Entrepreneur Mom: How do you know if your company is profitable?
When you start there is nothing simpler than numbers. If you consider your alternatives as a present mom and then choose your business, what follows is to take stock of profitability.
I have learned that the profitability of a business goes beyond cold numbers. And that the only person who can really know if it is profitable or not is you, once you have clear numbers.
So through this space we will learn both. How to make clear numbers and what questions you can ask yourself to know if it is profitable in a comprehensive way for you.
There is nothing simpler than numbers.
When you start there is nothing simpler than numbers. If you consider your alternatives as a present mom and then choose your business, what follows is to take stock of profitability .
In this part, many people will think that the only thing that counts is the difference between spending, income and future projections; but it's not like that.
How much does the product cost?
If you are going to produce it in an artisanal way, incorporate the costs that you may not see at the moment. The cost is not only that of the direct materials that you will use. Are you going to use gas, water, electricity, space? Perhaps at first these expenses seem imperceptible; however, it is important that you consider them from the beginning.
It is also important that you produce by batch, this will help you identify the individual cost of your product.
If you will do it by maquila, consider if there will be any additional cost to your marketing work for you to include it.
Finally, something very important for those who start and produce for the first time is to consider their time. This is something that we usually don't take into account either. Imagine that you are actually collaborating for an organization and calculate how much they would pay you to do this work. This is very valuable in more than one dimension.
Now that you are starting, it is useful to determine the profitability of your business, to value you and your contribution to this business that you undertake and in the future, to value the work of whoever can do it for you and with you.
One last tip on this topic: many of us who start for the first time do not value ant expenses, that is, those little things that are presented that we do not consider as tiny. The sheet of paper, the ribbon on the box, the product that didn't go well, the last minute cherry, and so on. That can lead to your business not flourishing as you expect. It is very important that you review your exercise once, twice or maybe even three times and ask for some support in the process of identifying your total cost. Finally, consider that at least during the first six months, you will have to be very careful to review it and probably adjust it.
What will my income be?
It will be the amount obtained from the sale of products or the provision of services.
How to calculate it? You will have to define how much you can sell in a period and the value at which you will sell your product or service.
The sale price needs to incorporate the cost of the product, plus the profit you want to obtain. In some later reflection we will talk about the many possibilities that exist to define the price of your product considering the market, for now let's stay with the basic definition.
It is essential that you consider a good balance between what you can produce and offer. Something that can generate great themes in the flourishing of a business is that customers feel that the service or product you offer does not satisfy them. So don't offer more than you can actually deliver in time, form and quality.
In the same way that with the cost of the product you will have to go reviewing, learning and adjusting little by little.
Is it profitable or not?
In numerical terms it is very easy to know if it is profitable or not. To determine it you do a subtraction: income less cost and you will know if you have a benefit or not.
You will find that there is a breakeven point, that is, a minimum amount of product that you need to produce and sell so that your costs are covered.
When you have all this data, you will be able to know if - financially speaking - your project is likely to be profitable. And here comes, in my view, the most significant part to evaluate profitability.
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Is the time you need to invest to get the benefit you want is it really worth distracting it from your baby? Can you handle it without feeling guilty? Will you feel comfortable with the balance you will make between being a present mother and this investment of your time in something different? Are there any adjustments you need to make? Can you decrease production to invest less time, even if you earn — perhaps — a little less? Is there a way that instead of you producing, make-up?
And please, one more time, be kind to yourself. Give yourself permission to change if things don't go the way you planned on paper. Michael Blumenstein said:
"Do something good with your decisions, even change them."
I believe that profitability is not measured only in money, it is measured in the satisfaction that money generates, the price of life that we pay for it and the monetary income that we obtain.
The bottom line to know if all this represents profitability for you or not, only you can decide.