Increase profitability by what method. Ways to Increase Your Return on Sales. Return on sales - value

Evgeny Smirnov

# Business nuances

Ways to increase profitability

It is believed that improving profitability can be achieved by reducing costs and expanding sales. This opinion is generally correct, but oversimplified. In fact, for effective control of profitability it is necessary to take into account many factors, internal and external.

Navigating the article

• Ways to increase profitability
• Formula for calculating profitability
• Cost optimization and cost reduction methods
• Assessment of the return on investment attraction

The head of the enterprise has no more important task than increasing profitability. Each ruble, dollar or other currency invested in the business should give the maximum profit. It is on this goal that the efforts of management are directed at all times. The article is devoted to the ways and means of increasing profitability, regardless of whether it is high or low.

Ways to increase profitability

The term profitability comes from the German word Rentabel, which translates to profitability. It characterizes the efficiency of the commercial use of resources available to the entrepreneurial structure. V general view the indicator of profitability is considered as the ratio of the result to the costs. In essence, this is an economic analogue of the physical efficiency, only instead of energy parameters, financial ones are used.

Objectively, there are only two ways to increase profitability: reducing costs and increasing turnover. Moreover, both methods are often interconnected and in practice have many side branches.

It is believed that improving profitability can be achieved by reducing costs and expanding sales. This opinion is generally correct, but oversimplified. In fact, for effective control of profitability it is necessary to take into account many factors, internal and external. For this reason, specific indicators of profitability are distinguished: sales, assets, production, equity and debt capital, fixed assets and others. It makes no sense to consider all the coefficients in this article in detail - there are many of them, and they are available in our other articles.

The two-pronged task of reducing costs and expanding sales is solved by general methods:

• introduction of innovations;
• diversification of material flows;
• optimization of credit policy and taxation.

At the same time, the application of each of the above methods can be implemented in a variety of ways. The assertion that an increase in turnover contributes to an increase in profitability of sales can be explained by a simple example.

Let's assume that the full reproduction cycle lasts exactly one year and the sold product brings in 10% of the net profit. Obviously, if an enterprise can manufacture and sell the same product twice as fast (in six months), then the increase in profitability will be 100%, and the value of profitability will rise to at least 20%, since the efficiency of investments for the same reporting period... The clause "at least" is due to the fact that the profit of each cycle can also be invested in turnover and bring its own financial result.

Equally understandable is the impact of cost cutting. The less their share in the price of a product, the more profitable its production. The topic of cost reduction is very interesting and requires a more detailed story - a separate chapter will be devoted to it in the article.

The return on equity is influenced by the share borrowed money in its composition.

The profitability of fixed assets increases if they are used most efficiently.

Assets are also used with greater or lesser profitability. Carrying out financial transactions (for example, in the stock or credit market) can help increase the overall profitability of the enterprise.

From all this, we can conclude that, in addition to the overall profitability, it is necessary to provide analytical accounting for certain areas and aspects of the financial and economic activities of the enterprise. Each of them has its own factors of growth and decline. These include:

• rational organization of management and production;
• correct distribution of the structure of equity and debt capital;
• efficient use of available resources, including natural resources;
• production volume, quality indicators of the product and its range;
• cost of production and additional production costs);
• profitability certain types activities in areas;
• directions of use of profit.

In turn, the income received by the enterprise can be used for various purposes:

• replenishment of the reserve capital;
• formation of consumption and accumulation funds;
• self-financing (own sources of investment in new projects);
• investments in shares and bonds of third-party structures, the formation of packages of securities (external profitable investment);
• other assets.

Other methods of increasing profitability are also practiced:

• savings on commercial and entertainment expenses;
• carrying out operations for the resale of property;
• reduction of commissions paid to intermediaries;
• minimization of fines, penalties, interest, etc.

These items of expenditure affect the so-called accounting profitability, the increase in which is due to the implementation of measures to improve financial discipline.

Return on assets reflects the return generated by operating them. Ineffective fixed assets and property taxed on property, but bringing little benefit to the activities of the enterprise, are subject to liquidation, sale or transfer at no cost.

Formula for calculating profitability

In general terms, the formula by which you can calculate the profitability or one of its types in the direction is a fraction. It correlates the received income and expenses incurred in order to achieve financial results.

