Working out your break even & profit point You should speak with your accountant about whether you will assess your business in separate cost centers or in its entirety. More sophisticated structures can be considered when scaling or planning for a smooth succession plan. It is imperative to consider how the set up of your business will affect your exit. All considerations should be explored when setting up your business for when you may look to scale, acquire or merge. Allocating expenses – options to consider. For example, if your office is split evenly between property management, admin and sales, many would split business expenses 50-50. However, another approach is to split expenses based on the revenue derived from your business. If 80% of your agency’s revenue is derived from sales then you would allocate 80% of the expenses to that particular side of the business, the cost centre, or if it is a separate P&L then allocate accordingly for each cost centre. More complex structures may involve service centers, corporate teams and different locations or cost centres, if your organization is at this size then we would recommend you reference the Raine & Horne Group for a preferred professional partner to best work with your goals and objectives. You should always seek independent financial advice or liaise with your accountant who works closely on your personal financials to assess which is preferable and more relevant for your business and personal assets. It is difficult and inefficient to operate a business without knowing your break even and desired profit points. In fact, it is a great way to go broke. Even if you have a strategy of aggressive growth you need to know how long you can spend money without a return on investment. It is important to know how to analyse these figures based on what we have discussed utilising the percentage or allocation of expenses based on income derived from the business, once you have your fixed expenses and cost of sale separated you are now in a position to calculate key metrics. In the annexure there is a sample P&L that we can use for the exercise if you do not have yours with you, but we would always encourage you to do this exercise with your figures to hand. State of Play & Key Numbers | 33
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