3/29/2017

MoneyMatters101.com Home
Planning A Business
A Lack Of Net Profits
A Lack Of Startup Capital
Failure: Good/Bad?
Goal Setting
Keep Customers Happy
Know Your Market
Learn To Negotiate
Making Adjustments
Names And Symbols
Meet Your Goals
Plan Your Business
Self Discipline
Social Networking
Strategic Information
Stressed Out
Stop, Look, Listen
Things You Don't Say
Think Positive
Use Your Time Wisely
Work Your Plan
Write Down Goals
Your Livelihood
Links

Email Us

MoneyMatters101



.

The Lack Of Net Profits

The one thing that can bring a business to it's knees very quickly is the lack of net profits. A positive cash flow is crucial to all businesses, large or small, because without it, there is little room for any type of misstep. A business needs to have a source of positive income that will be enough to pay salaries, overhead, and other business related expenses.

Even though the state of the economy is very important in terms of growth, it's not necessarily a bad economy that get entrepreneurs in trouble when starting a business. What gets most businesses in trouble, especially new one's, is the lack of planning.

Many entrepreneurs don't take into consideration that they may have to go long periods of time before making a net profit. This is crucial because with any business, there will be bills that have to be paid and there has to be a capital investment in the business to make it grow.

What is a net profit margin? A profit margin is the figure that is left after operating expenses, taxes, and other expenses have been subtracted from business related income. Profit margins are critical to the success of any business and may be affected by inflation, recession, and other nuances in the economy.

When starting a business, an entrepreneur has to understand that there is a difference between making money and making a net profit and make allowances for slow profit growth. A business can make millions of dollars a year and not be profitable because of high operating expenses and overhead.

Calculating the net profit margin is crucial to a business because it represents true profits. The lack of a true profit usually spells doom for small businesses, especially if loans and advances cannot be obtained.

It is imperative, as a new business operator, that you plan your business with a realistic idea of the amount of net income your business will make. Insufficient operating funds is the cause of most business failures due to the underestimation of how much money is needed to succeed.

Income is the most important aspect of a businesses survival. Income cannot be calculated to the exact penny because there are too many things that can force changes in revenue streams. Planning should include the understanding that there is always the possibility that there will be a lack of a net profit or not as much as needed to keep operations running.

A sound plan should include the costs of starting the business, short term and long term operation expenses, and how much money should be set aside for unexpected events such as a slow down in the economy, an overestimation of income, or any other unforeseen problems that may occur.

Book of the Month

Book about investing

Advertise on MoneyMatters101.com

 

Share


Accessibility Policy| Terms Of Use| Privacy Policy| Advertise with Us| Contact Us

Use of this web site constitutes acceptance of the Terms of Use.

We are looking to create more mutually beneficial partnerships. If you are interested in partnering with MoneyMatters101.com, send us your proposal.

MoneyMatters101.com™

Link to MoneyMatters101.com