The value of the indicator of return on sales RR is calculated by the formula:

Where:
PR - gross profit from product sales;
TR is the amount of revenue.

For ease of perception, the profitability coefficients are summarized in the table.

The resulting coefficient for conversion to percentage should be multiplied by 100%.

The average annual values ​​of funds (fixed and circulating) are most often determined as the arithmetic mean of the values ​​at the beginning and end of the reporting period. The amounts of the volumes of issue are taken in the balance sheet in line 12105 at the end of the reporting period.

Cost optimization and cost reduction methods

When developing measures to increase economic efficiency production costs reduction is given the greatest attention.

Commodity producers have been puzzled by the reduction of unit costs since time immemorial, but the industrialists used a system approach to solving this problem only at the beginning of the 20th century. The term "fordization" has become synonymous with complex cost optimization. The aim was to minimize the cost of the products as much as possible while maintaining acceptable quality. At the same time, economists carried out the first theoretical studies in this area, later significantly developed.

Reducing the cost of production is promoted or hindered by internal and external factors.

The first, internal, includes everything that enterprise management can influence: the creation of an optimal management system, the level of automation, technology, quality control methods, rationalization of production processes, etc.

At the factories of Henry Ford, already in the 20-30s of the last century, there was a significant process related to reducing time costs, organizing food for employees, uninterrupted assembly line and other measures that contribute to increasing profitability. At the same time, one of the most popular methods among industrialists of that time - the minimization of wages - was practically not used. In contrast, Ford's tariff rates were the highest in the United States.

The most important role in solving the problem of cost reduction is played by functional cost analysis (element-by-element economic analysis) Is a separate area of ​​applied science, pioneered by the American M. Miles and the Soviet scientist Yu. M. Sobolev.

External factors include circumstances beyond the control of the leaders of a single enterprise: state tax policy, changes in raw materials prices, market conditions, fashion, tariffs of carriers and suppliers necessary services and so on. It is impossible to influence external factors, but they should certainly be taken into account when planning production, forming an assortment and other activities that help maximize profits.

In the first place among the internal factors of increasing profitability is the level of labor productivity. It affects not only directly the cost, but also the rate of capital turnover. In the example already considered, the increase in profitability takes on a value of more than 100 percent, which means not only a double increase in the rate of return, but also a halving of the turnover period.

In other words, if an employee for the same time, receiving the same fixed salary, manufactures a larger number of products, then he will bring excess profits to the enterprise. At the same time, variable costs (raw materials, energy, depreciation, etc.) will increase in proportion to the volume of production. and the constants will remain at approximately the same level.

The second factor concerns automation and complex mechanization of technological processes. Reducing influence human factor reduces labor costs and, in some cases, improves product quality.

The third thing that every specialist pays attention to is all-round economy. Profitable means profitable. The process must be optimized in the direction of reducing the share of waste, reducing energy intensity and other cost items.

The fourth internal factor is the optimization of partnerships and logistics. We are talking about the purchase of raw materials at the lowest prices, the search for the most profitable distributors. For example, lowering sales costs is an effective way to increase the profitability of a firm's sales.

Finding ways to generate income from side activities. There are frequent cases of the provision of non-commodity services by industrial enterprises (transport, service, etc.)

Improving the qualifications of employees. There are two polar opposite approaches to the application of this factor. Supporters of the "Ford" concept strive to organize production in such a way that almost any employee who has undergone a simple instruction can begin to perform job responsibilities... An alternative concept involves the deep involvement of each employee in the process of material reproduction. Both strategies have a right to exist, but in the second case, it is necessary to take care of personnel training.

Permanent control of efficiency and relevance of costs is also important factor increase profitability. The relevance of expenses means identifying the dependence of the amount of costs on certain management decisions.

The listed factors in most cases apply not only to the conditions of a manufacturing enterprise, but also in the provision of services.

Assessment of the return on investment attraction

The overall profitability of an enterprise depends on how effectively it uses borrowed funds. The assessment of the benefits of external investment is facilitated by an indicator called the effect financial leverage(EGF).

As befits a lever, it has two "arms". One of them shows how much more expensive or cheaper it costs borrowed capital compared to the efficiency of the enterprise. The second link of the indicator demonstrates the ratio of own and borrowed funds. The leverage product is adjusted in accordance with the current bank rate.

