Free Advice Below and It Will Cost
Ya!!
So those that are anything like me you are always
researching and reading and in search of opportunities to improve your
business. I read as much as I can and I
watch videos and informational shows all the time about being a business
owner. Entrepreneur has to be the most
commonly used word these days. With
economic struggles and the instability of the corporate arena, more and more folks
are looking to do it themselves. They
are looking to get into business and call their own shots.
Well I watch Shark Tank and Profit just as everyone
else and TED talks is one of my favorites!
The same message is made in every avenue of starting a business. It is
hard work and you need to know where you are before you know where you are
going.
If you are already in business or just starting out it
is imperative that you know your financial position, today so you know where
you want to be tomorrow. It is broken
down in the components below. Focus on
these and no matter what continually review and assess. It is a cyclical
process and you have to remain persistent.
You have to look to people that can help you if you can’t do it
yourself. The key however is to DO IT!
Revenue – How much money is coming in,
daily, weekly, monthly, yearly? You have to keep track of how you are
performing at different increments of your time. You should have an idea already of what you
need it to be so now you should look to see how close or far you are from that
target.
Gross Profit
– Revenue minus costs = plain and simple. Once you have determined your costs
for making or providing your product then you should deduct from what is coming
in. And again it should be done weekly,
monthly, quarterly, and/or yearly.
Typically when all is said and done you want to shoot for your gross
profit to range in at best 50% more once direct costs are deducted.
Expenses –
Every business owner needs to know how much is costs to run the business. What are you spending in terms of
administration, operations, and marketing.
How much do you allocate to these expenses and where the flexibility in
what you can control is. Compensation is one you know you can control. You need to know of your expenses in total
how to fluctuate in the moment of a crisis. Marketing and advertising are
always a variable so you should carefully review them and if possible they
should be in line with your sales so that the expense can be justified.
Profit Margin – the key, the key, the key. Look at your gross profit and reduce it by
your expenses. Take this number and then
divide by your total sales and you have your profit margin. This number is vital as it tells you in a
nutshell how profitable you are in business.
AGAIN, review, review, review and assess. A rule of thumb is to research others in your
industry and find out what their profit margins read. You want to be in line
with if not better. Use your research as
a benchmark!
In assessing and identifying your numbers it is going
to take time. It is not something that is going to come easy initially but I
assure you it will open up a world to you once you become familiar with what
your business looks like financially.
And as I mentioned you can ALWAYS find help. If numbers are not your
thing then find and accountant or even an accounting software package that will
bring those numbers to you.
Let me add…knowing your numbers is crucial for whether
you are selling a product or service. If you are providing a service then you
have to reach for more intangibles but the points are all still the same.
I wish you luck in your business and I wish you
tenacity. Stick to it and hang in
there! GOOD LUCK!
Leslie Crudup writes for The Business Liaisons, LLC – Business Consulting
