The purpose of opening any small business is to make a profit. Your profit is what is left over after you subtract your total expenses from your total revenue. Some tips for analyzing your profits include:
- To determine your revenue, follow this formula:
- Make a comprehensive list of your expenses.
- Profit is more than just what the boss takes home.
- Profit can be used for funding business growth, covering economic downturns and debt repayment.
- To determine the financial ratio/liquidity of your business, follow this formula:
The higher the ratio is, the higher the credibility of your business.
Compare your profits with other firms in the industry, personal profit goals and past profits to determine if changes need to be made within your company.
Keep detailed financial records to foster a direction for your business to take.
If you have a buying and inventory system be sure to analyze the costs associated with it to determine if there are any ways to optimize the system.
For more information on how to analyze your profits, read this Canada Business article.