What is Net Income?

By MBO Partners | June 25, 2022

net income

Key Points

Having control over your money is crucial if you work independently.

Knowing your company's financial situation can assist you in making crucial choices, such as deciding on your bill rate, your funding for new equipment or marketing expenses, or the kinds of projects you should take on.

What Is Net income?

Net income is the profit your business earns after expenses and allowable deductions.

Why Is Net Income Important?

As an independent professional, it is important to have a good handle on your finances. Knowing where your business stands financially can help you make important decisions such as setting bill rate, determining your budget for new equipment or marketing costs, or what types of projects you should pursue.

Net income can help you understand the health of your business by giving you a picture of how much you are making after expenses are factored in. If your net income is lower than expected, consider cutting some expenses. Similarly, if your gross income (the total amount you earn before subtracting expenses) is significantly higher than your net income year after year, you may want to evaluate your expenses line-by-line to see what you can eliminate or reevaluate.

How Do You Calculate Net Income?

To calculate net income, take your gross income and subtract all of your business expenses—marketing or advertising costs, travel or office expenses, tax payments, etc.—as well as any deductions you may be eligible for such as a home office space, retirement plan, or legal and professional fees. Below we have used our bill rate calculator to calculate an example of typical business expenses so that net income can be determined.

In this example, let’s assume your gross income is $90,000 per year. After you determine your expenses, you can calculate your net income: $90,000 minus your expenses of $30,000 = a net income $60,000. In order to earn a gross income of $90,000, you will need to set a target bill rate of $50 per hour.


Related Posts

consultant working

Financial Management Tips for Small Businesses

Financial management is an important part of starting your own business. As an independent contractor your job isn’t just about keeping your clients happy and moving from project to project. It will also involve taking on an administrative role to help make sure your business runs smoothly and compliantly. Here are eight financial management tips…

consultant working

How to Become a Freelancer for Big Companies: 12 Tips

Becoming a freelancer for big companies comes with many benefits. Higher-value contracts, bigger budgets, and the opportunity to gain credibility with a recognizable name—just to name a few. However, to be attractive to larger organizations, freelancers and independent professionals must first ensure they have a reliable, trustworthy business in place. Follow these 12 tips to…

consultant working

How to Stay Organized as a Consultant

Boosting your productivity as a small business owner is never a bad thing. Two of the most valued benefits to being an independent contractor are the flexibility to work where want and the ability to work how you want. Whether you work out of a home office, leased space, or coworking facility, you’ve likely spent…




Learn more about the MBO Platform


Start, run, and grow

your independent business with MBO


Engage, scale, and optimize

your independent workforce