Blogging Economics: Where Does My Money Go?

By Mitch Wilson
44 Comments

Unless you are well established or independently wealthy to begin with, you have a budget that you need to work within for starting your blog and online business.

While this “magic number’ is different for everyone, a lot of things surrounding your blog have or will have costs associated with them. While I can’t speak for everyone – people use their money differently – here is where my budget goes both for the little things and some larger expenses relating to my blog.

1) Tech Help

I realized early on I wasn’t going to be able to do the tech work myself. As I have often said, making that decision had a lot to do with the success I have experienced.

With time put in I could have done some of the technical things myself, but I think if I were able, I would have tricked myself into believing that there is value in saving money by doing it myself. The reality is I don’t believe doing your own tech work is something that saves you money unless you are super-quick at it. Tech work is an expense and it is a cost center, time is almost always better spent doing things that will directly make you money or bring you traffic, which you can convert into money. There is very little tech work that can do that.

My first blog I had built for me was I believe around $900. My current redesign is $12,000 and to be honest the changes you see on the outside won’t be anything too drastic. Aside from this redesign project, I probably spend about $1,000 to $2,000 a month generally with enhancements here and there. I know when my redesign ends my monthly expenses will be the same as they were.

I don’t touch any technical jobs myself, yet I always want small changes here and there and the costs for doing them can add up. I have definitely learned to weigh what is a want and what is a need, and how to prioritize.

I will share my not too complicated method for making the determination of what tech work is going to be done and what isn’t. If it is imperative to keeping my site up or improve security, it will be done immediately. If it will make me money, it will get done. If it will just look cool, it’s going to have to wait or get combined with something else later.

2) Legal Help

Once I started making money, I knew I was already a little behind as far as forming a corporation. There are a lot of tax benefits and legal benefits of doing things this way. I’m not a lawyer and I certainly can’t tell you what’s best for you but I have heard some horror stories about people who didn’t take certain steps. I’ll share what I know on this end and what is involved, bearing in mind this shouldn’t be treated as legal or tax advice and I don’t give you this information in any official capacity.

Firstly, if you are self-employed in the United States, you are subject to a self-employment tax which can be avoided if you form a corporation, fill out a few forms and make some elections. I am not an accountant but my accountant explained this all to me and it made sense.

It isn’t too expensive to become or corporation or LLC or whatever entity works best for you but the money it may save can be big. If you are a corporation everything runs through there and then you pay yourself a salary. Of course you also get the benefits of deducting all of the expenses the corporation incurs. Like I said, there is a lot more to this than I can understand. I trust my lawyer and my accountant and they both said this was a must.

Another thing I did was I trademarked my brand. I have heard several really bad stories about people who didn’t do this. If you don’t own your site’s name, someone else can beat you to it and in essence own the space and have a right to all of your content and income and also they may have other damages that they can be awarded that can go well beyond that. While getting the trademark itself isn’t expensive, there is a search that is done to see if someone else already owns it that will cost several thousand dollars. This isn’t a fee for attorney charges, this is just the fee for the application process.

I figured while I was there, I would also trademark the little catch phrase that goes a long with my site. If this isn’t something you haven’t done and you have already made a big investment, you may want to talk to a legal professional.

I also get a ton of contracts that go along with advertising deals I sign or other partnerships. I also have my own contracts I issue to people who write at my site. All of this stuff costs money. Lawyers usually go around $200 to $500 an hour plus any fees associated with what they are working on.

Some people say you need to read everything, I don’t read anything, my lawyer does.

3) Hosting, Software, etc.

I used to get by with a relatively inexpensive hosting plan that cost less than $10 per month. Those days came and went long ago. Hosting is something I am continuously updating and it never gets cheaper. Currently I have my site broken up into three pieces with subdomains all hosted at different places, none of them use the base plan. Hosting can be as little as five dollars but it can run to several thousand dollars as your site grows. By the time it gets there it’s all relative.

I don’t spend a lot on software but there is a cost that comes up once in a while. I use Sony Vegas for editing videos and converting video files. There are things like anti-virus software and other tools, and I also bought Quick Books Pro, but I think I used it twice.