The formula for calculating leverage looks like this:

Where:
EFR is an indicator of the effect of financial leverage;
НС - current tax rate on profit,%;
ROA is the overall profitability of the enterprise,%;
С - rate at which borrowed funds (investments) are attracted;
SK - the amount of equity capital, rubles;
ЗК - the amount of borrowed capital, rubles.

The effect of financial leverage characterizes, firstly, whether it is profitable to attract investments, and secondly, how useful they are for increasing the profitability of the enterprise.

The corrective component, located at the very beginning of the formula, makes an amendment for the tax payable to the budget.

The first "leverage" is called the differential and indicates the advisability of attracting third-party funds as such. If the difference (ROA - C) is negative, then in this case the company will be forced to pay dividends to investors in excess of the amount of money earned with their help.

The second link of the leverage demonstrates the ratio of equity and borrowed funds. The smaller it is, the more profit will have to be given to investors.

For overall assessment the rationality of attracting debt capital, the corrective component (1 - НС / 100%) in most cases does not play a role, since fiscal rates are related to external factors that affect profitability.

The value of the corrector manifests itself if there are several types of activities of the enterprise, and they are taxed in different ways. The second option - the company opened a branch in an offshore or another country.

(3 estimates, average: 5,00 out of 5)

Profitability - it is an indicator of the economic efficiency of an enterprise, its profitability, or, in other words, the ratio of profit (gross income) and the costs invested in the creation of this income.

By the profitability of the enterprise, one can easily judge the well-being of the organization.

In addition, profitability is one of the criteria for management quality and investment attractiveness. Profitability is always considered when drawing up a business plan for an enterprise. It should be calculated regularly, compared and tracked.

What is the calculation of profitability for:

- in order to control profits;

- in order to follow the development of the business;

- so that your own profit can be compared with the profit of competitors;

- to be able to assess what sales the company has - profitable or unprofitable.

The calculation and analysis of the profitability of the enterprise is carried out by the following formula:

Pp = BP / (VOAm. + Om.)

BP- balance sheet profit received by the company in the reporting period;

BOAm.- the average value of the cost of non-current assets, calculated for the reporting period;

Wed- the average value of the value of current assets, calculated for the reporting period.

Profit indicators can be compared with the capital of the enterprise, sales or cost of production.

Profitability, more fully and clearly than profit, helps to see the final results of any enterprise. It allows you to identify bottlenecks, strengths and weaknesses organization and the dynamics of its development. Profitability shows how effectively funds are used to make a profit.

Profitability can be determined by the balance sheet, for yourself, when you need to analyze the counterparty. To do this, the sum of all costs (st.20 + st30 + st.40) is calculated from the balance sheet form 2, and the balance sheet profit is divided by this amount. Thus, the profitability ratio is obtained.

In a market economy, the return on sales indicator is widely used.

Return on sales is defined as the ratio of sales profit or net profit to the amount of revenue received:

R = P / V or R = Pch / V

R- profitability of sales;

P- sales profit;

Pch- net profit;

V- sales proceeds.

Of course, the higher this indicator, the better and more efficiently the enterprise works.

If the profitability turned out to be negative (loss), then you made a mistake in calculating the price of the product, the price does not cover the costs and it must be increased.

With profitability rates of -20%, if you do not take action, then it is better to close your business altogether.

It is necessary to compare the profitability of sales for analogous companies and in dynamics. If the profitability of sales decreases, then this indicates that the demand for the product or its competitiveness is falling.

How can the profitability of the enterprise be increased?

1.Increase profit from product sales:

By increasing the volume of sales, for example, the release of new products and the expansion of the range.

- due to higher prices (improved quality, more profitable markets, faster turnover).

By developing the right marketing policy.

- due to staff motivation and competent management.

2. Reduce the cost of production

By increasing the volume of production.

By increasing labor productivity and economical use of resources.

Any activity related to sales is carried out for the purpose of making a profit. It is the actual sale that provides income for the business, since at this stage, the company receives money from the client. Profit, in turn, is the main goal of the business as such. In order to achieve it, it is not enough just to make sales. They need to be cost effective. Simply put, they are effective. The assessment of the profitability of sales is A complex approach, which we will talk about.

Definition of "profitability"

Return on sales, or the rate of return on sales, is an indicator of the financial performance of a firm, showing how much of its revenue is profit.

