Planning for Business Profitability

Here is a simple, straightforward article I found on planning for business profitability. I hope you find it useful:

Recently, ABC News Now interviewed me [see interview here] on my 5 Tips to Get Unstuck When Starting Your Own Business. One of my tips was about “working the numbers,” and I’ve received numerous requests to expand on this topic.

I meet many entrepreneurs passionate about creating businesses around their exciting ideas, which is great, but too often they forget to do a little math to ensure profitability. After all, if you’re not a hobby or a non-profit, you need to make a profit to sustain your business.
Don’t be afraid of the numbers because they can be really helpful in shaping your direction. Answering a few simple questions will help reveal the wisdom of your business idea, or uncover a flaw that you can rework to ensure success.

5 questions to ask yourself about your business idea:
1. What price can the market bear for your product or service?
2. What is your initial capacity to provide that product or service?
3. What are your costs associated with that capacity?
4. How many units of your product or hours of service can you realistically sell?
5. Do you have anything left over, profit, before taxes for paying yourself?

For fun, let’s take a business idea and run through the numbers for a month to see how it measures up. Let’s say that you love dogs, and have designed an adorable dog sweater that everyone loves and thinks you should sell.

1. Price: You think that you can sell the dog sweater for $40.
2. Capacity: You can knit one sweater a day times 20 work days in a month equaling 20 sweaters a month.
3. Costs: You know that each sweater costs you $10 in materials to make. So 20 sweaters = $200/month.
4. Sales: Assuming you will sell all the sweaters you make each month: $40 x 20 = $800
5. Profit: Subtract your costs ($200) from your sales ($800), and you have $600 in profit for a month.

This simple example shows you are profitable. But keep in mind that you will have other costs such as marketing, taxes, etc. So while this idea would not pay your mortgage yet, it’s a start. Your next steps would be considering ways to increase your profits.

First, let’s look at the income side of the equation. Ask yourself if you can increase the price. Perhaps you could focus on high-end doggie boutiques in wealthy neighborhoods or rich doggie catalogs. Another idea would be to explore how you can make more sweaters faster. Could you hire some low-cost contractors (maybe retired grandmothers looking for a little extra spending money?), or consider investing in a knitting machine to expand production?

On the flip side, look at your costs. Perhaps consider changing your business model altogether by selling the knitting pattern for your doggie sweater instead of the sweater itself. This lifts your limit on sales and you’re not held captive by your ability to crank out sweaters.

Get it? Work your numbers. By taking a little bit of time for planning and making sure that your business model is profitable, you’ll ensure that your business is a success!
© 2010 Ali International, LLC

Self-made multimillionaire entrepreneur and Inc. 500 CEO Ali Brown is devoted to creating financial freedom for women globally through the power of entrepreneurship. To learn how to create wealth and live an extraordinary life now, register for her free weekly articles at http://www.alibrown.com/.

Enjoy!
Posted by Krista Dunk
www.KBWomen.com

Business Wisdom & Business Quotes from SHINE

Hello Everyone!
It's time to share some fun pictures with you and some great information that we learned at the Las Vegas SHINE event (put on by Ali Brown) earlier this month.

Krista signing to Marlee Matlin, Barbara Corcoran, Tammy with friend Jen Lovelady

Krista with Anne McKevitt, Tammy & Krista with new friends Brittany & Star, Ali Brown

Pearls of business wisdom:

"Bring value. Under promise and over deliver." -Ali Brown

"Develop key relationships with non-competitors." -Ali Brown

"My best successes came on the heels of failures." -Barbara Corcoran

"The power of publicity is more important than advertising." -Barbara Corcoran

"Marketing is creating a relationship with your target market with communication." -James Roche

"Marketing is more important than mastery." -James Roche

"Successful people understand that you don't need to make things complicated." -Anne McKevitt

"We all start not knowing what to do." -Anne McKevitt

"You need to have a sense of humor." -Marlee Matlin

Enjoy!

Brought to you by www.KBWomen.com

SHINE Entrepreneur's Event Re-Cap

Remember last month when we posted about a business conference we were going to attend in Las Vegas, called SHINE? The event was last week. From our point of view, it was a huge success and very worthwhile to attend!

Why? Several reasons:

• Networking with other entrepreneurial business women (and a few men) was great.
• We made new friends, contacts and interacted in various ways with some great people.
• Business skill building sessions helped us get clarity of vision to move forward with some projects and changes.
• Fun and famous guest speakers were there, including Marlee Matlin, Barbara Corcoran (from the TV show "Shark Tank"), Julie Clark (creator of the Baby Einstein product line), and a woman named Anne McKevitt from the UK (now living in Australia). The wealth of wisdom and experience that these women shared was amazing.
• The event itself was done with excellence, and everything ran smoothly.
• We had dedicated time to work on our businesses!
• We had fun!

Stay tuned for another post coming Monday with specific quotes and nuggets of wisdom from the event. Thank you Ali Brown for hosting this wonderful event!

Posted by Krista Dunk - www.KBWomen.com