4) Bookkeeper And Accountant

Much like tech work I don’t spend a lot of time watching the money that goes into my business. I follow it closely enough to know if I need to move things around in preparation to send money out. I hired someone who tracks all of this stuff for me and feel pretty good about it.

When I first started on July 1, 2008 I would have never thought I would have more income streams than I could keep track of but this is definitely the case. Of course I could probably do it but it would take several hours a week that I would rather spend doing other things whether it is work related or taking one of my few breaks.

I also have an accountant who handles all of the taxes. I never planned on owning my own business and when I started blogging, none of the structures were in place to be a business, hence the need for my bookkeeper and accountant. I really find most of this money stuff pretty boring and to be honest I don’t understand most of it. When they try and explain it to me I just nod my head, it’s going in one ear and out the other. That’s what I pay them for.

Blog Mastermind is a deductible as an educational business expense so if you haven’t signed up for Yaro’s courses, I’m not sure what you are waiting for (yes that’s a non-affiliate plug). You can either give the money to the government or put it to use.

5) Equipment

One day a week I have someone that comes over to my house and cleans. During that time I go to a local coffee shop and work. I saw a person there who had a Mac Book Air, an iPad, and an iPhone all out on the little table at the same time. To me it looked like he had left two of the three for dead and they were just a conversation piece or something. I was going to ask if I could borrow the iPad as all I had was one notebook with me.

I have a lot more equipment than I used to when it comes to stuff for my site and none of it gets left for dead. If it isn’t getting used, it goes to Goodwill or the Salvation Army. Not all computers, cameras, lighting, etc. are expensive, but mine isn’t too cheap. I don’t buy things like an iPad to show off at a coffee shop, but if I had one I would use it much the way I use my second and third screens at home, to display references so I don’t have to page back and forth while I write.

Equipment is tricky because you don’t want to go low end but you don’t want something that isn’t going to be paid for by the income from your blog pretty quickly. If it’s something you “might” need, take that money and spend it on something you do need, something that will build your brand and make you money.

Like most people I have a smart phone, which more than 20 times I have used to go into the back end of my site and fix something. Using a smart phone to make a quick fix isn’t ideal but it beats having to find a computer if you aren’t near one. All of this is a business expense.

Because Sports Chat Place is all about sports, I have all of the premium sports packages for television and I have satellite radio. I go to a lot of live events like the big boxing matches in Las Vegas, all for the sake of work. Hey, someone’s got to do it.

6) Contributors

If you have contributed regular content that has led to the building and the success of my site, you get paid and in some cases you have a profit sharing plan. There are a few ways which this works and to be honest, none of them currently work too well.

Once again, I never expected to make money and run a business so this is something that will have more structure in 2011. One thing is one hundred percent certain; there isn’t one person who contributes to my site whose sole purpose for being there is to make money. If you aren’t passionate about a particular sport or sports in general, you aren’t part of our crew.

7) Miscellaneous Expenses

Expenses pop up out of nowhere all of the time but it usually fits one of the above categories. These always happen at the worst possible time but at this point, I am usually grateful it isn’t something worse, as I have had it all happen.

Mitch Wilson

About Mitch Wilson

In 2008 Mitch typed into Google, "How do I start a Blog?". Within three months he was receiving 3,000 unique visitors a day, within a year he was blogging full time with over 400,000 monthly visitors and 1 million monthly page views. Blogging has given him a life beyond his wildest dreams. Today Mitch is a professional blogger who has turned his hobby passion into a dream job: running his own business at the Sports Chat Place. He now wishes to give back to the blogging community by sharing what he has learned.

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44 Comments

  • At this point my fees are rising month after month, but at the same time my income is rising also..the more traffic you get to an give site..the more you will be paying on hosting fees..its just the name of the game..growth equals more expenses.

    “Black Seo Guy “Signing Off”

    • Pretty much the cycle. What used to be considered a big expense isn’t as big of a deal now.

  • Wow, There’re some points that I never think it would cost of, especially Tech help that costs so much, legal help that I don’t even think of, and lots more that you mention.
    I start blogging with just the hosting plan and domain, and that’s the only thing that costs me to start.
    So I really need to think far, as my blog build up, earning will grows, as well as spending. Plan far, prepare far, action now. :D
    Thanks for the post Mitch.

    • I started with a domain and a host as well, it all is just part of growth.

