Business profitability is an indicator of economic efficiency, measured as a percentage. To determine profitability, you need to divide the profitability indicator by the amount of costs, i.e., resources involved in production. Thus, based on the level of profitability, you can evaluate the profit received for each invested ruble.
Profitability is influenced by a number of factors, such as:
The formula for calculating profitability looks like this:
P = P / (OPF + OA)
In this formula: P is profit, OPF is the cost of fixed production assets, OA is the price of current assets.
The level of business profitability indicates the cost efficiency and prospects of the enterprise. Except external conditions, profitability directly depends on internal factors, such as labor productivity, equipment, and production organization. The cost of the final product is reflected in changes in the range and price of products. To increase profitability, enterprises are recommended to increase product prices, intensify trade turnover and reduce production costs.
In general, the profitability indicator is influenced by over 30 factors that must be taken into account when determining this indicator. When calculating, you should remember the capital intensity of the enterprise, its market share, labor productivity, and product quality.
Without assessing profitability, it is impossible to adequately assess the effectiveness of an existing business.
When starting a new business, studying a business project or considering the terms of a deal, any entrepreneur asks the question - how profitable is this? Profitability calculations will help to adequately assess the efficiency and profitability of a future enterprise.
The ratio of income received from the sale of goods to the amount of funds invested in the production of these goods is called the profitability ratio. It is usually calculated as a percentage, but there are also indicators of profit per unit of invested resources.
In general, the profitability ratio can be expressed by the formula:
Where: R— profitability;
P— income from the implementation of the project;
AND- investments made in the project
In practice, financiers use several different odds, depending on the situation and the enterprise system.
Several types of profitability are defined:
1. On implementation: the ratio of the amount of total profit to the value of the revenue indicator for a certain period.
2. By assets: the ratio of net profit to the amount of assets for a certain period;
3. For current assets: the ratio of net profit to the amount of current assets for a certain period;
4. For investments: the ratio of the profit indicator to the amount of independently invested funds for a certain period of time.
The profitability indicator can reliably reflect the performance of an enterprise and its success. By this indicator, in contrast to the amount of income, two specialized companies can be compared.
In any business plan, one of the main points is the calculation of profitability. Determining this indicator is not so difficult; even a person without financial knowledge can cope with it.
For example, you can consider a business plan for opening a dry cleaner.
The average laundry and dry cleaning service involves the following expenses:
1. Registration of permits - 20,000 rubles;
2. Purchase and installation of equipment - 2,500,000 rubles;
3. Fixed expenses - 1,980,000 rubles per year:
Total: to open a dry cleaner and its uninterrupted operation required within a year 4 million 500 thousand rubles.
On average, for a month of dry cleaning, the net income is about 350,000 rubles.
Less wages employees, rentals and purchases Supplies we get income - 185,000 rubles per month.
At this rate of operation, the costs are fully recouped in 24 months, with a total return on investment of 44%.
Knowing the critical point of the project, you can easily determine its reliability: significant sales indicators above the profitability threshold indicate the financial strength of the enterprise.
Investors, knowing the break-even point of the project, will be able to determine the ability of the enterprise to repay the loan provided.
The profitability threshold depends on several factors:
Mathematically, the profitability threshold in general can be described by the following expression:
Where: P— profitability threshold;
Zpost— fixed costs;
Let's lock it up— variable costs;
VR- revenues from sales.
When it comes to investing in new project, it is important for the author to provide a profitability index. This index will help assess the profitability of the project. In other words, the index will show how much profit an investor will receive for each unit of investment.
Where: IR— profitability index;
Emergency- net profit;
AND— the amount of funds invested.
When deciding to invest in a new business, investors rely on the following index values:
Even the most tempting offer, which is simply impossible to refuse, can turn into a complete fiasco. How not to make a mistake when agreeing to a deal?
The economic effect for any business can be determined by calculating profitability. This will help you understand possible risks and determine future income for both a large enterprise and an individual entrepreneur.
Before starting a new business, it is very important to make a preliminary calculation of possible costs. You also need to calculate the expected income and indicate in what time frame it will be received.
We calculate profitability using the formula:
Where: R— profitability;
P— profit from the implementation of the project;
IN— revenue from the implementation of the project.
It is also worth taking into account all possible financial losses: interest on the loan, taxes, possible inflation, if the project is long-term. Then the calculation will be as close as possible to the real result and will fully reflect the result of financial and economic activities.
We also invite you to watch a useful video lesson on how to calculate business profitability:
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Many people constantly need a product that tends to run out. No, the buyers themselves, of course, dream of extending the life of their purchase as long as possible.
