We understand business profitability by industry: formulas for calculating company profitability. Profitability - what is it, types and formulas, how to calculate and increase profitability Business profitability sale

Content

Today, the unstable financial situation in the country is leading to job cuts. Some people find jobs in new companies after being fired, while others are looking for ways to organize their own profitable business. After reading the article, you will find out which business is profitable to open in Russia with small investments.

What business is in demand now?

Supply is formed by demand. This is one of the main economic laws, therefore, in order to open the most popular business, you need to determine what products and services the population of your city needs. It is believed that in any region, the greatest demand is for organizations engaged in repairs, replacement of plumbing fixtures, and sales of household chemicals and products. An analysis of the market for services and goods will help you find out more precisely which business is relevant now.

Demand for services

According to statistics, employment agencies are very popular: the crisis and constant layoffs increase the need for such organizations. Demand for the services of plumbers, hairdressers, electricians and funeral directors remains unchanged. In Moscow and other large cities, companies providing commercial transportation come first in terms of the number of requests. Organizations from the beauty and health sector are only 1% behind in the top. By finding out which services are in greatest demand among the population, you can organize a profitable business.

What is profitable to sell now?

Aspiring entrepreneurs like to wonder what people are in demand right now. Current products remain the same. Example of high-margin products: flowers, drinks, jewelry, handmade products. Such goods are distinguished by stable demand, low production and storage costs. Popular alcoholic drinks are considered popular products.

What kind of business is in demand now in a small town?

Beginning entrepreneurs bypass small settlements. In their opinion, business there brings in very little income. This is partly true, because salaries there are lower than in big cities. The costs of renting and purchasing premises will also be less than in big cities, so you can organize your own business with minimal financial costs.

The most popular business in a small town is a general hairdressing salon. In addition to hairdressers, there should be manicure-pedicurists, cosmetologists and massage therapists. Shoe and furniture repair shops are popular regardless of the financial situation of the country, because... people tend to restore old things because they are afraid of spending a lot of money.

In-demand business

Commercial activities are always aimed at satisfying people's needs or stimulating demand. Any promising business is built on this. You can create demand for products artificially by advertising products on the street and on television. The relevance of the entrepreneurial field and whether business decisions are effective still play a significant role.

Profitable business

Commercial activities should generate maximum income with minimal cash investments and exploitation of various resources. These features characterize a highly profitable business. During a crisis, you should not open enterprises engaged in the production of any products. Their profitability will be low, the risks will be high, and you will see real profits only after a few years. The service sector is considered successful.

Super profitable business

All aspiring entrepreneurs dream of receiving fabulous money, but few manage to realize this in practice. Some franchises allow you to build a highly profitable business from scratch in just a couple of months. Another way not to save and get a lot of money is to create a completely new and in-demand business for the region. Options for directions: from restoration or car rental to your own consignment store.

The most profitable business

By opening your own bakery in a large city, you can quickly return all the invested funds - in less than 2 months. A similar situation is observed with healthy food restaurants. People are no longer attracted to fast foods. The fastest-paying business is able to return all invested funds within a month. Before starting your own business, study current business ideas, sorting them by profitability indicators for your region - this way you can weed out proposals that will lead to bankruptcy of the company in the future.

Profitable business on the Internet

A distinctive feature of activities on the World Wide Web is the lack of connection to your place of residence. You can look for clients both in your city and outside it, so organizing a profitable business on the Internet is easier than doing it in the real market. A budding entrepreneur does not even need start-up capital. There are several areas of such business:

provision of online services (programming, design development, accounting, etc.);
launching an online store;
participation in affiliate programs;
creation and promotion of your information product.

You can create a current business providing services on the Internet if you are a specialist in any field. You need to create a portfolio or launch a business card website where your skills will be described in detail. You can launch an online store without money, acting as an intermediary between foreign sellers and buyers from Russia. Products will be sold with a slight markup.

Online store

Let's take a closer look at opening an online store.