If we express this concept as a percentage, then profitability is the ratio of net income to the amount of revenue received from the sale of manufactured products, multiplied by 100%.

Thanks to the profitability indicator, an impression is formed about the profitability of the sales process of the enterprise or how much the sold product pays for the costs of its release. So, the costs include: the use of energy resources, the purchase of the necessary components, staff hours.

When calculating the profitability ratio, the volume of the organization's capital (the volume of working capital) is not taken into account. Thanks to the data obtained, you can calculate how successfully competing enterprises in your field of activity are performing.

What does the rate of return mean?

Thanks to this indicator, you can find out how profitable the company is. You can also calculate how much of the cost is accounted for after the product has been sold. Having an understanding of the profitability of sales of its products, the company can control all costs and expenses, as well as adjust its pricing policy.

Important! Various manufacturing firms produce a wide variety of products, and for its implementation they also use strategic and tactical ways, advertising moves that are different from each other, therefore, the value of the profitability coefficients will be different for them. Even if two firms producing goods received the same revenue and profit, and also spent the same amount on production, then after deducting tax costs, their profitability ratio will differ.

Also, the planned effect of long-term investments will not be a direct reflection of profitability. If the company decided to improve technological cycle production or purchase new equipment, then for some time the resulting coefficient may significantly decrease. However, if the sequence of the introduction of new technologies and equipment at the enterprise was determined correctly, then over time the company will demonstrate more and more profitability indicators.

How is ROI calculated?

To calculate the return on sales, use the following formula:

ROS = NI / NS * 100%

• ROS- Return on Sales - profitability ratio, expressed as a percentage.
• NI- Net Income - data on net profit, expressed in monetary terms.
• NS- Net Sales - the amount of profit received by the company after the sale of products, expressed in monetary terms.

If the initial data are correct, then the resulting formula will allow you to calculate the real profitability of sales and find out how profitable your company is.

Calculation of the company's profitability by example

Getting started with the calculations, it must be remembered that using a general formula, you can find out how effective or ineffective the activities of an enterprise are, but will not allow you to find out about which part of the production chain there are problems.

For example, a company analyzed its activities and received the following data:

In 2011 the company made a profit of 3 million rubles, in 2012 the profit was already 4 million rubles. The amount of net profit in 2011 was 500 thousand rubles, and in 2012 - 600 thousand rubles.

How do you know how much profitability has changed over two years?

Calculations show that in 2011 the profitability ratio was:

ROS 2011 = 500,000/3,000,000 * 100% = 16.67%

ROS 2012 = 600000/4000000 * 100% = 15%

Let's find out how much the profitability has changed over the estimated time:

ROS = ROS2012 - ROS2011 = 15-16.67 = - 1.67%

Calculations showed that in 2012 the company's profitability decreased by 1.67%. The reasons for the fall in profitability are not yet clear, but you can find out if you conduct a more detailed analysis and calculate the following indicators:

1. The change in tax costs required to calculate the NI.
2. Calculation of the profitability of the goods produced. It is made according to the following formula: Profitability = (revenue - cost price - costs) / revenue 100%.
3. The profitability of sales personnel. For this, the formula is used: Profitability = (revenue - salary - taxes) / revenue 100%.
4. Advertising profitability of manufactured products. Calculated using the following formula: Profitability = (revenue - advertising costs - taxes) / revenue * 100%.

When calculating these indicators, it is necessary to take into account the following features of the production process:

1. If the company is engaged in the provision of services, then the cost price includes: the organization of jobs for sales specialists. For example, you need to purchase computers. Rent a room, allocate a telephone line, pay for advertising, purchase software for work and pay for a virtual PBX.
2. When calculating the profitability of salespeople, you can use a fairly simple formula - divide the gross profit by the total revenue. But it is better to use it when working with specific indicators: the profitability of each specialist, a specific type of product, a section on the site.

What Factors Affect Your ROI?

It is possible to increase the profitability of sales if the cost price and the level of costs are reduced. However, this must be done with thoughtfulness and caution, as such savings can reduce product quality or negatively impact staff performance. To avoid this, one should take a comprehensive approach to the issue of increasing profitability and study the following sides:

• Staff efficiency.
• Sales channels.
• Competitive companies.
• Sales and cost process.
• Efficiency of work with CRM.