But a perpetual motion machine has not yet been created, so when you run out of medicine/shampoo/product, etc., you have to buy a new one. And a budding entrepreneur should take advantage of this. Therefore, let's look at a few best options, most consistent with the above-mentioned requirement.
People in Russia, no matter how bitter the truth may sound, have been sick, are sick and will continue to be sick. There is no other pill for all ailments, which is why there is such a rich assortment on pharmacy shelves. You can’t build happiness on someone else’s grief, but the pharmacy is very profitable business with investments, and such a business is worth taking a closer look at.
You just need to take into account the location and basic needs of the population in the area.
For example, the demand will be huge in those places where the nearest medicine store is several kilometers away. And we ourselves know that sometimes a tablet of the same painkiller is needed immediately.
Accordingly, if a given area is predominantly inhabited by families with children, the proposal should be consistent with their requests. This includes baby formula, various bottles, and pacifiers with diapers. Keep in mind that the activities of pharmacies are subject to licensing, and the license is issued for a specific premises. And this is a business that is not afraid of a crisis.
Pharmacies have a big advantage - scalability. Having opened 1 small one today, in the future it will not be difficult to open 1,2,3 more in your city or a couple in the neighboring one.
You can open a pharmacy either on your own or, with the second option, the income will be less, but its implementation is much simpler, since the franchisor gives everything you need and teaches you the intricacies and nuances of the business.
In order not to stray too far from the topic of medications, the second option is to consider opening a medical center. Difficult? Yes, this is not the easiest business idea to implement.
But remember government institutions: most visitors equate them to one of the branches of hell. Why not show those in need medical care new service format? There are no queues, all doctors are extremely correct and professional.
Naturally, the key to success will be choosing a suitable location. Third in a row on the same street honey. the center will clearly be superfluous. But it’s not worth opening it even on the outskirts of the city. You will have to think about a convenient place in advance.
In particular, attention should be paid to transport and walking distance.
Even the best medical center does not guarantee immortality. And in the near future, until scientists find the secret eternal youth, funeral services will be in demand.
The niche is very well developed and filled, but high quality and low prices will set your small business project apart from competitors. This promising business, as there are more and more people, and accordingly more die. Death is usually not expected by anyone, so the funeral process itself can hit the budget.
Offer your customers installment plans, discounts, and then the profit will become constant and stable.
Moving away from the sad topic, let's remember about car owners. Many of them simply dote on their vehicles, choosing the best for their four-wheeled friend. It’s worth taking advantage of this and opening a car service center. You should attract customers not only with reasonable prices, but also with good quality and speed of work. A simple business worth starting for a beginner. To start, you need to rent 2 boxes and hire 2 car mechanics.
Important point: It’s better to pay them a percentage of the revenue, usually it’s 50-50, but you can negotiate 60% for yourself, 40 for the master.
This point could be attributed to the previous good business, which can be opened in both a small and a large city, but we will consider it separately. Not everyone who wants to fix a car wants to wash it. And vice versa. It is worth noting that a car wash requires much less investment.
Therefore, if your starting capital does not allow you to immediately create something large-scale, but you definitely want to work with cars, take a closer look at the option.
It's consistently profitable small business with minimal investment. You can start it with only 200,000 - 300,000 rubles ($4,000), provided you rent a garage or box for this business.
All stores have one purpose: to sell goods. But in our case, we will consider several points of sale of different directions. So, what clothes are popular these days? The one who has good quality and low price. By the way, you can open a clothing store with minimal expenses.
For example, it could be a store, stall, pavilion with only men's underwear.
It is desirable that the assortment be presented in both small and large sizes. Also, do not forget about creating several departments at once: for women, men, children. This is a good business of your own, where you can cheat on wholesale price usually around 300%. Organizing this business is not difficult and special knowledge no need.
Cosmetics and perfumes for the fair sex are always a “sweet spot”. To succeed, you should care not only about quality, but also about different price ranges.
Yes, yes, we are once again considering the store as a business option. And the grocery point most fully corresponds to what was said at the very beginning: disposable goods are becoming more and more popular.
Choose the good, a suitable location (this is important), open a store, fill the shelves with affordable and excellent quality goods and you can expect a quick payback.
As in the case of a car wash/car service, we open a meat and fish store separately from the grocery store. Why? Because this way we can offer our customers the richest choice. The entire retail space is dedicated specifically to our meat and fish products. This will allow us to attract buyers and keep quality at the proper level. This is one that can be opened from scratch.
