How To Keep Your Business Financially Strong!
Q: How much above the monthly overhead does a small retail business need to make a month to be considered worth staying in business? In other words, what should the ratio of overhead to profits be to be considered a healthy retail business? A.J. Lawson Alberta, Canada
This is a very important question with a fairly strait forward answer. What you are talking about here is your profit margin. Any viable business should have a 35-50% profit margin. That means that your “net” receipts after all your expenses should be 35-50% of your total “gross” income. What that comes out to in dollars and cents is something you will have to figure out for yourself or with the help of your accountant. I would encourage you to break that down even further into weekly and daily amounts. This should give you an idea of what you need to bring in each day and week to be profitable.
You can then break it down even further to what each employee should be bringing in each shift. This is a good way to judge your highest revenue days, hours during the day,or if you have them, if your employees are in the best position for that individual to reach their highest potential (although this should only be one of several criteria when it comes to employee reviews). Please see Chapter 12 of Business Genesis.
I hope this has given you a little guidance. If you need more in depth help please feel free to post your comments below or Contact Us Directly and send me your questions. I also have more Resources that you may find helpful. I would also recommend that you read chapter 10 and 11 of Business Genesis. It provides more detailed information than what I can go into here and will set you on a path to financial success and a strong business. If you think this post would be helpful to someone else please feel free to share it.
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