Pros:

minimum investment (often 10-15 tr. is enough)
you can work in the Russian Federation from any city
everything is growing rapidly: in 2018, the turnover of online commerce exceeded 1 trillion rubles, the forecast for 2023/24 is 3-4 trillion.

There are 2 main problems - finding a profitable product and standing out from competitors.

Advice - communicate more with the owners of existing online stores. Then the ideas will come on their own.

The best place for communication is clubs of Internet site owners. The largest of them, Imsider, unites tens of thousands of entrepreneurs. The club was founded by the owners of large websites; large (including free) online and live events are held every month.

it is led by the founder of the club, Nikolai Fedotkin, owner of the Video-shoper store (the site is visited by 10-15 thousand people per day)
issues of choosing a niche (they provide more than 1000 proven products), competition, website creation, advertising, suppliers, individual entrepreneurs, delivery, etc. are resolved.

The webinar is free. You won't find anything better in Russia now.

Profitable business with minimal investment

Many people want to make a profit without spending their own money, but not everyone succeeds. In practice, a profitable business with minimal investment can be organized if you offer products of your own production, engage in intellectual work, or act as an intermediary, organizing purchase and sale transactions. Some open collection points for glass containers or scrap metal in the garage.

Network marketing also refers to earning money with small investments. You can develop your business at home by recruiting interested people from the population. If the idea of creating a network of independent distributors does not appeal to you, then you can take up farming: the demand for basic food products that are not harmful from an environmental point of view is high among residents of megacities.

Rating of profitable businesses in Russia

Commercial activity must be profitable. The proceeds must cover the costs of further development of the organization, wages of employees and the entrepreneur’s own needs. If this is not observed, then the business is considered unprofitable. Some entrepreneurs initially choose unprofitable areas, which leads to loss of finance over time. By studying the rating of small businesses by profitability in Russia, you can avoid this. The TOP 5 best entrepreneurs include:

Private auditors. The economic state of the country and changes in legislation have virtually no effect on the popularity of auditing. This list also includes consulting services.
Clinics of narrow specialization. Various types of cosmetology and medical procedures are in demand among residents of all cities, so this field of activity is classified as highly profitable.
Accounting services. Needed by both small companies and large enterprises. The only disadvantage of this industry today is high competition.
Law offices. A highly profitable business with well-qualified specialists and many cases resolved in favor of clients.
Microcredit. This niche has gained popularity over the past 3 years. Money is issued on the security of products produced by enterprises or any property.

Business profitability by industry

Economic performance indicators determine whether a company will survive or not. They need to be taken into account when choosing the direction of the enterprise. Economic efficiency indicators determine the company's development strategy. Below is a table showing business profitability by industry:

Business industry	Percentage of profitable organizations
Transport/logistics
Trade, catering

Finance, insurance, banking
Mechanical engineering
IT and software development
Business services
Car sales and service
Food industry
Scientific activity, education
Construction, reconstruction and modernization of buildings
Ore processing, mining
Pharmaceuticals, medicine

Business profitability is a relative indicator of economic efficiency. In other words, this term explains the efficiency of the company’s use of property assets. Calculating the indicator gives a detailed idea of the total profit for each ruble spent.

Let's start with the fact that any money invested in a business should pay off over time and make a profit. Profitability is the ratio of this profit to all the costs of obtaining it. The higher this ratio, the greater the confidence in the stability and prospects for business development.

How often does a leader need to engage with or change company strategy? Most directors who have created successful businesses and management consultants agree on one thing: in modern times - constantly. A change in strategy is not an indicator of weakness, but, on the contrary, an indicator of the survivability of the company.

In the article we have collected four types of strategic approaches, their examples, as well as templates and tables for defining a company's strategy.

But it happens that the values of absolute profit indicators can be high, while the value of profitability remains small. Then the enterprise ceases to pay for itself (it becomes unprofitable). On the other hand, this ratio may have a high value, and increasing business development costs does not have a strong impact on profits. Then management thinks about looking for many other economic approaches.

