumables(Things like shampoo, etc)	($18)
*Total COS*	($270)
*Gross Profit*	$195

Quiz Time: What would the gross profit margin be based on the above table? Try to figure it out on your own before clicking below

”The answer is always in the question.” — Sherlock Holmes would say

Gross Profit Margin = 41.935%

2d. Let’s continue with our Income Statement, next we will list our OPEX which will show how much we pay for rent every month, what we spend on marketing, the salaries for admin personnel and our utilities, for example water or electricity.

Note: You can think of COS as costs directly tied to services and OPEX to be business-wide expenses.

Item	Revenue
*Revenue(Haircuts)*	$465
*Cost of Services Sold(COS)*
- Labour(Wages for staff)	($252)
- Consumables(Things like shampoo, etc)	($18)
*Total COS*	($270)
*Gross Profit*	$195
*Operating Expenses(OPEX)*
- Rent	($15)
- Marketing & Ad Campaigns	($3)
- Admin Salary	($8)
- Utilities	($1.5)
*Total OPEX*	($27.5)

Now, let’s finish our Income Statement with Operating Income which is also called EBIT, which is our earnings before any Interest or Taxes.

It’s calculated like so: Operating Income(or EBIT) = Revenue - Cost of Sales (COS) - Operating Expenses (OPEX)

Income Statement	For the month ended October 31st, 2024

in thousands, unless otherwise stated

Item	Revenue
*Revenue(Haircuts)*	$465
*Cost of Services Sold(COS)*
- Labour(Wages for staff)	($252)
- Consumables(Things like shampoo, etc)	($18)
*Total COS*	($270)
*Gross Profit*	$195
*Operating Expenses(OPEX)*
- Rent	($15)
- Marketing & Ad Campaigns	($3)
- Admin Salary	($8)
- Utilities	($1.5)
*Total OPEX*	($27.5)
Operating Income (EBIT)	$167.5

You’ll find that our biggest cost for this hair salon is the labour, layoffs should always be the last resort, there are other ways to drive efficiencies, the stylists at this salon earn $60/hr and there are a total of 20 stylists on any given day working 7 hour shifts which brings us to $252,000 a month on just labour.

Using this grandiose example, if Vendorfront could save each staff member a measly 1 hour of their time per day, you’d save a whopping $36,000 a month.

You save money, you avoid layoffs, and you drive efficiencies using tools like our scheudling platform to your advantage.