After you have studied these components of the business, you can move on to the formation of a strategy and sales tactics. It is also important to understand how profitable each product group is individually.

For example, a firm offers clients three types of properties for rent:

• Residential.
• Warehouse.
• Office.

Applying the calculations, we obtained the highest rates of return on sales for residential real estate, so it is possible to increase the costs associated with this group of services, as they will pay off.

Increasing profitability in many cases also depends on the human factor, for example, on the level of employees who are involved in the production process, so the business owner needs to pay attention to:

• Effective application of specialist knowledge.
• Professional development of employees.
• Optimization of costs for specialists who are not directly involved in the production process.
• Implementation automated systems and innovative technologies.

Profitability can also depend on the industry. Thus, the field of heavy engineering shows a slow growth in profitability of sales, and the highest rates can be observed in the trade or mining sector. For example, in 2014 the highest profitability indicators were noted in the chemical industry - 16.7% and in the field of subsoil development - 24-33%.

The profitability is influenced by the following features of the enterprise:

• Seasonality of sales.
• What activities does the firm do.
• The locality in which the company sells its products (regional feature).

Ways to increase profitability

Profitability does not always meet the expectations of business owners. In this case, it is important to find the reasons for the low profitability and ways to eliminate these reasons. There are many ways out of the situation, we tried to highlight the main ways to increase the profitability of sales.

We reduce costs. Reducing the cost of goods is the best incentive for increasing profits. The main thing is not to do this at the expense of quality. Better to do the optimization of logistics, work on the professionalism of managers, agree on more favorable terms with the supplier.

We raise prices. A difficult step that few are willing to take. Despite the fact that indecision in this matter is just the main mistake. Dumping is the way to kill business. Prices can and should be increased. Only this must be done wisely. First, there are no sudden jumps. Second, be sure to warn customers ahead of time that prices will rise soon. This is an unspoken rule of good manners and a way to maintain confidence in yourself and your company.

We focus on the client. For any product, the main thing is not the price, but the value that it represents for the buyer. In the selling description, you need to describe in detail what is the main advantage of the product, what problems it helps to solve, etc. This should be information that will make the client buy the product right here and now. If the person understands what you really give him Best offer, then the price increase will fade into the background for him. The natural thing that, for its part, needs to be ensured good quality product and service. Not a single selling text will help you if you do not properly organize the delivery or "sell" people outright nonsense. And on the contrary - with a loyal attitude, the person will become your regular customer.

And achieving loyalty is simple: meet halfway where it is appropriate. If the buyer needs extra urgent shipping, please implement it. The person is dissatisfied with the purchase (for objective reasons) - offer a refund, replacement or small compensation at your discretion.

People appreciate not only a professional, but also a human approach. Which ultimately has a positive effect on the profitability of sales.

We sell related products. Standard situation: store manager household appliances after buying a laptop, he offers to take a spray to clean the monitor. A trifle, moreover, one that you were initially unlikely to buy. Nevertheless, many agree. And all because this little thing will really be useful for them. Analyze what items from your assortment can go with the main product and offer them to the buyer. In online stores, for such a reception, the block "Buy with this product" is usually used.

P.S. This method is also suitable for b2b sales. Here, your main task will be to convey to your partner that the additional product will give more sales, primarily to his company. As an argument, you can use example statistics for other partners.

Hello! Today we'll talk about profitability, what it is and how to calculate it. aimed at making a profit. It is possible to assess the correctness of work and the effectiveness of the applied management methods using some parameters. One of the most optimal and informative is the profitability of the enterprise. For any entrepreneur, understanding this economic indicator is an opportunity to assess the correctness of resource consumption at the enterprise and to adjust further actions in all directions.

Why calculate profitability

In many cases, the financial viability of an enterprise becomes key indicator analysis of the activities of a business project, which helps to understand how well the investment in it pays off. Correctly calculated indicators for several factors and articles are used by an entrepreneur for, when pricing services or goods, for general analysis at the working stage. They are calculated as a percentage or used in the form of a numerical coefficient: the larger the number, the higher the profitability of the enterprise.

In addition, it is necessary to calculate the coefficients of profitability of the enterprise in the following production situations:

• To forecast the possible profit that the company will be able to receive in the next period;
• For comparative analysis with competitors in the market;
• To justify large investments, helping a potential participant in the transaction to determine the projected return on a future project;
• When determining the real market value of the firm during pre-sale preparation.

