While it is possible that your new business can be an instant cash machine, several business publications recommend you provide enough money to support your company and yourself for six months. In most cases, Kiplinger Magazine states that the sooner you make enough profit yourself to pay, the more prepared you are. Careful financial analysis can give you a good idea of how long it will take before Black.
Break down and analyze
Even analytics is a method of determining the profitability of your proposed business. Draw your specific cost estimates such as office space, utilities and insurance; Proceeds from the sale of goods or services; And the gross profit of each sale after the sale is reduced. Divide the gross profit by the total sales price and you get a percentage of the gross profit. Then the percentage of gross profit is divided into fixed costs.
Your fixed costs are $ 5,000 per month and your profit percentage is 25 percent, for example, divide .25 into $ 5,000 and you get the point of even breaking $ 20,000. This means that when you earn $ 20,000 a month in revenue, your business even covers its costs and covers its costs. You will become more profitable than this. If you see more than $ 20,000 five months after your business plan opens, then you will start to make a profit.
Your timeline shows that you cannot make a profit before your savings are exhausted, adjust your business plan. You can increase your sales price, reduce your specific costs – for example less employees – or find ways to reduce the cost of a product or service such as buying cheaper supplies. Each of these options can hurt your business and it can help, so think carefully about which option will work best for you.
If you don’t think your business can survive until the break-even point, look for financing. Putting your own money on the line will allow you to maintain maximum control of the company. Family and friends can also be a good option, but you need to consider this as a business transaction, not a personal loan. Sign the document, execute the terms, and make sure it stays there for a while before you can return them.