My wife and I have a new business and between start up costs, equipment, taxes and payroll there is hardly any left over for profit. Is this normal? It is a construction business, and I have PLENTY of work lined up. We sarted in September.
2006-12-20 05:58:08 · 4 answers · asked by Anonymous in Business & Finance ➔ Small Business
Usually businesses take a minimum of nine months to break even, and upwards of a year to start cutting a profit. This is why most businesses fold in their first year. Luckily it seems you're ahead of the game, so congrats! Construction is also a pretty stable business, so you should be set as long as you guys can survive till your start pulling in the big profits. Good luck to you!
2006-12-20 07:31:57 · answer #1 · answered by Anonymous · 0⤊ 0⤋
You may have answered your own question. You are about four months old and have PLENTY of work lined up. Maybe you are not charging enough for your work and that is both the reason you have lots of it and are not making any money. Making a profit is easy: All you have to do is make sure your revenue exceeds your costs. It sounds to me that you don't know a lot about cost accounting. If you did you would not have asked your question. My guess is that you are not counting all your costs when you bid a job and I suspect that you are missing a lot of overhead items. You need to charge for these items when doing your bid. Understanding what to charge is what cost accounting is all about.
Look at all your costs for the first four months. Look at the number of units (hours, etc.) you billed for. Did you allocate your fixed costs among these various units? For example, is the electrical bill for the shop priced into each bid? How about the rent, the employer portion of payroll taxes, etc?
To answer your question, if you don't get the costs right you will never make money simply because the sum of the costs will always exceed the revenue from the jobs. You will burn through your start up capital and then go belly up. Happens all the time with new businesses. You either get smart or you get killed.
2006-12-20 15:54:54 · answer #2 · answered by Flyboy 6 · 0⤊ 0⤋
Did you write a business plan? If not you may want to. Part of the process of writing a plan is to project revenue. Additionally, a business plan would also include a budget which will help you stay on track financially. Try "Business Plans for Dummies". I've found it easy to understand. I am NOT a business guru.
2006-12-20 14:25:03 · answer #3 · answered by Jeffrey P 5 · 0⤊ 0⤋
Are you breaking even?
Then be happy!
2006-12-20 13:59:58 · answer #4 · answered by god knows and sees else Yahoo 6 · 0⤊ 0⤋