Improve Your Profitability

“Turnover is vanity, profit is sanity” – maybe you’ve heard that saying?

It is bottom line that ultimately matters in business. having millions of pounds of turnover and only a few pounds profit is not the way forward to have a successful business.

Knowing what your costs are, where the cash is in your business – when it is coming in and when it is going out; and what the profit margins are on the product or service you sell is vital.

Don’t wait for your annual accounts to come out or your bank to call you in to find out you’re in trouble!

A key measure for you business is your break even point – this is the minimum level of sales that need to be achieved before your business is in a profitable situation.

If you know your fixed costs (salaries, rents, rates, etc. – often referred to as overheads) and your variable costs (i.e. those that relate to the cost of production and vary with volume e.g. raw materials), then your break even point can be represented graphically as follows: