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A new business owner often begins by taking some of their personal funds, in addition to funds they borrow from a lending institution to provide their new business with the necessary fixtures, equipment, and inventory as well as provide the necessary capital to pay operating expense until the business is turn a profit. While the funds from the lending institution will have a prescribed schedule for repayment, the funds that the business owner often do not. In reality, while the owner of the business may not have a schedule for the repayment of these funds, the owner should know what kind of return is being earned by the investment. This calculator requires information from the year end profit and loss statement, the balance sheet, and requires some calculation from the month end balance sheets. For the 'average inventory on hand' and the 'average accounts receivable' calculations you will need the appropriate number from each of the 12 month end balance sheets. Add the 12 numbers together and divide by 12 to obtain the average. To learn the most from this exercise, we would suggest that after completing the chart with the actual numbers from your business, you would begin to change numbers to what you believe you can achieve and see what the return on investment percentage changes to. As you do so, you will learn how to make the investment in your business provide you with a bigger return. |
NOVEMBER 2024
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With over 25 years of frontline experience Tom Shay is America's leading Small Business Management Expert. He's a "Must Have" for your next event.
Small Business
Perhaps you have investments outside of your small business; gold, stocks, bonds or money market funds. With each you likely know what the rate of return is.
What about your busines? Do you know what the rate of return is for your business? You should. After all, you do not want to be the person who has just bought themselves a job.
Small Business
We see a lot of social media with what we think is a "sympathy plea" do do business with local small businesses.
It is not going to work. People select where they do business based on positive reasons. We discuss what we are seeing.
A timely article for the holiday season. With any business that has inventory, are you looking at sales per square foot? Are you looking to see which is the most valuable space in your business? You can increase sales by knowing which items to place where.
Fix This Next by Mike Michalowicz. We love this description of the book; The biggest problem entrepreneurs have is that they do not know what their biggest problem is.
If you find yourself trapped between stagnating sales, staff turnover, and unhappy customers, what do you fix first? Every issue seems urgent - but there is no way to address all of them at once. The results? A business that continues to go in endless circles putting out urgent fires and prioritizing the wrong things.
