By Hernandez at August 30 2019 05:16:21
Certainly when you reach the point where you are looking for investors or lenders, you will move beyond those first casual notes. Until then, drawing upon your expertise can allow you to quickly jump into the market and perhaps gain a competitive edge by using a minimalist plan. The "One Pressing Issue" Plan: Business planning does not stop the day you open for business. Under the best of circumstances you should be revisiting your plan once or twice a year to see how things are going, and where perhaps you've veered away from your original goals. Remember, changing the direction of a business isn't always bad, but it should be intentional.
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?