After writing several articles on the effectiveness of small business, I received a letter from a reader asking what profit is in business. I believed that this question is so clear that it is not worth talking about it in detail. In addition, I already wrote about profit in several articles, but have not yet written about it in detail. But profit is the main criterion for a successful business. There is profit – the business exists, there is no profit, and the business quickly disappears.
But thinking, I realized that the reader is right. A story about efficiency will not be complete without fundamental definitions of profit. And further, scheduled for writing, articles on the economy of small business will always be based on the concepts of profit. Therefore, although belatedly, this article appeared. Continue reading
Profitability – this term is heard by almost every adult. But not everyone understands what this term means. Not even all businessmen can explain this term. After starting to publish articles on small business performance, I began to receive letters from my readers asking them to explain the difference between business performance and profitability. And in general, talk about profitability – what kind of concept it is, how it is determined, etc.
What is profitability.
Basically, these are letters from those businessmen who came across lenders or investors. And one of the very first questions they were asked was the question of the profitability of their business. But not only for the sake of lenders, it is necessary to have elementary concepts of profitability. Profitability is one of the main indicators of business performance, which illustrates the effectiveness of all, without exception, business costs, the effectiveness of all its activities. Continue reading
To take out a loan in the fire order to pay off financial problems, even if it succeeds, as a rule, does not solve financial problems, but only exacerbates them. Loan debt is added to all debts. And again, a frantic search for money to recover debts begins.
And only a small part of entrepreneurs considers credit not as a solution to the problem, but as a tool that helps the work of small businesses, helps to develop small businesses. They can take a loan only in order to earn money on it, to develop a business, to prevent late payments, to increase working capital.
Before taking a loan, an entrepreneur should think not only about the purpose of the loan, but also its payback. Borrowed money should be used for business development, but only on condition that these loans are profitable. Continue reading
To begin, I would like to return to the definition of a bank loan. The simplest, and most common definition, loan is the amount of money borrowed by the borrower. Well, a profitable loan is either a sum of money borrowed, or property or funds acquired for this amount, begin to work for the borrower and bring him profit.
And before making a decision on a loan, a businessman must determine whether he is profitable or not. Profitable loan must meet certain conditions. Consider these conditions.
A profitable loan should have a clear purpose.
I already wrote, and I want to repeat again. A loan should be taken only when there is a clear plan for its use, there is an idea what effect will be from the investment of credit money. Continue reading
For a small business, there are several ways to determine the benefits of a loan.
The easiest, but also the most approximate way. Rather, it’s not even a way, but simply a condition for those entrepreneurs who do not want to consider the economy of their business. The condition is quite simple. The net profit of small businesses should significantly exceed all payments on the loan. The fulfillment of this condition must be indispensable. To some extent, this will allow the business to avoid bankruptcy. But only that. It is unclear whether there is a benefit from the loan or not.
To accurately determine the benefits of a loan, you should turn to the concepts of profitability. To do this, I recommend reading an article on profitability. Continue reading