Making Profits

Winning Job Hunting & Career Development tips from Malcolm Hornby

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Making ProfitsMaking Profitsin in

BusinessBusiness


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What’s my line?What’s my line?

Complete the following sentence:

In commercial businesses The Chief Executive’s 2 most important priorities are:

1…………………………………………...2…………………………………………...


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What’s my line?What’s my line?

Answers

In commercial businesses The Chief Executive’s 2 most important priorities are:

1 To keep the business solvent / from going bankrupt

2 To make a profit


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Understanding profitsUnderstanding profits I run a business which sells Exercise books

I sell the books at 50p each.

Last month I sold 40,000 books (£20,000 sales).

I made £2,000 profit

I want to grow my business, so if I can increase sales to 50,000 books how much profit should I make?


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Understanding profitsUnderstanding profits

I have two sets of costsFixed costs – like the rent for my warehouse

and the lease on my vanVariable costs – like the cost of buying the

books, and the money I spend on diesel for the van; the more I buy / use the more I spend

My revenue comes from my salesMy profit = My sales – My costs


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Understanding profitsUnderstanding profits

It would be easy to think that if you increase sales by 25% then profits go up by the same amount

Actually something much more wonderful happens…. Take a look at the graph on the next page…..


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Costs / Sales / Profits RelationshipCosts / Sales / Profits Relationship


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Understanding ProfitsUnderstanding ProfitsSo if I increase sales by 25%

50p / book 40,000 sales = £2,000 profit50p / book 50,000 sales = £4,875 profit

If I increase the price by 50% and can achieve sales 75p / book 40,000 sales = £12,000 profit 75p / book 50,000 sales = £17,375 profit

And if I also double the price and achieve sales! £1.00 / book 40,000 sales = £22,000 profit £1.00 / book 50,000 sales = £29,875 profit


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Making Profits

Business

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