Developing a profitability plan will help you easily predict (based on financial data) how and when your business will start making a profit. It can be used to help you achieve your financial goals, measure your performance, establish a framework for making important decisions, and motivate other advisors/employees within your organization.
When you are building your profitability plan, you should first make sure to have your Data Analysis Process in place. If you have a CPA ,they can typically help streamline this entire process for you.
Profitability plans take into account your gross profit, your operating profit, and your net profit. You will be looking into your Profit & Loss Statement, your Cash Flow Statement, your Balance Sheet, your Sales Forecast, your Personnel (employee) Plan, and your Break-Even Analysis. We know, this all sounds like accounting, so we’ll make it as easy as possible.
- Profit & Loss Statement: This is a statement that easily summarizes the revenues (income), costs, and expenses of your business.
- Cash Flow Statement: This is a statement that summarizes the amount of cash coming in and going out of your business.
- Balance Sheet: This is a statement that contains details of your business assets and liabilities.
- Sales Forecast: This is a statement that shows your current and expected sales for the year.
- Personnel Plan: This is a plan that explains how you will employ people, what their salaries are, and what their duties/roles are.
- Break-Even Analysis: This is a statement that calculates the costs of your business against the current average sales price of each unit to justify your break-even point.
Maybe you do not have all of this information readily available, but you want to start building a Profitability Plan. Here’s a very simple way to take a snapshot of your business using your break-even point.
Add up your current expenses for the year.
Chances are you’ll need to roll in personal and business expenses for this budget because you need your business to make enough for you to personally make a profit. If you are working part-time or working in travel as a side-hustle, then feel free to only calculate your actual business expenses to find your break-even point.
Any amount earned above and beyond your expenses would technically be your profit!
You can use this number to create your goals for the year and make sure that you are on track to properly meet/exceed those goals. If you are looking to Transition into a full-time career as a travel advisor, you can easily create and use a Profitability Plan, along with an Accountability Plan, to set yourself on the right path.
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