How to determine if your business idea Is profitable
I have spoken to and mentored many lovely entrepreneurs who have wonderfully innovative ideas for a new business. But, as any business owner can attest to, starting a new business is hard work. Before even thinking about launching, you need to ensure that the business is actually viable. You do this by assessing your market, reviewing potential demand for your product and analyzing the competition. Once you have done this, you then need to ensure that your business can be profitable.
In order to determine profitability, you need to understand both the pricing of your products and/or services and the relevant costs. This can be difficult to do especially when you don’t have any history. Your only choice is to estimate based on the best information available. In this article, I give you some guidance on the financial information that you need to compile.
The Importance of Breakeven Analysis for Business Owners
When embarking on your new business venture, one of the first and most important concepts that you will be introduced to is break-even analysis which, very simply, is the amount of revenues you need to generate to cover your direct and indirect expenses. A good grasp of this is essential for business owners since even businesses with significant sales revenues can incur losses if they are not able to cover their costs. While break even analysis tends to be used more for businesses that sell physical products, it can also help to the determine the price for services