ABSTRACT
I once knew a lady who ran an informal ironing service. Friends would drop off items of clothing to her at the start of the day and she would return them, ironed, to their homes, at the end of the afternoon. At the time, she was charging £0.35 per garment, and she felt she was earning a little "pin money". When she had more time on her hands, she wanted to turn the service into a more formal business. We had sat down and calculated her legitimate business expenses (for example, insurance, electricity, equipment, telephone, transport, national insurance) and looked at the number of garments she could realistically expect to iron in a year. It soon became apparent that if you divided her total running costs by the number of garments she would expect to iron, she needed to charge at least £1 if she stood any chance of beginning to make a profit. She decided she could never 42charge £1, continued to charge £0.35, continued to pay her business running costs, and told herself that she was making a little money, even though in reality she was losing a lot. Income does not equal profit.