  • Your MessageMitch Nice post.
    Costs in business tend to pile up very quickly, and usually it’s the small small costs that over time tend to be the on the ones that start to effect the business accounts. Keeping you costs under control from day one is the way to go, especially now in The beginning of the year we can all forecast and budget our yearly expenses for 2011.

    • for me it was expenses for things that weren’t as important and things that weren’t done right that I had to have done over again.

  • Good point Mitch!
    I think I really need to signup for the Blog mastermind this year.
    Thanks for the post! :-)

  • Hi Mitch,
    This is great pillar content. It’s a good all round summary of things to consider. I know in the next two years I’m going to have to form a company and I’m going to need to fork out some money up front. Trademarking will be important. Thanks for the reminder.

    • I think the corporation can be done pretty early and it isn’t expensive..the other stuff can wait a little while…ask a lawyer though

  • You haven’t mentioned domains, maybe you don’t have any problem with them. There was a time when domains were starting to form a hole in my web budget. Not a significant one, just an unnecessary expense. This was because I bought them in advance since I didn’t want anybody to steal them. Well, some projects worked well and those domains were useful, but many projects didn’t quite get out of the planning stage and what I was left with were useless domains which were hard to sell without any SEO work or without putting something working on them. Now I buy a domain only if I’ve done more than 50% of the initial work required to put the project online.

    • They used to be an expense when I first started now I have the ones I want and have them paid for the max amount of years.
      I had like 20 or 30, now I think I have six.

  • Will

    Hi Mitch, Your success is very motivating and i’ve been looking at setting up blogs for a while and you have given a great overview of things i hadn’t yet considered. Thanks.

  • I like your concrete examples of the costs and gotchas.

    > While getting the trademark itself isn’t expensive, there is a search that is done to see if someone else already owns it that will cost several thousand dollars.

    I think you can start the search yourself for free at the following site:
    “tess2.uspto.gov/bin/gate.exe?f=login&p_lang=english&p_d=trmk”

    I thought it was too good to be true, but it seems to be the source and it is a trusted government site. It’s a weird URL, but it looks like it’s an old school CGI app.

    I think you can at least use it up fron to narrow down what’s taken, even if you pay somebody to finish off the searching for you.

    • I don’t believe the search is an hourly thing, I think it is just a flat fee that they charge. I leave all this stuff to my lawyer, it’s worth the money. Most Lawyers have a bunch of degrees and certificates on the wall, I don’t have any, I’ll leave it to them ;)

  • Hi Mitch thank you for your great articles! For Tech, where do you outsource it? I think it’s to expensive. but if you really satisfy with the result it’s ok

    • I have had the same tech person for a while now and I have found that you get what you pay for. I have had some horror stories getting good tech help and thousands of dollars spent getting either what I don’t want or getting nothing at all. I have someone I can call, they say how long ti will take and how much it is, i pay them and it’s done and I have done well that way. I know what things cost and I’m definitely not paying too much..

  • Interesting post. You have a lot of information that is imporant for bloggers, particularly new bloggers to consider.

    I had considered incorporation for the tax benefits, but not got around to it. I hadn’t even thought of trademarking – that is something I really need to do urgently.

    As for the legal and financials, I do the bookkeeping myself because of my background in accounts and I am fortunate that my daughter is studying a double degree in accounting and commercial law, so she can pay me back for supporting her through university by doing all my legal and financial work.

    For the technical stuff I have probably wasted thousands of dollars worth of hours trying to learn how to do it all, and more thousands buying software that is too hard to use. So I agree that spending money on technical (and graphic design) work is worth every cent and more.

    As for equipment, well I am a techno junkie so I never mind spending money on technology. If it makes me a buck as well, or is a legit tax deduction I am doubly happy.

    I agree with Pawel with regard to domains, I spend a lot on domains that I might use in the future. Recently I read something about reselling domains, so that is what will happen to my old domains in future.

    Infomum

  • It has taken me 4 years to learn this internet business. I am very concerned about the rip off merchants out there. However there is great content on this website and I commend you. Anyone who genuinely gives back is number one in my book.

    Steve

    • FOur years, congrats to you for sticking with it. Most people ditch out before then when they find out the effort that is involved.

