Sunday, 9 November 2008

What! You don't know how much you're making?

Have you calculated everything that it costs you to run your business? Not the cost of products or postage or packaging but the actual cost of being in business. Do you know what your monthly spend is to keep you business doors open? How about how many products you need to sell each week just to break even? If you don’t know this how do you keep your head above water?
It might be easy to look at the sales figurs each day/week/month and think ‘woohoo - look at all those sales!’ but did they make you any money?
We’ve being going over our accounts this month to find out exactly where Rainbow Designs is at and I tell you it was quite an eye opener! (Good and Bad) We are certainly growing and increasing our monthly orders but so are all our expenses, everything is going up from petrol and delivery costs to ink cartridges and cardboard boxes but we haven’t had a price increase since we open our doors in 2004!
This made me think ‘how can we possibly be making a profit’? So the only way to do this is to sit down and go through all the comings and goings of the business. How much does it actually cost for each gift, not just the physical items in the gift but the generally everyday costs that need to be met to keep the business running. There is so much I have to admit that I missed plus I don’t factor in my time running the business and simply ‘doing’ the orders.
Running your own business is rewarding but it is very hard contrary to what some people like to tell me! You NEED to know what products are worth selling and what aren’t, what profit each one makes but also look at the time it takes you to do each gift - are they still worth doing?
Advertising, marketing & promotion plus all the other bits and pieces that are part of your costs must be calculated into each product you sell to get a true reflection of how profitable they actually are.
Some of the things you need to take into account when working out the running cost of your business:
* electricity
* ink cartridges/copy paper
* telephone/mobile phone
* bank fees/merchant fees/eftpos fees/paypal fees/credit card and cheque fees
* internet/computer/laptop
* website hosting/domain name(s)
* newsletter program
* business insurance
So do you know what your business is actually making (or losing!).
Something else to think about: You can earn 8% on your money just by it being in a savings account, sitting there doing nothing. So work out your margins, how much higher than 8% is it and how hard have you had to work to get those margins? Makes you think doesn’t it!

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