Now more than ever, business operators should have a plan in place to manage during uncertain times in the pandemic. Even if your business is not directly impacted, it’s likely your customers, your supply chain, and your workforce will be to some extent.
So, how do you plan for uncertainty when every assumption is subject to change?
Now more than ever, business operators should have a plan in place to manage during uncertain times. Even if your business is not directly impacted by the pandemic, it’s likely your customers, your supply chain, and your workforce will be to some extent.
So, how do you plan for uncertainty when every assumption is subject to change?
Understand Where You Stand Now
Businesses fail (or fail to thrive) for a myriad of reasons, but the precursor is often a failure to understand what is occurring and what to monitor.
Strategically, managers need to be on top of their numbers to identify and manage problems before they get out of hand.
If you do not know what the key drivers of your business are – the things that make the difference between doing well and going under – then it’s time to find out.
Understanding Your Cost Structure and Your Break-Even Point
Do you know what your real cost of doing business is? Break-even point is the point at which total revenue equals total expenses – at the break-even point, there is no profit or loss.
Calculate your break-even point by dividing your fixed expenses by your gross profit margin. This figure represents the level of sales income you need to break-even.
Understanding your break-even point is crucial particularly when supply chains are impacted.
Not only will your break-even point assist you to monitor business performance, it’s critical when deciding whether or not to offer a discount.
If your break-even point is well below your current operating level then you have a good buffer in your profits to manage growth, invest in further capital opportunities, and to protect yourself against further downturns in operating performance.
Understanding your KPI’s and Key Metrics
A Key Performance Indicator is a measurable value that demonstrates how effectively a company is operating and achieving key business objectives. KPI’s and Key Metrics should be used by every business as they use real time financial data to help understand past and current performance to help manage and drive the business.
Contact us for further information.
Recent Comments