The importance of profit and turnover

Whether you’re new to being a business owner or have already found your feet, it’s vital you understand the full impact and overall importance of profit and turnover, and the differences between them.

Turnover

1

Your business turnover is the net sales your company has generated before any costs have been deducted, and reflects how your business is growing.

To obtain a healthy profit, you need to know what level of turnover your business requires. Look at your pricing, company spending and use of your profits, and decide how each of these will help you meet your target. It would be wise to take into consideration what is happening economically, your business targets and the current situation in your industry when making these decisions.

Profit

2

The profit your business is making really determines the health of your company. This is because profit is the money you have made after your business costs have been deducted, so can clearly show you if your business is in trouble or on the right track.

Investment

3

So what can you do with your profit? If you want your business to grow, a good idea is to invest some of it back into your business, by buying more stock for example. If you think this is the right move for your business, make sure you choose to invest in the right product and amount. Undertake thorough research first to see how well the new product would sell to your audience so you’re not wasting your profit.

Selling

4

It’s great when your product/service is popular and in demand, but just because you’re selling a lot, it doesn’t mean you’re going to end up with a high profit. You need to know how many sales you need to make to hit your targets. Look at the business expenses you need to deduct and your pricing. Making your aim clear to your team will give your business a clear path so it can grow and thrive.

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