Profitability is calculated in the following cases:

obtaining a loan;
business development assessments;
comparison of own profits with the profits of competitors;
sales performance assessments. How to increase the profitability of your sales department

Any bank, before issuing a loan, evaluates the return on capital of an enterprise. In other words, it checks whether the enterprise receives profit from each invested ruble. The profitability of borrowed funds is especially important. When making calculations, the percentage of borrowed capital in full and the difference between the profitability of equity and funds to be borrowed are addressed.

Let us assume that upon receipt of borrowed funds, production profitability begins to increase. Then it makes sense to attract borrowed funds in the future. This is the effect of financial leverage.

If suddenly the profit from business development begins to fall even slightly in a relatively short period of time, it’s time to start calculating profitability. This is done in order to promptly find the reasons for the decline in profits by assessing various profitability ratios. The reason may be hidden in many factors. For example, due to the excessively high price of the product or due to an error in the distribution of wages.

If the price of the final product is high, the costs of its production will correspondingly increase. Moreover, at such a fast pace that costs will be significantly higher than expected revenue. You need to be careful when setting the price. If the profitability of a certain product is known, then the markup can be calculated using the formula:

Almost always, business owners experience problems with profitability. It happens that many companies turn to third-party service consulting specialists, since their own employees may not have sufficient knowledge to carry out calculations and interpret them.

Financial analysis for a non-financier: what to pay attention to first

A practitioner tells

Dmitry Dvurechensky, HR director of the social block of Guta Group of Companies

In classical management, business efficiency is the company’s achievement of strategic goals. All enterprises of our group of companies use a similar evaluation system. I’ll tell you what universal parameters you can use to understand whether a company is operating effectively, regardless of the field of business.

General performance indicators can be divided into three groups.

Financial indicators (profitability, liquidity, asset turnover, market value, debt management, etc.).

Indicators of internal business processes (production, sales, resource management, training and development, etc.).

Indicators of the external environment (high customer loyalty, meeting market needs, etc.).

How to calculate business profitability yourself

Not every enterprise that makes a profit is profitable. However, it is worth delving into a more detailed analysis of economic efficiency, which requires additional calculations with which you can more accurately determine the profitability of the main and additional activities. You have to understand what initial investments and working capital are needed, the number of personnel, etc.

From all the sets of different profitability ratios, we will highlight three main groups:

Return on equity (assets and liabilities).
Profitability of the total number of goods produced.
Sales profitability. How to increase your sales profitability

With the help of mathematical operations, it becomes possible to determine the ratio of profit for a specific period of time to the finances spent on obtaining it.

The profitability of the entire production process is a generalizing number that clearly shows the effectiveness of invested finances (including intangible, labor and natural). It can be roughly compared with the coefficient of performance (efficiency).

Let's denote:

R ren – profitability;
S pr – profit (excluding taxes);
F m – book value of fixed assets;
F d – book value of working capital;
F new – the volume of funds raised from outside (for example, a loan);
F s – costs of selling goods.

The condition of profitability is profit above total costs:

Using this indicator of production profitability, you can verify the profit that every ruble invested in the business brings. In case of a low indicator, it is necessary to reduce the cost of production.

LTV indicator: 3 formulas for calculating customer lifetime value

A practitioner tells

Larisa Berdnikova, business coach in the field of medical and salon business

I will give an example of calculating the total load of a beauty salon. Let's denote:

actual time used (FIU);

number of hours according to the norm (CNH);

Based on this, the utilization rate will be equal to FIV / CCN * 100%

In numbers it looks like this.

Let's say the salon's opening hours are from 9:00 to 21:00: 12 hours * 31 days = 372 hours. Let's calculate how much time was spent on the procedures.

For example, LPG (hardware procedure) takes 245 hours per month: 245 / 372 * 100% = 65.8%

Other business profitability indicators

One of the most important indicators is return on assets. When calculating it, borrowed funds are not taken into account. It can be used to judge the level of assets' ability to generate profits. It can be calculated as follows:

In the same way it is determined return on fixed assets:

R o shows the return on investment of shareholders based on the profit reflected in .

