Calculation of business ideas

The need to determine what the profitability of a business arises very often:

• If you are just developing a business idea and deciding whether or not to implement it.
• If you are trying to understand the prospects of competitors.
• If you are offered to buy an operating company.
• Finally, your business is evaluated by the bank, which decides whether to lend or not lend.
• In many other cases.

It should be noted that all these cases have their own specific techniques.

In this article, we will focus on the first case - the assessment of a business idea and the forecast of income from its implementation (since the section in which this article is located is devoted specifically to starting a business).

You can also evaluate your business idea with our online calculator. There you are dealing with real numbers, here you are told about general approaches.

Calculating the profitability of a business idea

As a first approximation, you, in fact, just need to calculate everything "on a napkin", without complicated calculations and mathematical models. For experienced businessmen, such calculations occur almost in the subconscious.

Beginners should do everything consistently and logically.

Bad calculation

Hence the temptation to operate with abstract numbers like "market share".

Many beginners reason like this: 100 million are spinning in this area a month, if I win at least 5% of the market, I will have 5 million!

Financial plan. For many aspiring entrepreneurs, this part of working on a business plan seems daunting. Complex graphs, long and painstaking hours at the computer, searches for errors that have crept in from nowhere and, of course, nerves and nerves again are drawn in my mind. The Business Calculations mobile application from the 1000 Ideas company can significantly facilitate the process and even make it pleasant and exciting.

The Business Settlements mobile application was created to simplify financial settlements when preparing business plans. It allows you to accurately determine all the key parameters of investment projects. With it, you can easily calculate all the main financial indicators of the project, including revenue, net profit, fixed and variable costs, payback period, cash flow (cash flow), and secondary ones. For example, make a more thorough and serious assessment of your project using the so-called discounted performance indicators.

Working with the Business Calculations application is convenient because the user can quickly estimate the prospects and profitability of the project by entering and changing the financial parameters of the chosen type of business. The final calculation is compiled automatically based on the data entered by the user, divided into nine stages. The results themselves can be viewed both in the application itself and by sending a more detailed version of them to your e-mail.

We suggest that you familiarize yourself step by step with the operation of the “Business Calculations” application using the example of drawing up a financial plan for the “Cafe-Pancake” project.

Stage 1. Choosing a taxation system. First, we introduce the most suitable taxation system. In case you do not know which taxation system will be less burdensome for your type of activity, you can change the choice after receiving the results, and then compare the final calculations at different systems and rates.

In the case of a pancake cafe, we have chosen a simplified taxation system, the object of taxation of which is income, and where the rate is 6%.

Step 2. Entering initial data. After choosing the taxation system, you must enter the initial data: the start date of the project, the date of the start of sales, the approximate date for reaching the planned sales volumes, as well as the refinancing rate.

If, in principle, everything is clear with the first three points, then the value of the refinancing rate must be found using the link offered in the appendix. From January 1, 2021, its value is equal to the key rate of the Central Bank of the Russian Federation as of the corresponding date. In any search engine, we find the value of the key rate for today. In our case, it turned out to be 9%.

Stage 3. Investment costs. The next step is called “Investment Costs”. In it, you must enter all the initial costs invested in real estate, for example, in the acquisition or renovation of premises, in the purchase and installation of equipment and intangible assets.

In our case, in the “Real estate” section, we will enter the cost of repairing the rented premises (500 thousand rubles), in the “Equipment” column - a list of production and commercial equipment for the production of pancakes (389 thousand rubles). rubles), and in "Intangible assets" (115 thousand rubles) - the costs of registering an LLC and obtaining permits from various authorities (SES, Gospoznadzor), as well as the cost of conducting a starting advertising campaign.

Steps 4-5. Choosing a method for calculating income and entering income. Next, you have to choose one of three methods of calculating income: “Calculation of income from production and sales of products and services”, “Calculation of income based on the average amount of a check”, “Calculation of income based on planned revenue per month”.