About 5 years ago there was not one in my city. Now there are already 6 of them. I live in small town, with a population of only 18,000 people. And none of them closed. My friends opened 1 such store 3 years ago. They are doing well and have no plans to close. Products they sell include homemade sour cream, milk, meat, cottage cheese, dumplings, cheese, etc. There is no point in listing the entire assortment, but I will say that it is impressive and the prices are quite high. And even with this picture, there are always clients.
For example. Sour cream for half a kilo costs 250 rubles; regular sour cream in the store is 4 times cheaper. But people buy and are happy.
Another similar store has a large assortment of homemade baked goods: eclairs, various cakes, including Napoleon, a huge amount various dishes and salads, already prepared. There is a demand, people buy because many are too lazy to cook after work.
It is difficult to single out the most profitable business from the above. After all, a lot depends, including on the scale. For example, undoubtedly a meat and fish store in 30 square meters will bring more profit than a pharmacy kiosk of 8 square meters. m. But we’ll try anyway. Based on our experience, the most profitable business today among those listed is pharmacy, medical. center, grocery and clothing store.
The most important choosing the right place, 90% of success for this type of business depends on it.
Before starting your business activity, be sure to draw up a detailed business plan in which you describe everything down to the smallest detail (consider all issues thoroughly). We hope we have answered the question - what kind of business is profitable to do. Good luck to you, dear reader and aspiring businessman!
Opening your own enterprise means not only starting to work for yourself, but also taking the chance to discover personal entrepreneurial opportunities, take control of financial control, and control over the use of your own time. In this matter, the most difficult period is the planning period for the business area, since the success of the chosen path will depend on it. Not many entrepreneurs at the start of opening a business have firm confidence in their choice. Most aspiring businessmen are at a loss trying to decide, studying different areas of activity.
It should immediately be noted that the profitability of a business depends on the field of activity. And they, in turn, are divided into several main types:
If we consider business areas from the point of view of risk, then the production sector is the most dangerous, as it requires large investments in an idea, the creation of a large enterprise, the establishment of the production of high-quality products, and their sale at prices acceptable to the buyer. In addition, there are cases that the produced goods, at first, do not receive the required demand, which means that normal profits appear after a certain period of time. And the wait for success for an entrepreneur often turns out to be very painful.
High risks of loss of profit arise in the production of perishable goods (food, cosmetics, flowers), when finished products, without having time to sell, it falls into disrepair.
In the manufacturing sector, a businessman must always be aware of all trends in the market, follow the latest trends, customer preferences, study new types of raw materials and processing technologies, know and use profitable advertising techniques.
Giving preference to the production sector, a businessman must understand that the income from investing capital will become noticeable only in a few years, and the profitability of the enterprise will become guaranteed after hard work and a long fight against competition.
Without a doubt, it is much more profitable to give preference to the trade sector, and occupy an intermediate link between the manufacturer and the buyer. There is no need to invest money in technology and planning, and the product range can be compiled from elements that are in demand in the market. In the retail sector, the main expense item is the rental of retail premises and the payment of qualified personnel. Therefore, the main profit from products is received by sellers, not by its manufacturers.
Today in Russia, the spheres of entrepreneurial activity in the field of services are in the most dynamic development. According to Western experts, the level of development of a country’s economy depends on the share of GDP coming specifically from the service sector. This area combines different areas of the market - it could be the Internet, cellular communications, a hairdresser on the corner of the house, or shoe repair near a bus stop.
Only the service sector can minimum investment generate a solid income. Whatever the service, it is not a material product that needs to be stored, which can deteriorate or become obsolete. The advantage of the service is that it bides its time until someone needs it. And to satisfy the need you need space, tools and materials.
For the service sector to become a profitable business, an entrepreneur needs to ensure that his offer is in demand at the right time and at a convenient time.
Today it is impossible to single out any specific business and say that it is the most profitable.
The profit of any enterprise depends on many factors:
Of course, the leading place in business areas is occupied by activities related to the Internet and its maintenance. Demand for these business projects is growing, and so are prices. And if you look into the future, the prospects for Internet business are quite tempting, as there is a constant expansion of this area and an increase in its demand. Examples of this include ordinary online stores, online dating, online casinos, web design companies and others.
Modern reality records that profitable areas of business rely on people’s attachment to entertainment and are guided by a person’s desire to get quick money. These include catering organizations and gaming clubs (casinos).
After the entertainment industry, high profitability indicators are provided by the service sector for clients having fun while on vacation. Since they are the ones who are able to spend large sums on receiving various services and purchasing expensive goods. The scope of services for vacationers can include seasonal rental of sports equipment (bicycles, boats, catamarans), sale of food products and souvenirs, rental housing and transportation of tourists.
