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Have you decided yet whether you are going to register for VAT or not? What is the reasons for your decision?
What accounting software are you going to use? You must use something. Keeping track of stock, invoices, payments, purchases pricing etc. is impossible to do without it. Some people think they can track it all on spreadsheets. Don't!
Do your budget by completing the above table with your expectations. You can do it top down or bottom up. Use a spreadsheet like Excel.
Gross Mix:
When doing your gross profit, remember gross mix. It means you sell different things at different profit levels. Blind lines is lines where people do not really care and do not compare prices. Even if they do, chances is that your opposition will also make a bigger profit on these lines. It is also called 'bread and butter' lines, where you make your profit. Then there is very sensitive lines, called 'lost leaders'. On these you make very little or no profit. To stay in business, you must balance the proportion of lost leaders to bread and butter lines. Sell too many lost leaders, and you will not make your gross budget. Selling too many bread and butter lines, is good for your gross budget, but means you can be more aggressive on your lost leaders, to attract customers.
Say you sell R1000 high gross lines and R3000 low gross.
High gross you decided to sell at 40% gross, as your opposition is allowing you to do so.
Low gross you decided to sell at 5% gross, to come in under your opposition.
Your gross mix is now R400 profit plus R150 = R550.00, being 13.75% of R4000.
So, although you have a gross budget of 13.75%, you must have a strategy of how you are going to mix your markups to achieve it.
Without a history of sales, this is going to be a thumb suck at best, but you will have to give it a go and change things as you are going along and monitoring your actuals.
Expenses:
Neglect to do a proper budget and stick to it, will be a sure recipe for failure. List each and every line of expense that will be applicable to your business and budget a realistic amount for it. Google is your friend. Use it to research what type of expenses can come along without you anticipating it. Take a thing like SAMRO. Nobody talks about it, but if you play 'music on hold' on your telephone, or have a radio in the office, you are supposed to pay royalties. You might get away, because you are under the radar, I just use it as an example. If you are a 'visible' business, Dept of Labor is going to be on your case, so is TV inspectors and all types of 'inspectors'. A few things I can think of off the cuff for an on-line business, is obviously all the Internet related services, Telephone, Water and Lights, Rent or equivalent, advertising, petrol, stationery, repairs and maintenance of equipment, insurance, postage and delivery charges, wages, uif, workers compensation, TV licenses, legal fees, accounting fees, staff benefits like snacks or events, training, vehicles and maintenance. The list goes on and on... Some things you can claim, some not. But whether you can claim it or not, if you are going to use or do it, you better budget for it! Condition yourself to have the discipline to say, if it is not in the budget, live without it. See my signature.
What accounting software are you going to use? You must use something. Keeping track of stock, invoices, payments, purchases pricing etc. is impossible to do without it. Some people think they can track it all on spreadsheets. Don't!
Do your budget by completing the above table with your expectations. You can do it top down or bottom up. Use a spreadsheet like Excel.
Gross Mix:
When doing your gross profit, remember gross mix. It means you sell different things at different profit levels. Blind lines is lines where people do not really care and do not compare prices. Even if they do, chances is that your opposition will also make a bigger profit on these lines. It is also called 'bread and butter' lines, where you make your profit. Then there is very sensitive lines, called 'lost leaders'. On these you make very little or no profit. To stay in business, you must balance the proportion of lost leaders to bread and butter lines. Sell too many lost leaders, and you will not make your gross budget. Selling too many bread and butter lines, is good for your gross budget, but means you can be more aggressive on your lost leaders, to attract customers.
Say you sell R1000 high gross lines and R3000 low gross.
High gross you decided to sell at 40% gross, as your opposition is allowing you to do so.
Low gross you decided to sell at 5% gross, to come in under your opposition.
Your gross mix is now R400 profit plus R150 = R550.00, being 13.75% of R4000.
So, although you have a gross budget of 13.75%, you must have a strategy of how you are going to mix your markups to achieve it.
Without a history of sales, this is going to be a thumb suck at best, but you will have to give it a go and change things as you are going along and monitoring your actuals.
Expenses:
Neglect to do a proper budget and stick to it, will be a sure recipe for failure. List each and every line of expense that will be applicable to your business and budget a realistic amount for it. Google is your friend. Use it to research what type of expenses can come along without you anticipating it. Take a thing like SAMRO. Nobody talks about it, but if you play 'music on hold' on your telephone, or have a radio in the office, you are supposed to pay royalties. You might get away, because you are under the radar, I just use it as an example. If you are a 'visible' business, Dept of Labor is going to be on your case, so is TV inspectors and all types of 'inspectors'. A few things I can think of off the cuff for an on-line business, is obviously all the Internet related services, Telephone, Water and Lights, Rent or equivalent, advertising, petrol, stationery, repairs and maintenance of equipment, insurance, postage and delivery charges, wages, uif, workers compensation, TV licenses, legal fees, accounting fees, staff benefits like snacks or events, training, vehicles and maintenance. The list goes on and on... Some things you can claim, some not. But whether you can claim it or not, if you are going to use or do it, you better budget for it! Condition yourself to have the discipline to say, if it is not in the budget, live without it. See my signature.
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