Pusaram

Business and self-employment finance · 16 min

Small business and self-employment finance

Written and reviewed by Prashant Nandkishor Maheshwari (editorial review, 2026-10-18). Not yet checked by an independent subject specialist. How we review.

What you will learn

Separate personal and business money, set a price that covers costs, compute a break-even point, and plan for tax and slow payers.

Why it matters

Self-employed people and small owners carry the roles of owner, accountant and tax filer. A few habits prevent most of the common crises.

The ideas

Levels are a learning preference, not a credential. Switch any time.

Novice level

Keep business and personal money in separate accounts as soon as you can. It makes your records clean and your decisions clearer.

Know your costs before you set a price. Price must cover what the work costs you, including your own time and a share of the overheads.

Set aside money for tax when you are paid, not when the bill arrives.

Basic level

Margin is profit as a share of price. Markup is profit as a share of cost. A 25% markup on cost is a 20% margin on price.

Break-even units = fixed costs / (price - variable cost per unit). Below this you make a loss; above it you make profit.

Working capital is the cash needed between paying costs and receiving payment. Slow payers increase it.

Advanced level

Add cash-flow forecasts by week, and test a month where your largest customer pays late.

Expert level

Pricing is also about value, competitors and demand, not only cost. Use cost as the floor, not the whole answer.

Professional level

Management accounting (cost-volume-profit, standard costing) and statutory reporting have formal methods and legal duties.

Key terms

Fixed cost
A cost that does not change with volume, such as rent.
Variable cost
A cost that changes with each unit sold.
Contribution
Price minus variable cost per unit.
Break-even
The volume where revenue equals total costs.

Worked example

Illustration only. Fixed costs are 20,000 a month. Price is 100 per unit and variable cost is 60, so contribution is 40. Break-even = 20,000 / 40 = ₹500. At ₹450 the loss is 50 x 40 = 2,000. A 25% markup on a cost of 80 gives price 100, which is a 20% margin.

Try it yourself

List your fixed and variable costs. Compute your own contribution and break-even. Then list your three slowest-paying customers and write what payment terms you could ask for.

Nothing you write here is collected. Use paper or the workbook.

Try it with numbers: Break-even and pricing calculator.

Check yourself

Fixed costs 12,000; contribution 30 per unit. Break-even?
Why separate business and personal accounts?

A common misunderstanding

'Revenue is income.' Revenue is what you bill. Income for you is what is left after costs, tax and reinvestment.

Local context

Business structures, registration, tax and employment duties are local. Check with your registrar, tax authority and a qualified accountant.

References and review

  • Your national small-business agency and tax authority guides.
  • Berry, T., The Plan-as-You-Go Business Plan (Entrepreneur Press), for planning basics.

Author and editorial reviewer: Prashant Nandkishor Maheshwari, 2026-10-18. Independent specialist review is pending. Spotted a mistake? Tell us.

Suggested next step

Continue with 'Goals and time horizons'.