Welcome to day 4 of the blog profitability series at The Internet Cash Flow Guy. Last time we completed a break even analysis and now have a good idea of how much we need to earn every month on each of our sites to not be out any money. The next step is to build the income and expense sheet so we can see how profitable each site is.

Profitability is a simple concept. Many people think that financial analysis on their blogs is a black box that requires complex spreadsheets with weird calculations that only an astrophysicist could understand. That is not true - it is simply based on the following formula:

Revenue - Expenses = Profitability

With that understanding, we can build a spreadsheet that does the calculation for us for each site we have. To help you with this process, once again I have attached a sample Google spreadsheet that you can use to build your own sheet. Click here to get the sheet.

You will see that the bottom line number is actually how much money you are taking home after you subtract your expenses from your revenue. Do you have any sites that are losing money on a monthly basis? Which sites are the most profitable? Should you cut the money losing blogs and focus your attention on the one that is giving you the best return? These are all questions that should be answered if you are serious about making money online.

The next step in the process is to take the analysis one step further to build a spreadsheet that will provide us with a yearly view of profitability by rolling up the monthly results. This will be the topic of the the day, day 5, of the blog profitability series.
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Welcome to day 3 of the Blog Profitability Series. In the first post we officially kicked the series off and in day 2 I covered what tools and data you need to go out and pull together as the basis for your analysis. Today in day 3, we are going to determine our break even number that will tell us how much each blog or site costs us on a monthly basis. This will be the number, on a monthly basis, that each blog or site need to earn to break even.

I am going to use the spreadsheet app from Google Docs to do my analysis. As discussed in Day 2, you can use any spreadsheet program but Google Docs is free and easy to do. With that in mind, lets get to it.

Break Even Analysis

The first thing that needs to be done is to figure out what your monthly expenses are. You need to determine what costs you have on a monthly basis. The tricky thing about this is you may have costs that are paid yearly, such as domain names. We can use our spreadsheet to
help with this.

First thing to do is to set up the column and row headings for the break even analysis. To make this easy for you, I have attached a link to the file that I use to complete my own break even analysis. This spreadsheet may need to be altered depending on your expenses. The
important thing is that you determine what each site or blog costs you on a monthly basis.

To get the file for your own analysis, click here (you will need a Google account to view it).

Once you have completed this step, you will know how much money you need to earn on each of your sites to break even. This will be crucial for our next step when we start to look at revenues and actual blog profitability. Stay tuned for day 4.

Welcome to Day 2 in the Blog Profitability Series. Today will not be a long post, but it is important. The purpose of this step is to gather all the materials that will go into our analysis, especially the financial data required to gauge profitability. It is important to have ALL the data ready as even missing one piece can show incomplete and incorrect data. Junk data in, junk data out.

Now I am assuming that at this stage in your blogging career you don’t use financial products such as Quicken and have a bunch of accountants at you beck and call! At this stage you want to get a clear picture of your revenues, expenses, and profitability. With that in mind lets get to gathering our tools.

Software:

The only piece of software you will need for your profitability analysis is a spreadsheet program. You can use Microsoft Excel or Apple Numbers. I like using the spreadsheet available from Google Docs because it has everything you need and it is available on any computer you use. It doesn’t matter what you pick and the template I give you can be used with all of them.

The next thing we need is the data we are going to use in our analysis. This falls into two primary areas - revenue items and expense items.

Revenue Items:

This is the money you make from your blogs and/or sites. Your job now is to go to setup bookmarks in your browser with links to each and every affiliate program or PPC program that provides you with internet cash flow. For me, this includes links to SEO Book, Linkworth, Text Link Ads among others. Having this all nicely organized now will make the next step easier and quicker.

Expense Items:

This is the money you pay out on a regular basis to support your blogging “habit”. This will include the following items:

1. Website hosting fees, including your bandwidth costs. These are usually combined unless you are getting an insane amount of traffic.

2. Domain costs, including any add-ons you have such as private registration.

3. Advertisement fees, if applicable. This can including AdWords costs or banner advertising you might be doing to promote you sites.

4. Other expenses - there may be other costs as well that are specific to you. Gather that data as well.

Again, set up links in your browser so you can easily access the data when we will start compiling it in the next step. These links will be to your service providers who bill you for the above services. You do not need to get the numbers yet, but you should have the data readily accessible.

That is it for today. Make sure you spend some time on this step as the more organized you are, the easier the next steps will be. However, more important is having the right data as your analysis will only be as correct as the data you put in. So your task for today is to go out and gather Google Docs and all your expenses and revenue so you are ready for the next steps.