Profitability: what business owners NEED to know

Business owners often don’t understand what ‘being profitable’ actually means. Often we have clients who don’t know the difference between gross and net profit, or don’t understand why cashflow and profitability are so important.

BUT, it’s not your fault. We weren’t taught this stuff at school, so it’s really up to your accountant to help you get to grips with your finances.

In this video, Director, Joe Sword provides a basic introduction, covering:

👉Working out your break-even point

👉Understanding the effect of inflation

👉The impact of your pricing on profits

Break-even point is the level of turnover your business needs to cover all your overhead costs.  

No business is only aiming to break-even, so  once you identify this point you can plan the level of profit required to meet your goals.   

Unless you’ve been living under a rock, you’ll have noticed there’s been inflation recently.... but how does this affect profitability?

Factoring the impact that rising costs will have on your profit margins and break-even point is critical.  

The price that you sell your product for has a huge impact on your profit. Price too low and you’ll be missing out on profit, price too high and people will go elsewhere to your competitors. Make sure you actively research your competition and run your forecasts often. 

Profitability is all about increasing your turnover and reducing your costs. It’s not complicated, but you NEED to understand the basics to make sure you’re in a good place to keep the profits rolling in. 

There’s no need to let stuff like this confuse you. If you’re looking for some guidance on any anything business related, get in touch with our expert team today.