How is my business? Am I profitable?

¿Cómo va mi negocio?¿Soy rentable?

We are at the end of the year, and as usual at this time we are used to organizing our finances, setting goals and it is important that we carry out this process with our business, we start with a review to find out how we are working, and what measures we will have to take next year to improve, and what will be the future investments to be made.

The first thing that we must carry out in our business is a follow-up of all the activities carried out , from sales, purchases, disbursements, investments, etc. We must have control over these activities, if you still do not have it, you can start from today, or if you take them "out there written down", prepare some type of document that has everything "clean" and that anyone can read and understand it.

After we have this, we are going to subtract all of our expenses , and all of our income , so that we can get our net income . When doing this exercise, it is important that we take into account ALL OUR EXPENSES , from the public cart that we take to meet with the client, to that last purchase of materials made.

After having our net profit , we are going to divide it by the total investments made , that is, if our profit in 2019 has been RD$250,423, and the investments made throughout the year have been RD$1,090,000, we will have a return:

R=(250,423/1,090,000)*100=0.229=22.9%, this number can vary, there is no exact number that will allow us to say what state our company is in, because even if we have a rate of return of 22.9%, if we have a loan to finance our company that has a rate of 23%, the company has excellent profitability, but we are working to pay off the loan. The important thing is that this number is greater than 0 .

This is a basic example to evaluate how our company is doing, and other indicators that will give us more information about how our company is starting and what measures we should take.

This indicator allows us to know what we are working for and if it is worth all the effort invested. Remember if your business is quite recent you can do this exercise to find out its status, but do not let yourself get discouraged if you have low profitability , because every business is different and each business will have its own level of profitability.

Emi Group RD

Desde 2017