Many business owners go from year to year hoping to gain a bigger profit than last year. But of course in order to do that you need to fully understand what exactly drives your profit.

Generally the answer to this question is that we require more sales and less costs. As practical as this sounds, the fact is that you cannot decrease your costs to zero otherwise you would no longer have a business. This means that whilst costs do need to be well managed, you really need to look closely at what ACTUALLY drives your business.

What is the true Gross Profit Margin of your business?

This is an extremely important percentage in terms of understanding how your business conducts itself, and what sales are required in order to allow a specific target of wages to the owner as well as a profit to the business.

It is essential to optimise these elements in order to maximise an eventual sale price.

Business Accounting | BWD Accountants BWD – Business Accountants The fact is that as business owners, we expect that the sale of our business will see us through our retirement, as we have a perceived value on our business. However, the harsh reality is that most business owners greatly overvalue their business and its’ perceived value and in comparison to the actual value on sale, can be 60% lower than expected. This leads to a less than extravagant lifestyle in retirement to what they envisaged.

To establish what sales are required for you to achieve your overall goals;

  • Firstly we need to establish what your profit target is (after taking a reasonable wage for yourself) 
  • We then estimate the general overhead costs 
  • From this we will compile an actual gross profit percentage for your business, which should be monitored and controlled 
  • This will show us the sales that are required to achieve the overall goals set 

The result;

A simple financial plan, which is clearly laid out on a page.

This plan will give you simple targets, as a weekly or monthly number of sales at an average transaction value.

From this you can keep a track on weekly or monthly targets so that you will know at all times if you are on target, if you are well ahead or indeed, what you need to focus on in order to achieve your profit goals, whilst taking a fairly remunerated wage for yourself.

Contact our professional team today!