At the next level of profitability is the trade sector. Here, in order to obtain high profits, it is important to choose a profitable place for trading, that is, work on gathering a large number of people and organize a catchy advertising sign. The option of a small basement in the courtyards, away from the bus stop, will reduce the number of clients by half.
In last place in terms of profitability are the production sectors. However, here you can create an enterprise with a high and stable level of income.
To do this, you will need to fulfill at least one of several important conditions:
An example of a unique production: piece production wooden furniture with hand carving.
An example of filling an empty niche: create an enterprise for the production of PVC windows and doors, the only one in a given locality.
Whatever the direction of the enterprise, its creation should begin with the development of a business plan. This material can tell you how to correctly compose such an important document: .
Thus, based on the stated conclusions and conditions, it is impossible to single out one business and say that it is the most profitable and profitable. This indicator is influenced by many internal and external factors, as well as the personal characteristics of the leader.
The most expensive and profitable type of business is financial business. Its essence boils down to transactions of purchase and sale of financial resources moving at the state and international level.
Such operations are carried out by such financial institutions as:
The activity of the financial market is carried out on the basis of its two components:
Today, the modern financial sector is in deep fusion with trading centers and currency, thanks to Internet programming. The introduction of new banking programs and techniques has made a breakthrough in this area. Money transfers, contracts and various banking activities began to be carried out in a matter of seconds.
Today, in the Central Bank of the Russian Federation, the gold reserve constitutes the country’s insurance fund and is a means of capital accumulation for the population. However, an increasing role in financial transactions began to fall on convertible currency and various means borrowing. The role of gold as world money has decreased significantly today, and this has a significant disadvantage - a growing problem with international debt has arisen, and the second wave of the international crisis is gaining momentum.
Financial experts, emphasizing the growing interest in financial business, emphasize that more than 1,000 banking structures have already been created in Russia, and more than 2,000 individuals own securities.
Commercial banks are in the forefront of the most popular financial institutions. To start such a structure, you will need 180 million rubles with confirmation of the source of their receipt.
To obtain a license to open a bank, you will need a complex stage of its approval, collection of a package of documents, as well as information about the participants involved (bank director, firms, companies, shareholders).
What operations can a commercial bank carry out:
All banking activities are reduced to passive, active and commission transactions, regulated by special legislative acts of the Russian Federation. The financial sphere of activity is carried out according to clear regulations and is accountable to the Central Bank of the Russian Federation.
To open a stock exchange, you will need to obtain a license, fulfill a number of conditions and collect a package of documents.
The essence of the stock exchange is the intermediary activity between persons selling and buying securities. Securities confirm the relationship that arose under a loan and developed between the person who purchased the security and the person who issued it (the issuer).
Financial business ensures the legal circulation of securities. Before being listed on the stock exchange, securities undergo a strict analysis in the listing system and only then are included in the list of stock values.
The operation of the stock exchange will be successful only if there is a clear accounting of supply and demand for the products offered. Exchange employees strictly monitor trading and control all actions of intermediary companies on the exchange. By adjusting the value of securities on the part of sellers and buyers, the administration of the exchange carries out transactions for the purchase and sale of securities.
The trade sector has been leading profitable areas of business for centuries. It is based on acts of purchase and sale aimed at carrying out the exchange process.
Today, 20% of Russia’s GDP is made up of trade, so it is separated into an independent area of the economy.
Where can I get money to start my own business? This is exactly the problem that 95% of new entrepreneurs face! In this article we have revealed the most current ways to obtain starting capital for an entrepreneur. We also recommend that you carefully study the results of our experiment in exchange earnings:
The main tasks solved by trading activities:
The trade sector can be divided into two types:
Considering the level of supply and demand in developed countries, it can be noted that in the USA there are 125 people per retail store, in Japan the level of supply is higher by 70 people. In Russia, there are 420 people per retail store.
A similar situation is observed with the availability of retail space in relation to the number of customers. Therefore, the current circumstances provide entrepreneurs with ample opportunities to develop trading activities, increasing the capacity of wholesale and retail trade.
The economic level of any state depends on the scale of its production activities. It is production that creates material goods, with the presence of which a person’s life becomes more comfortable and safe.
In past times, productive activity was at the core of all countries, but globalization processes have imposed a division of labor. Now you can observe how states that produce nothing, but only print money, can live richly and prosperously. Example - USA, UK.
Russia is among the countries that urgently need to open their production facilities. And dependence on a foreign manufacturer only confirms that our country is a “raw materials colony.”
Therefore, it is worth noting that today Russia needs ambitious and courageous entrepreneurs who are ready to increase domestic production.