Finding return on current assets produced according to the formula:

Return on constant capital

Return on funds raised:

where F z is the sum of all borrowed funds.

To achieve a more daring result, the formula should be supplemented with the following values: income tax rate, loan rate. Then the formula will look like:

Enterprises that provide contractor services find the efficiency indicator somewhat differently:

Px 0 – costs for services not provided;
Px 1 – costs of the service provided.

Due to fines and failure to comply with the terms of the contract, they resort to such calculations.

Product profitability

The profitability indicator of a product (service) produced or sold helps to evaluate the benefits of production or sales.

R – profitability;
S pr - net profit from sales;
C – cost (production or purchasing costs),

Then the profitability of the total volume of goods:

Another formula also applies:

where B is revenue.

To calculate profitability of one type of product, You need to subtract its cost from the final price of one unit. This difference is divided by the cost. Let's give an example. To produce goods A, 130 rubles are required. It sells for 155 rubles. The profitability of this product will be equal to:

Return on sales can be calculated using the following formula:

S h – profit including taxes;
B – revenue for a certain time period.

Let's consider profitability of trade margin:

C – product at cost;
S s – price.

There is a metric for calculating excess jobs. It is called personnel profitability. It can be calculated using the formula:

N cp - average number of jobs for a certain period;
P n – profit including taxes.

Business profitability is an indicator of economic efficiency, measured as a percentage. To determine profitability, you need to divide the profitability indicator by the amount of costs, i.e., resources involved in production. Thus, based on the level of profitability, you can evaluate the profit received for each invested ruble.

Profitability is influenced by a number of factors, such as:

sources and structure of capital;
asset structure;
resource usage;
cost of working capital;
volume of revenue;
cost level, etc.

The formula for calculating profitability looks like this:

P = P / (OPF + OA)

In this formula: P is profit, OPF is the cost of fixed production assets, OA is the price of current assets.

Types of profitability

Profitability of sales. Represents the quotient of profit and revenue amounts. The amount of revenue depends on many factors, external and internal. External factors include competition and the market situation, prices and quality of raw materials, rhythm of supplies, etc. Internal factors are costs, rhythm of production, quality of goods, etc. Subjective factors that cannot be ignored are also affected, for example, the political situation , anti-advertising, etc.
Return on assets. Net income divided by assets. According to this indicator it is possible With examine the performance of assets and their ability to generate profits.
Return on investment. Net income/equity and long-term liabilities.
Return on current assets. Net profit / current assets. High profitability of current assets is ensured by their efficient use. The indicator allows you to judge the possible profit from investments.
Return on equity. Net profit / volume of own funds. Indicates the level of return on investment.

Factors that determine business performance

The level of business profitability indicates the cost efficiency and prospects of the enterprise. In addition to external conditions, profitability directly depends on internal factors, such as labor productivity, equipment, and production organization. The cost of the final product is reflected in changes in the range and price of products. To increase profitability, enterprises are recommended to increase product prices, intensify trade turnover and reduce production costs.

In general, the profitability indicator is influenced by over 30 factors that must be taken into account when determining this indicator. When calculating, you should remember the capital intensity of the enterprise, its market share, labor productivity, and product quality.

Without assessing profitability, it is impossible to adequately assess the effectiveness of an existing business.

Profitability - almost every adult has heard this term. But not everyone understands what this term means. Not even all businessmen can explain this term. After I began publishing articles about small businesses, I began receiving letters from my readers asking me to explain the difference between business efficiency and profitability. And in general, talk about profitability - what this concept is, how it is defined, etc.

What is profitability?

These are mainly letters from those businessmen who have encountered or. And one of the very first questions they were asked was about the profitability of their business. But not only for the sake of creditors, it is necessary to have a basic understanding of profitability. Profitability is one of the main indicators of business performance, which illustrates the efficiency of all business costs without exception, the efficiency of all its activities.

