Factors to Know When Growing Your Business In 2020

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Starting a sale business is no smooth ride. It can be very hectic and also requires all of your physical and mental energy. If you want your business to grow and be successful, then you have to work hard on it. Before starting a business, you must make sure that you have enough knowledge regarding this highly benefitting profession. Business is one of the most profitable professions you can indulge in. However, starting and then running a business is no easy job. You will make so many mistakes along the way, and you will also learn a lot of new things. If you need tips on how to grow a business, you can take help from the internet, books or you can also take classes of such nature.

Before starting a business, you must be aware of a few things. One of these things is that once you set the foundation for a business, you will barely find time on your schedule, and you will also have to compromise a lot of things. You will have to put all your time and effort into work, and you should be willing to stay and work all night when necessary.

Similarly, know that if you have good days, then there will also be bad days at the office. You must not let those days get to you or demotivate you from continuing to work hard. Your main priority should be work, and you must be willing to compromise your sleep, comfort and relaxation for work. That is the only way you will be successful. Also, start a business only if you are willing to make mistakes and then learn from them, if you aren’t that kind, then the business isn’t your cup of tea. Remember that it is okay to make mistakes as they are only proof that you’re learning, and you will rise back from a heavy blow.

Growing Your Online Products Sale Business

To improve your business, you must come up with plans and strategies that will help bring in more profit. It is crucial to keep the cash flow in check since if you are spending more money on your business and it is giving lesser back, then you will result in a loss. So, controlling cash flow is essential. On the other hand if you sale products online, you must consider providing a discount on the products you sale. You have to make sure that even after giving a discount on products, you must gain profit. Make sure to calculate discount rate before quoting prices on the products. This process will help you always to earn a profit on discounted products.

Just like that, there are other things you must keep in mind when aiming to grow your business. Firstly, it is essential always to treat your employees with respect. When you see them doing more work or if the work that they do is bringing you profit or benefit, then award them with a bonus. This way, they will stay motivated. You should cut things down that don’t benefit you. If you see a product doing unwell, then stop manufacturing it and invest that money in the products that people are buying from you. This way, you won’t result in a loss.

Another way is to increase the price of the product that is gaining popularity amongst customers. There are numerous other strategies that you can try to grow your business. Different ones may work for you but make sure to keep on trying out new approach; there may be one that will work correctly for you.

Calculating Your Profits

A margin calculator is a friendly tool for you. It is readily available on the internet and can be accessed anywhere, anytime and is free of cost. It helps in calculating your profit. You have to enter the cost that went into making the product and then the revenue it is bringing in, the calculator will then analyze the profit you are making. This is an excellent tool and is fast and efficient. It also saves you plenty of time and is very reliable. It is essential to know the difference between sale earnings and markup as it helps you in setting goals. If you are well aware of the profit you want to make, you can then set the prices of your products per the markup vs profit formulas. But, if you are unaware of the difference between the two, then you will be unable to set the correct price of a service or a product. This can then decrease your chances of revenue.
So, knowing the difference between the two should be extremely important. Sales targets and markup can be confusing. If you can’t sleep to figure out the difference between the two, then here it is.

Sales Growth Expectations

This tells the revenue that you earn after paying the cost of goods sold (COGS) as a percentage of gross (the difference between revenue and COGS) profit.
The formula to calculate this is (Gross profit / Revenue) x 100.

Mark Up

Markup shows how much more the selling price is of the product you sold than the amount the sale item cost you.
The formula for calculating this is (Gross profit / Cost) x 100.

It is challenging to decide which one of the two is more preferred. Although markup comes in handy by sales departments in setting prices, it can sometimes exaggerate the profit you might make from the transaction. If we talk in terms of mathematics, markup is a more significant number than gross earnings. So, people think that they are earning more profit, but the real case is sometimes opposite to that. But, if you calculate the sale prices in terms of sales, then you can compare the profitability of the transaction to the economics of the financial reports.

While the main aim is to find a price that will maximize the profit you make while simultaneously maintaining an advantage, you might find yourself confused between markup rates and margin values. Below are a few points as to how you can avoid the confusion when you are working with markup vs margin rates.

  • Make use of pricing tool for sales (pricing model can work too). Use the tool to estimate the gross percentage and the markup percentage.
  • Keep your charts of accounts organized as to match sales quotes to the profit rates.
  • Link or relate the gross percentage per sale invoice to the income statement.
  • Make sure that your employees that handle sales are familiar with the differences. You can expect an additional 2% to 3% profit if you target gross earnings vs the markup percentage.
James Mwangi

James is a Financial Trainer who offers Personal Finance Classes to Kenyans in Nairobi. He has been doing this for the last 5 years through his financial literacy page on social media.

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