Brief Investment Memorandum

Investments in real estate are one of the most reliable types of investments. In addition, it does not depreciate over time. The demand in this area is always high. For people, the housing issue is of paramount importance. To solve this problem, they most often turn to real estate agencies. Even in times of crisis, this market does not experience serious losses.

The agency is often opened by people familiar with the real estate business - former realtors or real estate appraisal experts who have experience and have developed their own client base. The seeming ease of opening this business has let down many start-up entrepreneurs, as a result of whose inept actions most of the agencies are being closed. A reasonable option is to work for at least 6 months in this area, perhaps even in several companies, gain some experience in finding clientele and communicating with people, make important contacts, your own customer base. And only after that you can invest in the project.

To create a promising organization, you need to have a clear plan for the implementation of tasks. This business plan addresses important aspects of this case.

Key factors for the success of the project:

• A huge number of consumers.
• High amount of resources on offer.
• Free entry to the market.
• Low upfront costs.
• High profitability of trades.

The initial investment is 428,000 rubles.

The break-even point is reached in the first month of operation.

The payback period is from 6 months.

Internal rate of return - 88%.

Material on the topic: "Calculation of a business idea" with full explanation and justification.

How to calculate the profitability of a business

The need to determine the profitability of a business occurs very often:

• If you are just developing a business idea and deciding whether or not to implement it.
• If you are trying to understand the prospects of competitors.
• If you are offered to buy an operating company.
• Finally, your business is evaluated by the bank, which decides whether to lend or not lend.
• In many other cases.

It should be noted that all these cases have their own specific techniques.

In this article, we will focus on the first case - the assessment of a business idea and the forecast of income from its implementation (since the section in which this article is located is devoted precisely to starting a business).

You can also evaluate your business idea with our online calculator. There you are dealing with real numbers, here you are told about general approaches.

Calculating the profitability of a business idea

As a first approximation, you, in fact, just need to calculate everything "on a napkin", without complicated calculations and mathematical models. For experienced businessmen, such calculations occur almost in the subconscious.

Beginners should do everything consistently and logically.

Note that one of the accompanying stages of "development" of a business idea is the analysis of the market and competitors.

Hence the temptation to operate with abstract numbers like "market share".

Many beginners think like this: there are 100 million a month in this area, if I win at least 5% of the market, I will have 5 million!

From this article you will learn:

• What does business payback mean
• What is the payback period of a business
• How to calculate business payback
• What ideas for business the fastest payback in Russia
• How to shorten the payback period of a business
• How to implement business ideas from scratch
• Where to get money to implement your business ideas
• 2 mega cool business ideas of 2021 on the Internet
• Another 56 business ideas related to the Internet in one way or another
• 7 criteria for an ideal business idea
• 9 common mistakes in the implementation of any business idea
• 6 books for aspiring businessmen

Any businessman who recently started his own business wants to know when it will pay off and start generating income. And this is quite natural, since the funds invested in the business must be returned. The situation is simplified if it is your own money. And if not? If they are borrowed from relatives, friends, or, even worse, at a bank at interest? How to assess the return on business? About this in our article.

What does business payback mean

Payback is the rate of return of funds invested in a business project. The shorter the payback period, the higher the return on investment in the business and the better the entrepreneur is doing.

The payback period is the time it takes to return an investment. Based on this indicator, one can also judge how successful, stable and promising the business is.

The starting point of payback is considered to be the start of direct activity within the framework of a business project.

The payback point is the starting point of the calculation period, after which the current net profit is considered positive and stably remains so in the future.

Discounting costs is the reduction of costs that will appear in the future to the present moment through the recalculation of the amount using the discount coefficient. This is a basic indicator that determines the cost of funds, taking into account the time factor.

The break-even point is considered to be a point in the calculation of the return on business that allows you to determine the amount of services provided or the financial equivalent of the total volume of production, when the amount of initial investment becomes equal to the amount of net income received.

Business payback period