Making Profit

Making Profit
August 12, 2019 Gary Shotton

At the end of the month or end of the year, we all hope to see a profit. This only happens if we can maximize profit at on individual job or project. #000299

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Making Profit

By Gary Shotton

This text is in Extreme Rough draft and will be edited in the near future.

hello my name is Gary Shotton and I’m sitting here in the country of Croatia in this capital city of Zagreb and I’m delighted to be a part of a trip here to help encourage businesses but on a weekly basis we talked to groups in developing nations and particularly East Africa and one of the questions that came up was a situation where someone had started in a chicken farm raising I think eggs but probably maybe broilers I’m not sure but the situation was such that after a period of time they were selling the product and they’re selling the product and they went bankrupt and they said what happened how could this happen well let me tell you that’s something that’s extremely common in start-up businesses and I want to answer that problem or that situation to the best of my abilities because we all could face that we’re working hard and at the end of a period of time there isn’t just isn’t any money well first of all we have to look at every situation we’re calling this a making profit how do you actually make profit and so when we look at a profit we usually look at a time period of one year how much profit did we make in one year that’s nice to know we could look at a situation regularly and should be looking at how much profit did we make at the end of each month so you know only if you were making profit in most of the months or we had good profit in some months and you add all the months together then you could say at the end of the year you had this amount of profit but let’s go down further let’s say that we were looking at each individual job that we did we call the term job costing but in this sense just say making profit at the end of each job did you make a profit and that’s going to be a challenge or a situation where you’ve got to be able to keep some records not a lot of records with some just basic income records and expenses records on the individual job that you’re doing so let’s take the chickens somehow these people got some chickens I don’t know how many let’s just say that there was a hundred chickens let’s just say those chickens cost has baby little bitty chickens two dollars each that’s not out of line in my country and maybe at the end of the growing season when they grew up from just babies to ready to lay eggs that would be about five months and so let’s say at that point these chickens cost $10 each that’s your startup cost you see you could buy them as little bitty baby chickens but you have to have the money to get them to the point that they’re laying chick laying eggs so let’s say that they’re actually at that point and they’re ten dollars per chicken and those chickens now and you have again a hundred chickens so you can do the math there’s the amount of money you would need to have for what we call startup that’s how you’re going to get started and then at that point you’re ready to run you’re ready to go on going on going you’re gonna feed the chickens you’re going to gather the eggs you’re gonna feed and water the chickens are gonna gather the eggs you’re gonna sell the eggs now you’re up and running now at that point you’ve got to be able to cost everything again to get started let’s say you know that they’re ten dollars a chicken but now you’re running on a regular weekly basis and you now need to count all of the costs related to those eggs in this case most of the cost is going to be that the the feed water is not going to be very expensive so the feed is going to be the major cost but you should figure in your cost of labor now if this is just a small operation you should have a job or doing something else someplace else so that you’re getting income for your household so you can’t put too much a burden on these just 100 chickens now to raise enough money to feed a family of 15 or something not that’s not fair you have to have other income so that these this process of investment of your chickens and your eggs can make a chance of making a profit and you’ve got to be able to take good records at that point and at this point you need to know hey these chickens are going to take some mixture of good food you should have done your research so you know the best food I know one of the foods is some fish and dried fish and some grain and now you’re gonna have to look and see how much grain how much of fish how much ingredients is necessary on each month if let’s say to raise that hundred chickens and that’s a sum of running down to figuring out exactly what cost per egg to raise those that those chickens and make the those eggs sellable so our dozen eggs so basically each egg would cost you certain amount I’m gonna make up a figure of 20 cents you can sell each egg for 20 cents now you’re gonna have to ask yourself what did it cost me for that 20 cents of eggs that it cost me 10 cents that’s your cost of operation and if you’re not making your cost of operation then you’re not going to make a profit at the end of the end of the month end of the year well this is this why would I say just 10 cents well most people do not figure their overhead the cost of keeping things running and my general range of thought is that in most cases your cost of direct expenses should be somewhere around fifty percent or one half of your selling price of your product or service because that leaves you some room for overhead the cost of things you didn’t really count on relate it to directly those growing those chickens and those eggs and in reality there’s probably going to be around 40% of those selling price of the eggs that covered that are just the overhead of operation I know it may be hard to figure out to begin with but if you’re doing certain things you’re going to have some operational just buying the gasoline for your car or going to town those things that would be ready most businesses should be targeting 10% profit all that sounds so small well I’m telling it’s pretty close most people that say are making 40% profit they are not making 40% profit because they’re not paying all the bills fairly out of that related to that and so your profit is what’s at there after everything’s paid absolutely everything and most of the time it’s going to be around 10% is a good target and by the way if you want to grow you’ve got to take some of that 10% in order to buy your your chickens buy some growth chickens buy some more chickens and so that you’re growing all the time that you’re always adding to your flock let’s take some other products let’s take someone that’s making cakes well to make a cake what are the ingredients in making that cake first of all if you’re making cakes you probably could start maybe in your home so you have very little overhead very little cost of getting started the ovens in your house the the cost of operations when you move to a new location where there’s actually a store then you’ve got an overhead so while you’re in your house that’s that overhead is is covered by your household but when you’re out at that other location you’re going to have that cost again what is the cost of the flower what is the cost of the the the the salt what if their sugar is or whatever’s ingredients in there you should know that the the amount of cost of each individual piece of making that with let’s say a full cake and then you look at the cost of selling that cake the money that really comes in and decide how much was the direct cost of that cake to make the cake he goes and everything if you’re a tailor like you’re making this coat what is the cost of the labor what is the cost of the leather what is the cost of the thread you need to know that individual cost of each thing well it’s raining here now so I better wrap it up I’m glad to be a part of this I hope this makes sense because the job costing of each individual part is what makes up their profit and if you make the profit in one segment of this then you add that together and you have a hundred chickens great there’s your profit and by the way you’ve got to grow step by step don’t try to grow too fast make sure you understand your accounting and your job costing before you get larger well I’m here hoping this is helpful to you we wish you the very best and and and we believe that you’re going to make profit with your business thank you

 

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Gary Shotton
Founder | IBBTalks.com
The founder of IBBTalks.com which was formed to "Inspire Better Business."
As an astute businessman, he is passionate about helping others in the business world achieve maximum profits. He has a keen interest in international business. www.InspiringBetterBusiness.com

2 Comments

  1. Tim Walterbach 12 months ago

    Did you have any problem playing the video? I tried on two different devices and couldn’t get it to plug.

    • Author
      Gary Shotton 12 months ago

      Yes, I messed up and did not load the proper video before I left for Florida. It is fixed now if you wanted to go back on that e-mail or just to the website.
      Blessings,
      Gary

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