You can assess profitability by making financing and profitability calculations. Careful planning is the only way to ensure that the enterprise you establish operates on a realistic basis.
A financial statement reveals the acquisitions your company needs to make in the early stages in order to enter business. These calculations take account of the period during which the company will be without sufficient sales income to cover expenses such as wages, rents and phone bills. You should also enter sources of financing, such as loans, in the statement. You must also include your personal financial investments in the company and existing IT equipment, among other matters.
A profitability calculation, in turn, helps to outline the company's sales targets. In the calculation, you examine costs and determine how many hours of work are required, for instance to meet income needs. As the end result, the calculation shows how much you must gain in sales at a certain price and over a certain period of time. Profitable business covers expenses and yields profit covering your living costs and other needs.
Profitability calculations and financial statements are included in the business plan prepared on the basis of the company’s business idea. These calculations and a business plan are often required as a prerequisite for applying for financing or support to start a business.