Real Profit

For an owner of any business, given the number of hours, stress, and personal commitment an owner has to make, anything less than $100,000 a year in profit or earnings is not worth the risk associated with the running a business.

Cost Drivers in Small Business

Cost Drivers in Business

The textbook answer defines cost drivers as those factors that determine the overall cost of operations.  As an example, in manufacturing the cost drivers may be processing time or number of steps to produce the product.  In service, the cost drivers could be the actual ratio of billable to non-billable time.  Or it may simply...

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Profit

Profit refers the earnings from the business operations.  It customarily means the bottom line of the business income statement or its profit and loss statement.  For many business owners, it refers to the amount earned before income taxes are paid.  However, this is not correct.  It really means the amount earned for the owners of …

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Fixed Costs – Explanation and Examples

‘Fixed costs’ is a business term used mostly in cost accounting.  It has several meanings based on its usage.  The most common definition associated with fixed costs is expenses that must be paid regardless of production or sales volume.  The best example is rent for a company.  It doesn’t matter whether you produce or sell …

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Hobbies – Business Perspective and Tax Compliance

Many people turn their hobbies into a business function.  Not so much to make a living or make big profits, but more to help offset the costs of the hobby.  Whenever you go to one of those community fairs, the vendors at the respective booths are mostly folks selling a product that is direct outcome...

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How Much is a Fair Profit? Part III of V – Risk

A third factor in determining a fair profit percentage is risk.  Risk is divided into two types.  The first is insurable and the second is uninsurable risks.  Insurable risks are mitigated and have very little to no effect on the profit formula due to transferring the risk to a third party known as the insurance underwriter.  …

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What is a Reasonable Profit in Construction?

For any company, profit is based on the risk reward concept.  So in construction, what should be the profit (reward) given the risk?  What is a reasonable expectation given the industry and the particular business?  There is no single correct answer.  The construction industry is divided into several significant branches.  This article is focused on...

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The Financial Truth about Flipping Houses

During my recent vacation, I had the chance to watch one of those reality shows about flipping real estate.  These two partners in Texas bought a house, fixed it up, and then sold the house.  The show illustrated that they made $52,000 from the deal.  Really?  I have yet to see a deal like that...

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Food Service – An Introduction to Owning a Restaurant

I have always been impressed by those that provide this product and service to our society.  Overall, I don’t think they charge enough, but that is just my opinion.  It also comes out in the numbers.  I have reviewed the books for over 40 different types of food service operations.   From franchise based to the...

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