The production sector of a Russian businessman today often frightens him with its negative aspects. It is this fact that is the constraint that slows down the development of large-scale, diverse production activities in the country.
The negative aspects of the production sector include:
Considering the service sector, it can be noted that it belongs to profitable areas and is divided into several types:
The list of services that commercial companies can use is quite diverse - these could be photographic services or construction work, services to help create kindergarten. Therefore, there is a niche for any entrepreneur here, taking into account his interests and financial capabilities.
Today there are hundreds of business areas, projects of which can be implemented quickly, and at the same time developed in such a way that expenditure items are minimal.
Just recently appeared the new kind activities – social business. If previously any business had only one key goal - to make a profit, then social business has two goals - to make a profit by solving social issues in society. He takes over complex tasks and solves them by combining a business approach with the desire to improve people's living standards, focusing not on oneself, but on society.
There are two main business models in the world:
In the commercial version, commercial structures sell their products and services to generate income.
In the non-profit option, the activities of government bodies and non-profit enterprises are carried out, solving social issues that are not of interest to commercial areas of business.
At first glance, everything seems to be in its place. But, unfortunately, this system does not work well today, and we still have poor, sick and hungry people in our country.
Non-profit organizations do not have the acumen that a for-profit business has. As soon as this problem became clear, Nobel laureate Muhammad Yunus published serious material for thought that will be of interest to entrepreneurs planning to work in business in the social field. In his progressive work, he outlined a unique, radically new business model that solves social problem areas of society through business methods.
Professor and talented scientist Yunus identified seven positions of business in the sphere of society:
1. The goal of business is not to increase capital, but to solve social problems that threaten people’s lives (increasing low living standards, protecting the environment, healthcare).
2. Investors in such a business return their invested funds without profit.
3. Profits from business are invested in the development of the company and improving the characteristics of its products.
4. The objective of the activity is to strengthen economic and financial stability.
5. A businessman is responsible for preserving the environment.
6. Workers should be provided with decent wages, and optimal working conditions should be created for them.
7. Social business must bring satisfaction to its leaders.
If we consider the most profitable areas of business activity, it is worth noting hotel enterprises. The nature of the hotel business is heterogeneous; there is a combination of interdependent and interconnected functions, pronounced individual and collective work, the presence different types property. And at the same time, it solves the key socio-economic problems of the country in the field of services.
The main difference between the hotel business and other areas of human practice is the close interweaving of the process of creating services and the simultaneous implementation of a range of services, that is, there are no intermediaries in the sale of goods, and it reaches the consumer privately.
The hotel management process consists of two parts that are dependent on each other: human service occurs with the simultaneous organization and provision of material services.
So, taking into account that servicing a person faces his individual needs, we obtain a condition when material production must have a direct connection with the customer. Such conditions push the business manager to study customer demand, advertise services, collect orders and study customer wishes using various forms of service.
In order for the hotel business to generate great income, it must provide maximum comfort, a high level of etiquette and culture, taking into account many organizational aspects.
For a hotel business to succeed, it should:
It is the service in the management of a hotel enterprise that is the main indicator of the performance of this service.
The head of a hotel enterprise must constantly monitor the improvement of service processes, that is, in solving customer requests, rationally organize an ordering system, using progressive methods in providing their services.
Thus, there are a number of features in the organization of the hotel business, knowledge of which will allow the manager to receive maximum profit from the business:
Restaurant activity refers to a specific service sector in which the success of the enterprise will be achieved against the backdrop of timely management actions, using extraordinary creative solutions. 
Increase the profitability and competitiveness of restaurant activities:
The placement of restaurants is permissible in educational institutions; customer service in this situation can be carried out according to a simplified scheme. With high competition, restaurants are divided according to price characteristics.
When opening a restaurant business, an entrepreneur must remember that:
When opening a restaurant business, its owner must remember that the basis of the functioning of any restaurant is the desire to improve the quality of products. That is, a strategy is chosen to satisfy the client’s needs. In this regard, restaurant marketing has special methodologies and methods for researching the work of restaurants.
Distinctive features of chain and independent restaurants:
Therefore, chain restaurants have a built-in specialized marketing policy, while independent restaurants are characterized by full-fledged service and uniqueness, which are formed against the backdrop of competition.
Today in Russia the construction business is one of the most profitable, as its profitability exceeds 50 percent. For this reason, many Russian entrepreneurs are ready to invest large amounts of initial capital in construction in order to return the investment in the next two years and begin to make a profit.
However, before plunging into the construction business, it is necessary to study the pros and cons of organizing this industry.
