What Percentage of Small Business Income is Used for Expenses?
Trying to work out just what percentage of small business income is used for expenses can be tough. It all depends a lot on the type of business you are running and your expectations.
But a quick formula is usually Double it. Another words, if your expenses for an item you are producing is 50 cents, then you should try and get one dollar.
This is a good formula to use for crafts and other product driven businesses, but doesn't always hold true for the market.
If the market does not want to pay that much, then you will have to look at ways to lower your expenses without taking away quality from the product.
But a quick formula is usually Double it. Another words, if your expenses for an item you are producing is 50 cents, then you should try and get one dollar.
This is a good formula to use for crafts and other product driven businesses, but doesn't always hold true for the market.
If the market does not want to pay that much, then you will have to look at ways to lower your expenses without taking away quality from the product.
The above link is to a good book that can help you with many other questions.
You can start by really looking closely at your expenses through the process of creating your product or service. There are a few areas that can be look at.
1. Supplies and suppliers - Could you get a better price if you ordered your supplies in larger quantities? Is there a better supplier somewhere else that can offer you a better price? Sometimes we work with one supplier for so long, we don't always realize that there can be better deals elsewhere.
2. Overhead - Can you cut back on your overhead? Are you in a rented unit with high utilties? could you sublet some space to help with rent? Can you do more things yourself instead of outsourcing?
3. Wastage - A small business can lose a lot to wastage. Using a craft business as an example, you could try taking all those small scraps of fabric of supplies and bundling them up into "grab bags" that can be sold for 5 dollars or so to help recoup expenses.
Depending on the type of business you run, take a good look at how much wastage you have.
Then work out a good price for your product that the market can bear. So, what percentage of small business income is used for expenses? Try not to go over 50%.
