The Zero Expense Income Statement

This page will discuss how you can theoretically get a zero expense income statement. This is partially to demonstrate that there are multiple free resources for businesses. Also, if this can be achieved then any money made from the business that the income statement represents would be free money. A related page for additional reading is Passive Cash Flow Businesses With $0 Startup Fees.

Even if a zero expense income statement can be achieved, most business owners would not even want it. One of the benefits of owning a business is to have the business pay for some personal expenses, such as a cell phone, vehicle, and gym membership. Also, it may be beneficial for taxes to let the business have expenses so that the profit is less, and therefore the taxes will be less. (This article is not written by an account, it may be best to consult an accountant for your business).

The Income Statement Is Possibly The Most Important Business Financial

There are three important business financials including the balance sheet, the cash flow statement and the income statement. The balance sheet has all of your transactions. The cash flow statement helps you get an idea of how much cash flow you have to work with. This can be important for businesses that use accrual-based accounting, since a lot of their cash resources can be tied up in accounts payable or accounts receivable.

Arguably, the income statement is the most important of the three since it gives an overview of the profits or losses of the business. (The income statement is also called the Profit & Loss or P&L statement). The following is the general formula for the income statement:

Revenue – Cost Of Goods Sold = Gross Profit
Gross Profit – Operational Costs = Net Profit

The costs of goods sold or COGS are the costs that are immediately associated with the product or service that you are providing. If you’re selling widgets, then it’s the wholesale cost of the widgets. If you’re selling a service, then it’s the hours you pay a technician that are immediately associated with the service. Operational costs include store rental, insurance, marketing, labor, office supplies, utilities, taxes, continuing education, meals & entertainment (for business purposes), and a variety of other businesses expenses.

$0 Cost Of Goods Sold

Again, this article is mostly theoretical. One business may not be able to get an entirely $0 income statement. But the individual parts could apply to any business. Also, business owners are generally creative and this article can help with ideas. Here are some possible products that you can get for free, which would mean $0 cost of goods sold:

Services generally do not require costs until they are performed. If you’re the technician in your business as well as the business owner, then any services you provide will not cost you anything, except maybe your time.

You could partner with another business. This will help them make more sales so it benefits them. They handle all the up front expenses which helps you. If you’re selling products that they’re stocking, packaging and shipping, then your COGS are $0.

You could repackage the public domain. There may still be some costs of goods sold involved, such as printing costs. However, the intellectual property itself is free. Besides the public domain there are other free use licenses that allow you to use the intellectual property of others, even for commercial purposes.

You could have a business that is specifically established to sell items you get for free. See Craigslist Freebies, Arbitrage, Local Retail Leftovers, Yard Sale Leftovers, Free After Rebate, Dumpster Diving, and Cash For Stuff.

$0 Operational Expenses

The following are ideas that may help you reduce your operational expenses or even get them for free.

 

Free Legal & Accounting

You can get free accounting software and do your own bookkeeping. See Web Freebies: Free Software: Business Software: Accounting.

You can get access to legal databases through your local library.

You could represent yourself legally, or have a student represent you for free or nearly free. Students could also help you with bookkeeping and filing taxes. See Free Services From Students.

Just because you can get something for free doesn’t always mean it’s the best thing for you or business. Getting the right lawyer, account, and other advisers is one of the best pieces of advice for any business owner, even if you have to pay for their services.

Free Marketing Resources

Find free resources for market research under Web Freebies: Business Solutions. You can also find promotional resources there, as well as Web Freebies: Free Software: Business Software. Software will be listed that can help you with things like branding.

All marketing promotional channels can be broken down into sales, public relations and advertising. Sales involves live, human interaction. Public Relations is the use of free or earned media, and advertising is the use of paid media. Most sales activities are free, especially when you do it yourself. These may include canvasing, cold calling, and networking. If you hire a sales force then you can pay them with commission only. This is not $0, but it is $0 up front. However, some of the better sales people will also want a salary. Public Relations can be completely free if you do a lot of it on your own. This would include radio show appearances, working with journalists and bloggers, search engine optimization, and social media. Is there a way to get free advertising? Yes, by trading services, co-branding with other businesses, or using online Classified Ads. Free advertising channels are not always the best channels to help you reach your target market.

You can use students to help with marketing campaigns, creating content or graphic art. See Free Services From Students.

Similar to legal and accounting above, hiring the right professionals to manage your marketing can also be one of the most important steps that you take for your business. Even if you have to pay the professional for their services, even if it’s for public relations where the media is free, it may still product a better return for your business to pay the right professional to do it. Consider Mirex Marketing for all your digital marketing needs, including website development, search engine optimization, social media, email marketing, mobile marketing, and content marketing.

See Free Marketing for more information.

 

Insurance & Taxes

Insurance and some taxes are a couple of expenses that may be impossible to get for free for most businesses. Yet, there are some possibilities. One way to get free insurance is to be self-insured for liability. That’s when your business does so well and your assets so large that you could cover on your own anything that insurance would be able to provide. For health insurance it is now federal law to have health insurance. However, you may still be more interested in cash-only services since they can often be cheaper than insurance deductibles.

One of the reasons to go into business in the first place is for tax benefits. There are some who know the tax code so well that they either have $0 taxes or their taxes are deferred indefinitely. See Tax-Free. If your business owns property, then you will not be able to avoid property taxes without eventually losing the property. The only way to avoid FICA taxes is to not have employees.

Free Rent

A work-at-home business does not require rental expenses. See Make Money Online.

You could partner with another business to use space they’re not currently using. You may have to offer something in exchange, but it does not necessarily have to be a monetary exchange. Trading services and using other people’s resources will be mentioned frequently as other expenses are discussed below.

Free Office Supplies

There is a point where larger businesses would be more interested in smooth-running operations, even if it means having to pay for office supplies. However, small businesses can get plenty of office supplies for free through rebates, visiting trade shows, and free samples. Paper and software are especially common items that you can get for free after rebate.

Free Labor

You can avoid costs of labor, such as salaries, benefits and taxes, by not having any labor. This means you’ll have to do everything on your own, which is not always the best for business.

You can use a commission-only compensation structure which is not $0, but it is $0 up front.

You can use independent contractors or foreign labor which helps to avoid some costs of putting employees on the payroll. Eventually the IRS might require that you treat independent contractors the same as employees.

You can get some free labor from students or non-paid interns. See Free Services From Students.

Additional Resources

See also Free Business Solutions Directory.

You could potentially get free money from the government to start or support your business. See Government Freebies.

Some free samples are just for business owners. See Free Samples Directory.

Do you have any resources that should be added to this page or other business-related pages on this site? Let us know.

Once again, this article is mostly theoretical. One business may not be able to get an entirely $0 income statement. But the individual parts could apply to any business. Also, business owners are generally creative and this article can help with ideas. It was not written by a legal or accounting professional so be sure to consult with appropriate advisers concerning your business.