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Evaluating a Business

Every time you offer another item or administration it is essential to put forth three inquiries to assess another business thought. On the off chance that you take after this three stage handle it will help dispense with terrible business decisions and elucidate that increases or new thoughts are justified regardless of your time and exertion.

What is the noteworthy issue does my business understand?

Numerous entrepreneurs regularly concentrate on what they accomplish for their customers yet this is truly the wrong core interest. Rather you ought to concentrate on the issue you tackle. Do you offer your customers time flexibility? Certainty? Yes, you DO something however what your customers really think about is the issues that you unravel for them. Make sense of what that is before advancing. By knowing the issues you fathom, and recognizing what your customers or clients need, you can without much of a stretch make sense of whether the business attempt is beneficial for your objective market.

How much money will I need to start my business?

Every business costs money to start. If you aren’t sure of the financials involved you cannot make good choices. Even if you do not spend much money, there other factor often left out is time. Time is money, so your own time should be calculated in terms of dollars so you know what your business really costs to get started. Consider every single factor of cost such as: Supplies, Technology, People, Services, Utilities and etc…

How much revenue will the business bring in?

What parts of your business bring in the money? How much will you need to bring in to break even? How many sales does this constitute in terms of widgets sold, or service hours provided? If you know your costs from above the formula to figure out your breakeven point (BEP) is:

Total Fixed Expenses – (X)(Y) = Zero

When your total fixed expenses minus sales(x) times price(y) equals zero at BEP. Naturally you want to make more than the BEP but the BEP is necessary to know before you start any business or add any service or product to your inventory.

If you sell a product for 20 dollars each and your BEP is $60.00 then you know that you must sell 3 products to break even. So the formula would look like this:

$60.00 = 3 x $20.00

Be realistic if you’re trading hours for dollars instead of selling a product on how many hours you can actually bill. Billable hours, and hours in the day are two different things. While you likely get paid for forty hours a week or 8 hours a day at work in your job, you won’t always get to bill for 8 hours a day if you’re working hourly.

If you sell a widget how many will you need to sell each day to break even? But if you’re working hourly, how many hours do you need to sell to break even? The best thing to do is figure out how many hours you have each day to bill, be realistic, and assign a fair number to your hourly charge so that you can figure out your BEP realistically.