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.