Every business person goes into business with the aim of making a profit… that is the only way it makes sense. But what is profit really?
Profit is the amount of money that is left in your pocket after you have taken off all the costs that are associated with delivering the service or selling the product to the customer. This sounds simple enough, right?
The tricky part about it is that you need to take ALL costs associated with the creating, delivering and selling the product or service.
Key questions to ask yourself in determining profitability are as follows:
At BGH my product is consulting services for SMMEs. The outright costs that I incur relate to printing toner, paper, travel to client meetings, costs of data and phone costs. These are pretty easy for me to quantify as they are actual cash-outflows.
What I found I was leaving out in my early days was all the costs related to landing the contract as well as the many dinners, lunches and drinks that I often have to do prior to landing a client project. I found that this cost and travel related to these events did not appear anywhere on my books and was essentially coming out of my pocket rather than the profits of the company.
Essentially I was personally subsidising my company and in so doing, reducing my own salary as well as artificially inflating my business profits. This had an effect on both my personal finances as well as on the tax burden of the company.
BGH offers profitability analysis services for SMME client at an affordable rate. This allows you, as the business owner, to understand what your cost drivers are and thus better manage them to create optimal profitability [For more information, send us a message or email firstname.lastname@example.org]