The calculation of indicators is often used for lending, obtaining loans or participating in joint projects, the development of new types of products.

Enterprise profitability

Dropping scientific terminology, we can define the concept:

Enterprise profitability as one of the main economic indicators that well characterizes the profitability of an entrepreneur's labor. Its calculation will help you understand how profitable the chosen project or direction is.

Many resources are used in the production or sales process:

• Labor ( wage-earners, staff);
• Economic;
• Financial;
• Natural.

Their rational and correct operation should bring profit and constant income. For many enterprises, the analysis of profitability indicators can be an assessment of the performance for a certain (control) period of time.

In simple words, business profitability is the ratio between the costs of the production process and the resulting profit. If after a period (a quarter or a year) the business project has made a profit, then it is called profitable and profitable for the owner.

To carry out correct calculations and predict indicators in future activities, it is necessary to know and understand the factors that, to varying degrees, affect profitability. Experts divide them into exogenous and endogenous.

Among the exogenous are:

• Tax policy in the state;
• General sales market conditions;
• The geographical location of the enterprise;
• The level of competition in the market;
• Features of the political situation in the country.

In many situations, the profitability and profitability of an enterprise is influenced by its geographic location, proximity to raw material sources or consumer customers. The situation on the stock market and fluctuations in exchange rates have a huge impact.

Endogenous or internal production factors that strongly affect profitability:

• Good working conditions for personnel of any level (which necessarily has a positive effect on the quality of products);
• Efficiency of logistics and marketing policy of the company;
• General financial and management policy of the management.

Taking these subtleties into account helps the experienced economist to make the level of profitability as accurate and realistic as possible.

Factor analysis of enterprise profitability

To determine the degree of influence of any factors on the level of profitability of the entire project, economists conduct a special factor analysis... It helps to determine the exact amount of income received under the influence of internal factors, and is expressed in simple formulas:

Profitability = (Profit from product sales / Cost of production) * 100%

Profitability = ((Product price - Product cost) / Product cost)) * 100%

Usually when carrying out such financial analysis use its three-factor or five-factor model. The number indicates the number of factors used in the calculation process:

• For a three-factor, the profitability of manufactured products, an indicator of capital intensity and fixed assets turnover is taken;
• For the five-factor, it is necessary to take into account the labor intensity and consumption of materials, depreciation, and the turnover of all types of capital.

The factorial calculation is based on the division of all formulas and indicators into quantitative and qualitative, which help to study the development of the company from different angles. It shows a certain relationship: the higher the profit and capital productivity from the production assets of the enterprise, the higher its profitability. It shows the manager the relationship between regulations and business results.

Types of profitability

In various production areas or types of business, specific indicators of the company's profitability are used. Economists distinguish three significant groups that are used almost everywhere:

1. Profitability of products or services: the ratio of the received net profit from the project (or direction in production) and the costs spent on it is taken as a basis. It can be calculated both for the whole enterprise and for one specific product;
2. Profitability of the whole enterprise: this group includes many indicators that help characterize the entire enterprise as a whole. It is used to analyze a working project by potential investors or owners;
3. Return on assets: a fairly large group of various indicators that show the entrepreneur the feasibility and completeness of using a certain resource. They allow you to determine the rationality of the use of loans, own financial investments or other important assets.

An analysis of the profitability of an enterprise should be carried out not only for internal needs: this is an important stage before large investment projects. It can be requested when granting a loan, or it can become a starting point for the enlargement or reduction of production.

A real complete picture of the state of affairs in the enterprise can be obtained by calculating and analyzing several indicators. This will allow you to see the situation from different angles, to understand the reason for the decrease (or increase) in expenses for any item. This may require several coefficients, each of which will reflect a specific resource:

1. ROA - return on assets;
2. ROM - the level of profitability of the product;
3. ROS - return on sales;
4. ROFA - profitability of fixed assets;
5. ROL - personnel profitability;
6. ROIC - return on investment in the enterprise;
7. ROE is the return on equity.

These are just a few of the most common odds. To calculate them, figures from open sources are enough - the balance sheet and annexes to it, current sales reports. If a projected estimate of the profitability of a business is needed for a startup, the data is taken from marketing analysis the market for similar products or services from those available in the general overview of competitors' reports.