Unlike other business performance indicators, profitability is a purely economic indicator, an indicator of its economic efficiency. This term comes from the German word “ rentabel"- profitable, profitable. Profitability shows how effectively certain business costs are used to generate profit. In other words, profitability is always the ratio of profit to the costs through which it was obtained.

So, business profitability is an indicator that demonstrates the effectiveness of a business’s use of its material resources (fixed, working, borrowed and other funds) in its activities. Those. Profitability ratios show us how much profit a business makes for each unit of money invested in its production process. Business profitability indicators are influenced by many factors. Almost everything that determines the life of a business affects its performance.

By the amount of profitability, one can judge its well-being and its sustainability. In addition, profitability is one of the criteria for the attractiveness of a business for investors. Profitability is almost always considered when drawing up a small business business plan for banks. Profitability indicators should be calculated regularly, the results should be compared, and the state of the small business should be monitored using them.

As can be seen from the definitions, profitability is a relative indicator of economic efficiency. And as a relative indicator, it is measured as a percentage. Typically, profitability is determined by dividing the amount of profit by the amount of assets and resources spent to obtain it. In general, the formula for determining profitability is as follows:

P = P/Z * 100%

Where: P – profitability;

P – type of profit for which profitability is calculated;

Z – costs of obtaining this type of profit.

What is the profitability?

In I wrote that there are several types and definitions of profit. Accordingly, there are even more types of profitability. It makes no sense to even list all existing types of profitability. Let us dwell only on a few of its types, which most specifically determine the performance of a small business.

Profitability of production.

This is the ratio of profit from the production and sale of a product to the amount of costs incurred to obtain it.

Rpr = P/Salary * 100%

Where: P – profit received as a result of production activities. You can take into account both profit before tax and net profit. I believe that calculations with net profit are more revealing for a businessman.

Salary - production costs incurred to make a profit.

Production profitability can also be calculated for small business units to compare the efficiency of their work. Some sources suggest taking into account the cost of production in the form of production costs. But then, for small businesses, return on sales will be more indicative.

Sales profitability.

This is the ratio of profit from sales of products to total revenue from sales of products.

Рр = П/В * 100%

Where: B – revenue received from sales for a certain period.

This indicator reflects how much profit is contained in each monetary unit received from the sale of products. This indicator should certainly be calculated in case of changes in product prices. Using this indicator, you can determine how much a business can afford to reduce prices without risking going out of business, or increase profits by benefiting from increased sales volumes due to lower prices.

Return on investment in small business.

This is the ratio of profit to the amount of funds used to create or develop a small business.

Ri = P/I * 100%

Where: I is the amount of investments made in the business.

It is necessary to determine for the assessment of invested contributions to the business. But quantities corresponding to each other must be correlated. Those. if the amount of a certain investment is taken, then the amount of profit is taken that is obtained thanks to these investments.

There are several types of ROI. I don't see the need to dwell on this in detail. Anyone can, if necessary, familiarize themselves with this issue in more detail.

I just want to add that the return on investment can be predicted, calculated to justify investments in creating or developing a small business, and real, obtained from the results of using these investments.

Small business return on assets.

This is the ratio of the profit received for a certain period to the amount of working capital of a small business for the same certain period. This type of profitability is sometimes called operating profitability. This indicator shows the effectiveness of investments in working capital and depends both on their cost and on the speed of their turnover.

Ra = P/A * 100%

Where: A is the total cost of working capital of a small business for a certain period.

Product profitability.

This is the ratio of the profit received from the sale of one unit of a product and its cost.

Ri = Pi/Ci

Where: Pi – profit from the sale of one unit of product;

Si is the cost per unit of product.

Product profitability should be considered the most important indicator. It allows you to determine the effectiveness of the production of certain products and take measures either to increase the profitability of specific products or to stop their production and focus on the production of profitable products.

Small business profitability.

This a general indicator of the profitability of a small business. I recommend leaving the exact calculation of this indicator to an accountant. I will give, just for your information, a simplified calculation of this indicator, which an entrepreneur can easily perform himself.