Basic positive sides in the organization of the construction industry:
The construction industry also has its downsides. Namely:
1. In recent years, there has been a decline in the production of building materials against the backdrop of declining volumes construction production.
2. Construction products are of low quality due to the use of ineffective, outdated technologies.
3. Unreasonable territorial location of construction production increases the cost of delivery of building materials, and accordingly, increases their cost.
4. It's difficult to get a loan. Banks often refuse loans, citing doubts about the stability of the company and its business prospects.
5. Common problem construction companies is the difficulty of strengthening positions in the construction market due to high competition, which is created due to already existing companies and the work of guest workers, whose labor is valued cheaply.
6. The realities of Russian life ascertain the facts of inflation processes in the country's economy, which has a significant impact on construction volumes.
7. Negative factors for the development of the construction sector are increased taxes and jumps in exchange rates.
Positive and negative trends in the development of the construction sector indicate that today it is a profitable industry, but against the backdrop of the financial crisis, it is experiencing a decline in development. The growth trajectory of the industry can be aligned construction organizations, directing its strategy and tactics to smooth out jumps in pricing policy.
Analyzing different areas of business, we can say with confidence that in Russia there are ample opportunities for starting profitable business activities in different directions. But this requires brave, persistent, smart and hardworking leaders. Having studied the factors described in the article that affect the profitability of a business, an entrepreneur will be able to structure his business activities correctly, reducing risk factors.
Evgeniy Malyar
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Business Dictionary
Examples of profitability of various business ideas, calculation formulas, terms and definitions. Find out which activities are the most profitable.
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When planning to open his own business, a future entrepreneur inevitably thinks about “what will he get from it.” This completely healthy interest is due to the need to invest funds, either own or borrowed. When receiving a loan, you need a business plan. If you invest your own money, you also always want to predict its return and the possibility of making a profit. The profitability of a business is determined by the profitability indicator. If commercial activity is already underway, it can be calculated quite simply based on balance sheet data. And if not?
What is a high profitability business? If this figure is, for example, 8%, is that a lot or a little? To answer these and other questions, you need to dive into the topic and understand some of the nuances.
The article focuses on the analysis of small businesses. Representatives of large businesses already know how to calculate profitability.
In general terms, profitability is the ratio of the result to the resources spent on achieving it, that is, a certain economic analogue of the physical term efficiency. This concept can be illustrated by the simplest speculative scheme: someone, buying a product for 200 monetary units, expects to sell it for 250, and “make” a quarter of the initial price (face value). If no other costs are incurred, then the profitability will be 25%.
An ideal business would be one that generates income and does not require any costs. This does not happen in real life, and if it does happen, then examples of such “air trading” are considered by law enforcement agencies to be fraud.
There are two main strategies for increasing income:
The choice of one strategy or another is determined not only by the personal desire of the entrepreneur, but also by the industry in which he is active, product positioning and many other objective and subjective factors. In some cases, a combination of methods is possible.
An example is the watch market. A manufacturer of mass products offers the market cheap products at prices ranging from a dollar to a hundred per piece. The company that owns the brand attracts wealthy buyers with very expensive, prestigious timepieces.
The specified characteristics of the product cannot unambiguously determine the level of profitability. This requires profit and cost data. The manufacturer of inexpensive watches uses an automatic line for assembly, but it is expensive, as is its maintenance. A prestigious brand requires a special infrastructure, including special showrooms, qualified salespeople, not to mention specialists producing handmade goods.
Overall profitability is determined by the ratio of book profit to all costs, including non-production costs.
For example, for a leased business they will include monthly rent, for franchising - the cost of the franchise, and when using a loan - payments for its repayment.
The profitability of a business is influenced by the degree of uniqueness of the product in demand. The seller gets the opportunity to dictate his price and set the profit margin in conditions of limited competition.
At the same time, there is a rating of economic sectors characterized by high profitability (production of cars, alcohol, cigarettes, mining industry and others). They are subject to increased tax rates, excise duties and other types of fiscal burden, or they are controlled by the state.
However, the stated general provisions give only a brief theoretical basis. Of practical interest for small business representatives may be information about calculation methods and cost items for specific types of small enterprises (workshops, catering establishments, retail outlets), as well as their approximate average profitability levels.
The generalized calculation formula has the form of a fraction, the numerator of which indicates the amount of profit, and the denominator indicates the cost of its formation.
R = P x 100% / I
Where:
R – profitability;
P – profit;
I – costs that form the income of the enterprise.
The smaller the business structure, the easier it is to take into account all the factors affecting its profitability in terms of costs. In other words, analyzing the activities of a company operating with a small number of types of costs is not a problem.