  • Mitch, I was inspired by your obvious income from blogging, as opposed to how you control your costs. My costs are minimal, but have just risen slightly as I needed to increase my blog hosting memory.

    I went through the same stage as Pawel, getting excited about a project, buying a domain and then doing nothing with it. I have now cancelled all the domains I don’t use.

    You seem to have come a long way in just 3 years Mitch, and that’s a real inspiration for any blogger. 8)

    John
    Leamington Spa, England

    • Thanks, It’s just never going to be about the money for me, I honestly don’t even know how much I make but I guess I’ll find out when I sign the tax form in a few months.

  • It’s crazy how fast costs can pile up!

    When I first started selling online in 2008 I naively thought that I could go into it with a hosting account and little else. Wrong.

    Alas, it taught me that doing business online is just like doing business in the brick-and-mortar world.

    Alex Work
    YourGoalBook.com

  • Hi Mitch,

    Great post! It was very interesting to read the various cost associated with each task, you never imagine how much everything would cost! Thanks a lot for the break down, it will definitely help in financial management. And congrats on the success in such a short time, the article was very inspirational.

    Riya Sam
    Training for Entrepreneurs.com

    • Yaro once told me one of his friends hosting plans cost several thousand dollars a month I couldn’t even fathom it, now I think I will be doing the same and it really won’t impact the bottom line.

  • I guess I never really associated Economics with blogging, it wasn’t something that was taught to me during my degree (Then again blogs didn’t really exist them). The budget side if things is very important, with so many options of how to waste your money its easy to go over budget with very little return. Anyway, great post :-)

  • Just to elaborate on the saving money as a corp bit.

    While as a corporation you won’t have to pay self-employment taxes you will pay the same amount, just paid out differently. As an employee of a corp/llc you have to pay half of the social security and half of the medicare medicare and the corp/llc pays the other half. As a sole proprietor, your self employment taxes pay both halves at once.

  • great thoughts on liability protection. i have seen folks loose their shirts due to this. always incorporate at least an LLC to protect your personal assets from business related suits…

  • Mitch, you mentioned about Self-Employment tax, doesn’t the corporation still have to pay a share of the employer’s taxes, and then the employee pays the other share, so essentially it equals out to the same thing in the end? Perhaps I am thinking of something else… but just thought I’d toss that question your way.

    -Jean

    • not sure, I have an accountant and bookkeeper who handle these things but I know I filed as an S corp for some reason..There is an advantage to it but I would run it by a pro in that area.

      • Thanks for the follow up Mitch, I am in college at the moment so I can just an accounting teacher on this matter :D one of the expensive privileges I get from paying for college lol.

        -Jean

    • Jean, you are thinking full blown C corporation. with an S corp and LLC – limited liability corp, there are ways to get around this

    • That’s quite an interesting point you have brought up. I’ll also be looking into it using my friends and contacts and see what I can find about it.

  • As with most things in life the good things are going to cost you, but if you know what you are doing and have a bit of time to spare on the net each day, blogging can be great tool to make money.

  • Inspiring Post. I am too trying to become a successful blogger..and the matter how much you earn plays a crucial role when it comes to your blogging skills…rather nice post

  • I am really out of the list of investment yet but thinks it’s the time to move on and make some investment within my blogging place for better results. Thanks for evolving the expenses you all guys make on your blog because it motivates to invest instead of collecting and collecting.

  • Great informative post.

    Thanks for sharing.

    Cheers,
    Togrul

  • of all that you mention, what would you say is the single most “impactful” and important?

  • When I read some of the costs I cringed and wanted to hide under the table. Never want to make money from the internet if I have to start messing around with legal terms and jargon. I am professional at running away from responsibility so would hate to have all that over my head. Hell, i can not even pluck up the courage to get a mortgage!

  • Great article Mitch. I have been at blogging for a few years now and still learned from your post. I wish I had read this when I was first starting out to help avoid some of the pitfalls of starting a blog. Anyhow thanks for sharing.

    - Robert

  • Thanks for sharing.

  • I spoke with a CPA once about incorporating.. He said an LLC only protects partners against each other, not protects you against the public.. Definitely a subject to get a consult for your particular situation and needs.

  • That’s a lot of expenses, but if your site makes that much then the site deserves only the best.

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