Independent Web site publishers consisting of a single employee have a far different view of profit than the way it is handled by larger companies.
The major difference lies with payroll and the type of business entity, such as C corporation, S corporation and Limited Liability Company.
Large publishers tend to be incorporated and usually have employees with hourly or salary pay.
Those wages are the same and are paid regardless of the profit and revenue fluctuations month to month (unless a major economic or business decline leads to the painful step of pay cuts).
Independent publishers often are set up as sole proprietorship limited liability companies.
Many of these LLCs consist of a lone employee. As a result of the LLC structure, the “profit” consists of all expenses except for the labor of that publisher.
Imagine an online publishing company with $1 million a year in revenue. It has $500,000 a year in wages and $400,000 in other expenses for a profit of $100,000. The profit margin is 10 percent (profit divided by revenue).
An independent publisher has $100,000 in revenue. She has $40,000 in other expenses such as hosting, advertising and contracting.
According to Schedule C in her tax return, that leaves her with $60,000 in profit or a margin of 60 percent.
A margin of 60 percent sounds great, but she is no better off than the large publisher. The large publisher spends 50 percent of its revenue on wages.
If the sole proprietor rewarded herself with 50 percent of her revenue as a wage, she would be left with a true profit margin of 10 percent, the exact same level as the larger company.
Independent publishers will find that targeting what seems like an exceptionally high profit margin is essential in building an effective business and earning a livable wage.
They also will find that operating on their own, especially if working out of a home office, creates exceptionally low expenses.
As a result, a revenue goal that may seem low in a corporate environment can be quite healthy in a single-person LLC.