R = P x 100% / (VCm + CCm)
Where:
R – profitability;
VCm – average annual cost of working capital;
CCm – average annual cost non-current assets, including fixed assets of production.
Most often, the annual average values of the costs of working capital (raw materials, components, consumables, energy, etc.) are calculated as the arithmetic average of the states at the beginning and end of the analyzed period. The advantage of a small business is that with a small amount of equipment and a limited range of resources, the same thing can be done with much greater accuracy.
For example, the car worked from January to April, after which it was sold. Its average annual cost will be equal to one-twelfth of the book value multiplied by the number of months of operation:
CCm = CCb x T / 12
Where:
CCm – average annual cost of the main means of production;
CCb – book value of the means of production;
T – the number of months during which the product was used.
Using the same principle, the average annual value is calculated in the event of forced equipment downtime (for example, due to breakdown).
This indicator is of paramount importance in the production of commercial products. If you compare the profit brought by a unit of manufactured goods and its cost, then you will get the profitability of a particular product. In turn, profit is equal to the difference between price and cost:
R = P / Q = (PR – Q) / Q
Where:
R – product profitability;
P – profit brought by the product after its sale;
Q – product cost;
PR – selling price of the product.
It is quite natural for a novice entrepreneur to ask in which direction of economic activity it is most profitable to invest money. The most profitable industries are known, as is the average level of profitability for them. However, these data should not be taken as a certain guaranteed level. Some businessmen manage to exceed it, while others fail to achieve it.
The costs of opening a beauty salon are considerable: one rental will cost at least ten thousand rubles (by the most conservative standards). Modern representations A hairdressing salon requires a decent interior, special equipment, and the location plays a significant role. In general, initial costs from 170 thousand rubles are required. and more. If the business is organized correctly, they will pay for themselves in a year and a half, and the approximate profitability is 45%.
Opening a mini-bakery is considered profitable business, but again, it all depends on how well the business is organized. The required initial investment is from half a million to 5 million rubles. The payback period is on average up to two years. Profitability ranges from 20 to 50%, and at the same time naturally increases as sales volumes increase.
For a bakery or small bakery, the reputation that is achieved through years of hard work and high quality products. Experts believe that having a confectionery shop that provides greater added value is a rational way to increase profitability. According to some estimates, in this case the profitability can reach 80%.
Marketers consider the network nature of business to be an important factor influencing profitability. Availability of coffee machines located in crowded places ( shopping centers, cinemas, near supermarkets, etc.) significantly increases profitability. When opening a small cafeteria with “live” service, an investment of up to $60 thousand will be required, which will be repaid in three years, provided that the monthly plan of 7 thousand cups is fulfilled (consumption of 50 kg of grains).
The location is important, but even with a good location, without offering additional products (including “coffee to go”) it is not easy to achieve such a result. Possible profitability is up to 80%.
The profitability of the pharmaceutical business is obvious: the product is characterized by low price elasticity and the demand for it is stable. However, this advantage has led to high competition and oversaturation of the pharmacy market. As a result of these processes, pharmacy profitability is relatively low, ranging from the top 10% to the bottom 1.5%.
In Russia, 37 retail outlets of this profile account for one hundred thousand people (2016 data). Important components of success are:
The disadvantages are the large number of required permits and licensing requirements.
The basic profitability of catering establishments is around 25%, but for an inexpensive canteen, shawarma kiosk, pizzeria or other fast food with delivery, it may be higher. Profitability is affected by the presence of an organized branded network (franchising is possible). For a restaurant, correct positioning and location near places of concentration of possible target visitors (tourist sites, office centers, etc.) is very important.
Additional opportunities are provided by the service of providing set meals at an affordable price, as well as their delivery. Experienced restaurateurs put the personnel problem first among difficulties.
Carpentry business at home or in the garage is characterized by an average payback of less than two years (sometimes ten months is enough) and a high level of profitability (from 40 to 70%). However, serious initial investments are also required - up to 10 million rubles, as well as a competent assessment of the market, timber supply channels and possible options for large-scale sales. Calculations are based on prices in force in mid-2016: finished products cost 5 thousand rubles. per cubic meter m, and raw wood - 1.5 thousand.
Based on these data and estimated costs, as well as taking into account the percentage of waste (they can be recycled), the required productivity is 700 cubic meters. m. per month (according to primary round timber). The most profitable product line is the production of pallets, construction wooden fasteners and boards. There is always a demand for this product.
The profitability of cargo transportation is limited regulatory documents“bar” of 35%. However, it is not easy to achieve such profitability, given that the earning potential of SPD in servicing legal entities is determined by the presence of a bank account. To carry out passenger transportation, a license is required.
