Reply to: Plan B turnover amount?

[ASB]

Quick search: "Margin is measured as ratio, profit as an amount -- in both cases, they measure the difference between cost of materials and revenue. Gross margin/profit do not consider the cost of doing business (ie. payroll, taxes, etc)".

So, what's the technical term for the stuff I'm looking to cost then, i.e. salary, fees, tax, etc? Then I think I'd get something like:

Revenue - cost of materials - "the cost of stuff I'm working out" = profit (£).

Take your pick.

Expenses
Overhead

Though a possibly correct term would be "cost of sales". But that wouldn't fit in with what you have above since you have already excluded raw material cost.

[Spoiler]

Expenses/Admin Expenses

Thanks again!

[Clare@InTouch]

Quick search: "Margin is measured as ratio, profit as an amount -- in both cases, they measure the difference between cost of materials and revenue. Gross margin/profit do not consider the cost of doing business (ie. payroll, taxes, etc)".

So, what's the technical term for the stuff I'm looking to cost then, i.e. salary, fees, tax, etc? Then I think I'd get something like:

Revenue - cost of materials - "the cost of stuff I'm working out" = profit (£).

Expenses/Admin Expenses

[Spoiler]

Quick search: "Margin is measured as ratio, profit as an amount -- in both cases, they measure the difference between cost of materials and revenue. Gross margin/profit do not consider the cost of doing business (ie. payroll, taxes, etc)".

So, what's the technical term for the stuff I'm looking to cost then, i.e. salary, fees, tax, etc? Then I think I'd get something like:

Revenue - cost of materials - "the cost of stuff I'm working out" = profit (£).

[Spoiler]

Are you the most accounting savvy of the four?

Probably not, but I'm the one who had a free day today to do some research. Would also explain why I've included fees for accountant & bookkeeper in potential costs.

[JamJarST]

I believe you make a good point. I am trying to work out potential costs to ensure we can create enough margin to make it viable. So I think I should really be interested in the gross margin (profit?), not necessarily total turnover. Some services we sell will have a much better margin than others.

You see - this is all good. I'm learning the basics here (hopefully) so I won't sound completely clueless when I speak to accountants.

Gross margin is not profit. Are you the most accounting savvy of the four? If you are going into business it is well worth learning basic accounting principals especially if you need to meet with potential incvestors or the bank.

[Spoiler]

Why is everyone confusing gross profit with turnover?.

I believe you make a good point. I am trying to work out potential costs to ensure we can create enough margin to make it viable. So I think I should really be interested in the gross margin (profit?), not necessarily total turnover. Some services we sell will have a much better margin than others.

You see - this is all good. I'm learning the basics here (hopefully) so I won't sound completely clueless when I speak to accountants.

[JamJarST]

Why is everyone confusing gross profit with turnover? We don't know what Plan B does - if its selling widgets with a 10% markup you can multiply that turnover by 10 to achieve suffieicnt profit to pay the wages. As others have said, check what sort of yurnover is achievable with a staff of 4, rather tha working out to pay the wages.

Because the OP implied that turnover was all margin.

[Spoiler]

Whilst you can get some ideas and pointers on here, please do speak to your accountant who should ask all the right questions and will be able to provide you with good advice.

Trust me, we WILL be speaking to an accountant BEFORE making any decisions about plan B.

I just wanted to get some basic figures down to set expectations and have some idea when I speak to the accountant(s).

[Nixon Williams]

I would strongly recommend that you speak to your accountant before you do anything.

There are many issues that will need to be considered and if you get them wrong it could be quite costly.

Whilst you can get some ideas and pointers on here, please do speak to your accountant who should ask all the right questions and will be able to provide you with good advice.

Good luck with Plan B.

Alan

[v8gaz]

Why is everyone confusing gross profit with turnover? We don't know what Plan B does - if its selling widgets with a 10% markup you can multiply that turnover by 10 to achieve suffieicnt profit to pay the wages. As others have said, check what sort of yurnover is achievable with a staff of 4, rather tha working out to pay the wages.

[northernladuk]

Remember dividends are only paid out of profit as well. If you don't do well 4 of you don't get full (or expected) renumeration.....

[Contreras]

Yes, sorry. All directors are shareholders - 25% share.

What happens if one of the party puts in considerably more than 1/4 share of effort, or another wants to slack off for a while?

I know you can have different share categories and/or mess around with dividend waivers. It's basically using dividends as a NI-free remuneration tactic - when I looked at this some time ago I received conflicting advice, one accountant said no problem and another said don't go there.

[Clare@InTouch]

So based on your figures if the OP just wants to break even, then £139556 would be the required turnover.

Exactly. Add on any other expenses like legal/professional fees, and that gives the required turnover to break even.

If he's wanting to pay dividends then he'd require a certain profit, and that would involve more convoluted calculations re CT.

[MarillionFan]

Just realized: £36000 x 4 = £144,000 per annum on my calculator!

Bloody Lotus 123.