Calculation of the profitability of the enterprise

The largest and most generalized indicator is the level of profitability of the enterprise. To calculate it, only accounting and statistical documentation for a certain period is used. In a more simplified version, the formula for the profitability of the enterprise looks like this:

R = BP / CA * 100%

• P is the main profitability of the enterprise;
• BP is an indicator of balance sheet profit. It is equal to the difference between the revenue received and the cost (including organizational and administrative costs), but before taxes are deducted;
• CA - the total cost of all circulating and non-circulating assets, production facilities and resources. It is taken from the balance sheet and its annexes.

The calculation will require the average annual cost of all tangible assets, the depreciation of which is used in the formation of the selling price for services or goods.

If the assessment of the company's profitability is low, then certain management measures should be taken to improve the situation. May need adjustment production costs, revision of management methods or rationality of resource use.

How to calculate your return on assets

A complete analysis of the profitability indicators of an enterprise is impossible without calculating the efficiency of using various assets. This is the next important stage, which helps to assess how fully all assets are used, to understand their impact on profits. When assessing this indicator, attention is paid to its level. A low one indicates that capital and other assets are underperforming, while a high one confirms the correct management tactics.

In practice, the return on assets (ROA) indicator denotes to the economist the amount of money that falls on one unit of assets. In simple terms, it shows the financial return of a business project. Calculation for all types of assets must be carried out regularly. This will help to timely identify an object that does not bring returns or benefits in order to implement it, lease it or modernize it.

In economic sources, the formula for calculating the return on assets looks like this:

• Р - profit for the entire analyzed period;
• A is the average value for the types of assets for the same time.

This coefficient is one of the three most indicative and informative for a manager. Retrieving a value less than zero indicates the operation of the enterprise at a loss.

Profitability of fixed assets

When calculating assets, the profitability ratio of fixed assets is separately distinguished. These include various means labor that directly or indirectly participate in the production process without changing the original form. Their term of use should exceed a year, and the amount of depreciation is included in the cost of services or products. These fixed assets include:

• Any buildings and structures in which shops, offices, laboratories or warehouses are located;
• Equipment;
• Heavy vehicles and loaders;
• Office and work furniture;
• Cars and passenger vehicles;
• An expensive tool.

Calculating the profitability of fixed assets will show managers how effective economic activity business project and is determined by the formula:

R = (NP / OS) * 100%

• PE - net profit for a certain period;
• OS - the cost of fixed assets.

This economic indicator is very important for commercial manufacturing enterprises... It gives an idea of ​​the share of profit that falls on one ruble of invested fixed assets.

The coefficient directly depends on profitability and should not be less than zero: this means that the company is operating at a loss and irrationally uses its fixed assets.

Profitability of products sold

This indicator is equally important for determining the level of profitability and success of the company. In international economic practice, it is referred to as ROM and is calculated by the formula:

ROM = Net profit / cost

The resulting coefficient helps to determine the efficiency from the sale of manufactured products. In fact, this is the ratio of sales income and the cost of manufacturing, packaging and selling. For an economist, the indicator clearly demonstrates how much in percentage terms each spent ruble will bring.

The algorithm for calculating the indicator of profitability of sold products may be more understandable for beginners:

1. The period in which it is necessary to analyze the indicator is determined (from a month to a whole year);
2. The total amount of profit from sales is calculated by adding up all income from the sale of services, products or goods;
3. The net profit is determined (according to the balance sheet);
4. The indicator is calculated according to the above formula.

A good analysis will include comparing the profitability of products sold over several periods. This will help to determine the decline or increase in the company's income over time. In any case, you can conduct a deeper consideration of each supplier, group of goods or assortment, work out the customer base.

Return on sales

Margin or return on sales is another essential characteristic when pricing a product or service. It shows how many percent of the total revenue falls on the company's profit.

There is a formula that helps to calculate this type of indicator:

ROS = (Profit / Revenue) x 100%

Different types of profit can be applied as a basis for calculation. The values ​​are specific and will vary depending on the range of products, the line of business of the company and other factors.

Professionals sometimes refer to ROI as the rate of return. This is due to the ability to show the share of the share of profit in total sales revenue. It is also calculated over time to track changes over several periods.