Rb = P/(STops + Stoa) * 100%

Where: STOPS is the average cost of fixed assets for a certain period, for example, a month or a year. The average cost of fixed assets is determined quite simply. It is necessary to add up the value of production assets at the beginning of the period and at its end, and divide by two.

Stoa is the average value of current assets for the same specific period. Defined similarly. It is necessary to add the value of working capital at the beginning of the period and at its end, and divide by two.

To complete the picture, the denominator of the calculation formula should include both the amount of funds raised during the billing period and the amount of other expenses of a small business. But, I repeat, to assess the profitability of a small business, it is quite possible to do without this indicator.

Conclusion.

I already said in the article that the main criterion for the operation of a business is profit. Profitability, as mentioned above, unlike profit, is a relative indicator, so profitability allows comparisons between businesses, divisions within a business, and the state of the business itself at different periods of time. Profitability indicators are necessary to carry out financial analysis of business activities, identify its weaknesses, plan and implement measures to increase business efficiency.

Business, whatever it is, requires costs. An entrepreneur, investing in a new project, expects a return in the form of high profits and its constant growth. To assess the investment efficiency indicator, business profitability is calculated. We will tell you in the article what it gives and how it is determined.

Each entrepreneur determines the need to calculate profitability for himself. Large companies employ an economist, whose responsibilities include regularly calculating the efficiency of activities and planning further work taking into account the obtained values. In addition to total profitability, for this purpose the net return on assets, return on fixed assets, investments, sales, personnel, equity and other ratios are calculated.

How is profitability determined?

Calculating the profitability of a business is not so difficult if you have ready-made financial statements at hand. Individual entrepreneurs who do not keep accounting records or are just planning to open their own business will have to bring everything together “by eye.” Profitability is calculated mainly as a percentage. The calculation formula is as follows:

Profitability of production = (Profit on balance / Costs of production and sales) x 100

This calculation will allow you to determine how much profit before taxes falls on 1 ruble of funds spent. For convenience, you can find a convenient online calculator online or download a special program. On average, the normal ratio is 15-35%, but highly depends on the specifics of the commercial activity. For retail trade, 10-15% is a decent result, but for the beauty or construction industry this figure will be small. For these areas you need to start from 50-100%, for legal services, trading in intangible assets - from 100%.

The above calculation shows the nominal value of profitability. There is also real profitability - the one that is determined taking into account inflation. To assess the purchasing power of an enterprise. When the indicator turns out to be low or even negative, this indicates a lack of operational efficiency and impending bankruptcy. A business with high profitability is considered promising, fully receiving a return on investment.

Factors influencing the level of profitability

Since profitability is a relative indicator, its value largely depends on internal changes in the company and external market conditions. The main ones:

Labor productivity.
Technical issues in production.
Fluctuating prices for resources purchased by the enterprise, materials, third-party services, and labor.
Changes in the assortment and prices of products sold due to changing demand and crisis.
Seasonality, temporary equipment downtime or product defects.

The level of profitability can be increased by accelerating trade turnover, reducing costs, and rationally increasing prices. In any case, to stabilize the situation, a number of other economic indicators and points should be calculated and taken into account: labor productivity, product quality, the situation with competitors.

Example of profitability calculation

For better understanding, let us show a simple example of calculating the level of profitability using the above formula.

Initial data:

Total expenses (purchase of raw materials, wages, rent, materials for work, fuels and lubricants, etc.) – 18 million rubles.
Total income (revenue) – 22 million rubles.

First, let's calculate the profit: income - expenses = 4 million rubles.

Profitability = (4 million rubles/18 million rubles) x 100 = 22.2%

Calculations can be made per month, year, quarter. For convenience, profitability for each type of product or production department is often calculated separately.

It is important to compare indicators over time and take measures to improve them. Return on capital, personnel, assets and other things is also calculated separately. Economic analysis must be taken seriously. This is an opportunity to find out the company's weaknesses and improve its overall profitability.