Break even | Numbers Knowhow

7 SMART KPIs All Business Owners Should Track Each Month

Mahmood Reza — Tue, 10 Oct 2023 08:08:10 +0000

SMART KPIs may be a new concept for you. However, you’ve probably heard of SMART targets or objectives which are often used for employee performance measurement. SMART stands for Specific, Measurable, Accepted, Realistic and Time-bound, but what does this mean when applied to KPIs? KPIs, or Key Performance Indicators, are metrics that businesses can track over time to identify progress (or lack of progress) toward their targets. Targets are long-term goals such as a 10% year-on-year increase in net profit. So use a SMART KPI focused on net profit to monitor your success monthly or quarterly towards reaching your target. Therefore when you closely monitor your SMART KPIs, you’ll know whether your target is challenging enough or perhaps too challenging. In addition, you’ll get vital information during the target period rather than waiting until the end. In much the same way that mid-term tests and mock exams help students review their progress toward their final exam, KPIs help business owners monitor how well they are doing. How do I choose which SMART KPIs to track? To clarify it’s important to realise there are dozens, if not hundreds of possible SMART KPIs you could track. Therefore you must use your overarching […]

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What Is Operating Profit?

Mahmood Reza — Fri, 28 Apr 2023 10:13:25 +0000

Business is all about making a profit, isn’t it? But in accounting, there are several terms used to express different kinds of profit. Ultimately, what should interest you is your operating profit. There are multiple names for operating profit. You might hear people refer to it as EBIT which is the acronym for earnings before interest and tax. It can also be called PBIT which stands for profit before interest and tax. Another name for it is net profit. Definition Operating profit is the profit you make after you’ve deducted your costs for making the goods you sell and also the costs for running your business. Furthermore, it’s your total revenue minus costs of sales along with operating costs. How to calculate operating profit The easiest way to show you how to calculate your operating profit is to use an example. That way you can translate it to your business and make your own calculations. Let’s take an artist as our example. Say you’re an independent artist who sells their art and you’ve got your own company. The moment you sell a piece, you’ve made revenue. As per our definition of operating profit, you now need to deduct the costs for creating that artwork. […]

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What Is Break Even In Business?

Mahmood Reza — Fri, 14 Apr 2023 09:07:45 +0000

To understand break even, you first need to know the components involved with business activity. But how do you find out what your business requires to break even? What is break even in business? Your business breaks even when your sales cover all your costs – when neither a profit nor a loss is made. To be able to work this out in more detail, there are numbers that you can analyse. These include ‘sales revenue’, ‘fixed and variable costs’, and the ‘contribution margin’. Break even is the point where the total revenue generated equals the total cost incurred. To put it simply, this is achieved when all the money spent on production, marketing, distribution and administration is covered by the sales of the product. It is not uncommon for businesses to spend more than they earn, so knowing how much you need to sell to cover your expenses is crucial. Why break even is important Knowing and understanding your break-even point gives you better insight into your business, accountability and enables you to make important business decisions that will improve your profit margins and company success. You can pat yourself on the back when reaching that financial milestone! […]

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How To Judge Your Financial Performance

Mahmood Reza — Tue, 11 Apr 2023 08:59:07 +0000

How do you assess financial performance? It’s not that straightforward, isn’t it? Knowing how to judge your financial performance can be tricky. It’s because many factors come into play. Plus, it’s not always easy to know where you stand. You can get a good idea of how you’re doing if you turn to your numbers – more specifically, your income and expenses. Take a careful look at them, and it should be much clearer where your business is at the given time. In the words of Dietrich Bonhoeffer, “Action springs not from thought, but from a readiness for responsibility.” So, to be able to lead your company to a brighter tomorrow, you need to be informed about the facts, take responsibility for the current situation and plan away based on reasonable data. Care for some tips to get you started? Read on to learn more. Know your income and expenses If you’re running your own business, it’s important to keep on top of your financial performance so you can make sure you’re making a profit. But how do you know if you’re doing well or not? Here are a few tips on how to judge your financial performance. Regardless […]

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