By Carly W at September 22 2019 08:55:18
So, thinking about this principle, let me ask you a question. If your sales grew 10% and nothing else changed, would your profit margin be higher, the same, or less? Profit margin is % of profit against sales. If you said the profit margin would be higher, then you are right. Why would your profit be higher? If you said because of the fixed expenses, you would be right. Your material cost, labor cost, and variable expenses would have gone up 10% but your fixed expenses would have remained the same. You brought in more revenue because of more sales and you spent 10 % more on material, labor, and variable expense to cover the extra sales, but you didn't spend any more on your fixed expenses. So, less overall expenses, would give you higher profit margin. Make sense?
The business planning process can be very helpful to "accidental entrepreneurs" as it allows you to decide which ideas are best left as hobbies and which ones could provide some real cash flow. The "Back of a Napkin" Plan: It is the source of entrepreneurial legend and lore, the million_dollar idea that was hurriedly scribbled on a bar napkin. Yet, for most potential business owners this option for business planning remains a fantasy. However, like any myth there is a tiny grain of truth inside. A quickie business outline can work as a launch plan under the right circumstances.