By Barbara R at October 08 2019 12:22:30
To me a small business is one of the best things you can have if you enjoy operating a business; however, it does require a lot more than just enjoying ownership and running a business. Especially if you are starting a small business and even if you have had a business for many years, you should know what you want for your future. Never guess about your business. You see, without a plan, you are just guessing. We business people work hard and we always continue to hope for the best but when we guess, we're taking a lot of risks. You've probably heard the old saying from an unknown author that says, "If you fail to plan, then plan to fail."
There is quite a bit of calculations and you should know a little about business principles but it isn't that complicated. So first let's look at figuring out your future needed sales with this formula: Projected sales = fixed expenses divided by Ƒ_(var exp % of existing sales + mat cost % of existing sales + lab cost % of existing sales + desired net prof %)) So, let's say you existing sales is 迲ꯠ annually, your fixed expenses are 足ꯠ, variable expenses is ็ꯠ or 6Ǒ% of the 迲ꯠ, material cost is 趌ꯠ or 27ǔ%, labor cost is 贍ꯠ or 12ǔ%, and your existing profit margin is 赏ꯠ or 20ǒ%. Now let's say next year you want to have a profit margin of 25% so what would your sales need to be to give you that profit margin? Now you might think you would simply tack on 4ǐ% more to sales ྐྵ% _ 20ǒ%) and you would have it. Well not quiet. it doesn't work that way because you are going to have the additional variable expenses, material cost, and labor cost too. Remember, the more sales the more each of these expenses and cost will be.