Emergic: Rajesh Jain's Blog

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Business Monitoring Idea – 4

November 18th, 2010 · No Comments

What I have done is create a set of spreadsheets wherein I track numbers every week and every month. In addition, it has data for many of the key items for 12 months, allowing historical comparison, especially for margins.

As a business grows, the hope has to be that the margins improve. For that, it is important to track which key costs are within one’s control, and how they change with growing revenue. Some costs are fixed – like salary, rent, electricity. These should be reasonably flat month-on-month (or at least very predictable). Based on these numbers and an estimate of the gross margin, one can also arrive at a figure which reflects the breakeven revenue for a business.

Based on topline (revenue) growth, it now becomes possible to estimate when a business is likely to become profitable, and therefore how much cash will be needed till then.

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