Up to one in five Brits now run small online businesses as a side gig or main income, but accountant Harvey Dhillon warns many make a critical error: focusing on sales figures instead of actual profits.
Turnover vs. Profit: The 'Big Mistake'
Dhillon, founder and CEO of accountancy firm Zmartly, said: 'There's a well-known saying in the business world: turnover is vanity, profit is sanity, but cash is king.' He noted that many new ecommerce sellers fixate on turnover, which he called the most deceptive figure in small business operations.
'A person generating sales of £100,000 a year on Amazon or eBay will tell you they run a six-figure business. That sounds very impressive until you look at what actually reaches their bank account,' Dhillon explained.
Hidden Costs Eat Into Revenue
Platform fees, advertising, shipping, returns, payment processing, stock costs, and tax all take slices. 'We regularly see sellers turning over six figures who are effectively working full-time for less than they would earn stacking shelves and they have no idea until someone shows them the real maths,' Dhillon said.
Shift Focus to Profit Margins
Dhillon urged side hustlers to track profit margins per product rather than total sales. 'Looking at the products that generate the best margins is second nature to more experienced business owners, but for people starting out, it's not the case. They're too often focused on the vanity side, but it's the sanity side that pays the bills.'
He advised dropping product lines that look busy but lose money and concentrating on the few that actually pay. 'Yes, making fewer sales can feel counter-intuitive and is far less exciting than a big sales graph, but understanding that it can mean a better and more profitable business is the difference between a hobby that drains you and a business that pays you. The number that matters is not what you sold. It is what you kept.'
