Any person who wants to start up a business project must do a feasibility study. This includes planning the necessary investments, financing them, estimating their deterioration, the costs they will face, the sales and income they expect to obtain, and the money needs that will arise. etc.
- How do I know if my business has opportunities to be viable?
- How many expenses will I have per month?
- How will I face the payments?
- What is a repayment plan?
Within the programming of tasks must be done to know the viability of a business:
- Investment plan
- Financing plan
- Amortization plan
- Sales plan
- Cost plan
- Analytical results forecast
- Treasury forecast
- Calculation of the dead center, NPV, IRR, economic profitability, financial profitability and analysis of financial ratios.
- Study of the fiscal calendar
As can be seen, it is estimated that as the business is strengthened, the warehouse could be rotated more quickly, also applying a greater margin over the product price.
From € 2,500 of biweekly stocks, the manager applies a margin and multiplies this figure by the rotations (number of times they will sell the warehouse).
Profitability threshold
Another indicator of obligatory calculation is the so-called profit threshold or operational dead center. This refers to the number of units that the company must sell to start generating profits.
The explanation is given because the business must assume a series of costs that are independent of the level of sales (fixed costs). For example, the example businessman must pay 2,000 euros every month for rental expenses, even if there are no sales. The same happens with personnel expenses, supplies, etc … Therefore, you must sell a minimum amount of products to cover those expenses (profit threshold) until you start reaping profits.
Calculation of the threshold of profitability:
If the product is sold for € 5 and you work with a margin of 180%, the selling price will be € 14. Therefore I have a margin of € 9. If the fixed costs of the first year were € 101,119.59, the UR = (101,119.59 / 9) = 11,236 products to be sold until obtaining profits.