As for taxis, if the number of vehicles is more than twenty, the simplified taxation scheme cannot be applied. The main costs are operating and labor costs. Based on these factors and taking into account high level competition, transportation as a business is characterized by profitability of up to 10%.
This business gives a good profit, but due to the considerable amount initial investment(from 6 to 10 million rubles), the payback period for a self-service car wash reaches 5 years. Average monthly profit up to 300 thousand rubles. Profitability fluctuates around 30%.
Given the relatively low cost of entry into the flower selling business, it is considered very difficult. High risks and costs, perishable product and uneven demand, together set an average profitability of about 50%.
It is very difficult to predict the profitability of a car service center without taking into account the specifics of a particular business. A service station that provides the most popular services in a minimal set (tire fitting, electrical equipment repair, oil change, etc.) will cost at least two million rubles. At the same time, the costs for a full-fledged station, equipped with diagnostic equipment, lifts and a stock of spare parts, are several times higher.
The ratio of profits to expenses, that is, profitability, according to statistics, on average ranges from 20 to 50%. The payback period is from one to three years.
Competition in this business is relatively low due to the many difficulties of entering it. Drilling activities are licensed, work is preceded by geological research, water quality requires hygienic examination, and there are many other technical problems. Demand for the service is highly seasonal. However, the disadvantages smoothly turn into advantages for those who have overcome the obstacles and legally own the installation and the right to drill wells.
The main advantage is the relatively low price of entry into the business - from 35 thousand rubles. for fixed assets plus 100-110 thousand rubles. variable (current) costs per month. Clients pay 20 thousand rubles for a well. (on average), and if you drill at least eight of them per month, the revenue will be 160 thousand. Simple calculations lead to the conclusion that the average profitability is 13%. Under favorable circumstances, it is possible to recoup the costs within one season.
IN in this case It is also possible to calculate only the average profitability, and it is approximately 30%. The highest profitability is demonstrated by the service of developing online stores, which is also classified as an area of online commerce.
Hotel profitability ranges from 15–80%. Such a wide range of indicators is objectively due to the difference in conditions in which enterprises operate, but there are also subjective factors.
The presence of additional services in the hotel (SPA service, swimming pool, sauna, etc.) adds up to 6% to profitability and smoothes out seasonal downturns. As in any other business, competent cost management plays a paramount role in the process of increasing profitability.
Despite the saturation of the market, maintaining steam rooms of various types (Russian, Finnish, Turkish, etc.) is considered quite a profitable business with a profitability of up to 60%. Opening a business will cost from 1.2 million rubles. (for rent) or 2.2 million (for purchase). Monthly projected income is from 400 to 900 thousand rubles, depending on the range of additional services. The investment pays off on average in two years or less.
A significant share (up to a third of the resulting “dirty” profit) of costs falls on maintaining the premises in a state of operational readiness - exposure to hot steam destroys the structure of the wooden cladding.
Opening a pub in the modern sense is an expensive business. Renting premises and purchasing equipment will require over 700 thousand rubles, plus operating expenses and a lump sum contribution (if the business is based on franchising) - only about one and a half million. However, with a daily service of two hundred visitors and an average check of 225 rubles, the projected profitability can reach 27–30%. As a rule, a business reaches “point zero” five months after opening.
There are many myths about the profitability of candle production, which most often have nothing to do with reality. Talk about the unusually high profits of church production is generally baseless, since profitability non-profit organizations zero, and all the funds they earn (no matter how many there are) must be spent by the end of the reporting period.
If we consider souvenir or lighting products, including for birthday cakes and pies, then they are actually produced by enterprises and individual entrepreneurs from various materials(paraffin, stearin and wax). The total number of candles produced is up to 20 thousand pieces per year throughout Russia. The profitability of this production can reach 50 and even 100%. The main problem is organizing sustainable sales. Candles are not essential products.
The profitability of a tobacco store or kiosk is limited by high excise taxes and intense competition, which does not allow setting arbitrary prices. An entrepreneur can improve his prospects somewhat by using related products (lighters, cigarette paper, pipe tobacco, and smoking pipes, cigarette cases, etc.) The main emphasis, as a rule, is on a good location and assortment.’
Theoretically, profitability of up to 50% is achievable with a return on costs within a year (plus or minus a month), but in practice it is usually lower.
At the right decision challenges of location and assortment, the costs of a large store selling animal feed and related products can pay off in two years. Profitability, with an average markup of 30%, will be about 20%. The required initial investment is 2.1 million rubles.
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