Bad Credit Business Financing: Compare your Gross Revenue and Profit
The difference between gross revenues and profit within a small business can be significant when overhead is brought into the picture. A business that is making many thousands of dollars in gross revenues may find that its actual profit margin is far below what one might have guessed offhand. Comparing the numbers between gross revenues and profit within your business can help create a more illustrative picture than looking at gross revenues alone, which is often the first thing that business owners do when reviewing monthly sales activity. Taking a deeper look at the accounting behind a small business, in particular a business that may be in extenuating circumstances due to bad credit, is an important part of management and should be done regularly enough to capture significant sales data.
Monitoring gross revenues is important should business owners seek alternative capital. How much small business owners can qualify for when applying for bad credit business loan alternatives is directly influenced by their gross monthly sales, so understanding what the numbers are and how they relate to the health of a business is essential when creating a financing strategy for bad credit business owners. When bad credit is present in a small business it can significantly increase the difficulty associated with applying for traditional bank loans. Keeping options open and making sure gross monthly sales are as normalized as possible is in business owners best interests.
Reconcile profit expectations with reality. Small business owners often project sales goals, but they may also consider setting some goals regarding their profitability as well, since low profitability paired with high gross monthly sales can set up issues related to an overextended budget and short amounts of cash on hand. Should there be an unsatisfactory breach between gross sales and profit, a few things may be to blame. Potentially, overhead costs are present that can be done away with, such as location based expenses or recurring payments for business services. Apart from that, business owners may need to rethink their pricing. Doing market research and figuring out what is a price point that works for customers while allowing for profitability should be fundamental to a business plan, but due to shifting economic realities, price points may need to be periodically adjusted.
Photo Credit to Simon Cunningham on Flickr