In the short term, the operating profitability of sales can give a more interesting picture, which can be easily calculated using the formula:

Operating profitability of sales = (Profit before tax / Revenue) x 100%

All indicators for calculations in this formula are taken from the "Statement of profit and loss", which is attached to the balance sheet. The new indicator helps an entrepreneur understand what the real share of revenue is contained in each monetary unit of his revenue after all taxes and fees have been paid.

Such indicators can be calculated for a small enterprise, one department or an entire industry, depending on the task at hand. The higher the value of this economic coefficient, the better the enterprise works and the more profit is made to its owner.

This is one of the most informative indicators that helps determine how profitable a business project is. Without calculating it, it is impossible to draw up a business plan, track costs in dynamics or assess the profitability of the enterprise as a whole. It can be calculated using the formula:

R = VP / V, where:

• VP - gross profit (calculated as the difference between the proceeds received from the sale of goods or services and the cost price);
• В - sales proceeds.

The formula often uses an indicator of net profit, which better reflects the state of affairs in the enterprise. The amount can be taken from the appendix to the balance.

Net income no longer includes income tax, various business and overhead expenses. It includes current operating costs, various penalties and paid loans. To determine it, the calculation of the total revenue that was received from the sale of services or goods (taking into account discounts) is carried out. All expenses of the enterprise are deducted from it.

It is necessary to carefully choose the period of time depending on the task of financial analysis. To determine the results under internal control, the calculation of profitability is carried out in dynamics regularly (monthly or quarterly). If the goal is to obtain an investment or a loan, a longer period is taken for comparison.

Obtaining the profitability ratio gives a lot of information for the management personnel of the enterprise:

• Shows the correspondence of real and planned results, helps to assess the effectiveness of the business;
• Allows to conduct comparative analysis with the results of other competing companies in the market.

If the indicator is low, the entrepreneur needs to think about improving it. This can be achieved by increasing the amount of revenue received. Alternatively, increase sales, slightly raise prices, or start optimizing costs. One should start with small innovations, observing the dynamics of the coefficient changes.

Staff profitability

One interesting relative metric is staff profitability. Almost all enterprises, regardless of their form of ownership, have long taken into account the importance of effective management of human resources. They affect all areas of production. To do this, it is necessary to track the number of personnel, their level of training and skill, improve the qualifications of individual employees.

You can determine the profitability of personnel using the formula:

• PE - the net profit of the enterprise for a certain period of time;
• ЧШ - the number of staff at different levels.

In addition to this formula, experienced economists use more informative ones:

1. Calculate the ratio of all staff costs to net profit;
2. The personal profitability of one employee, which is determined by dividing the costs associated with him by the share of the profit brought to the company's budget.

Such a complete and detailed calculation will help determine labor productivity. On its basis, it is possible to carry out a kind of diagnostics of jobs that may be reduced or need to be expanded.

Do not forget that low-quality or old equipment, its downtime or other factors can affect the profitability of personnel. This can reduce performance and add additional costs.

One of the unpleasant, but sometimes necessary methods is often the reduction in the number of employees. Economists must calculate profitability for each type of staff in order to highlight the weakest and most vulnerable spots.

For small businesses regular calculation of this ratio is necessary in order to adjust and optimize your expenses. With a small team, calculations are easier, so the result can be more complete and accurate.

Profitability threshold

For many trade and manufacturing enterprises, the calculation of the profitability threshold is of great importance. It means the minimum sales (or sales finished products), in which the received proceeds will cover all the costs of production and delivery to the consumer, but without taking into account the profit. In fact, the threshold of profitability helps the entrepreneur to deduce the number of sales at which the enterprise will work without loss (but also will not make a profit).

In many economic sources, this important indicator can be found under the name "break-even point" or "tipping point". It means that the company will receive income only when this threshold is overcome and the coefficient increases. It is necessary to sell goods in a quantity that exceeds the volume obtained by the formula:

• PR is the threshold (rate) of profitability;
• PZ - fixed costs for sale and production;
• Kvm is the gross margin ratio.

The last indicator is calculated in advance using the formula:

Kvm = (V - Zpr) * 100%

• B - the revenue of the enterprise;
• Зпр - the sum of all variable costs.

The main factors affecting the profitability threshold coefficient:

• Product price for one unit;
• Variable and fixed costs at all stages of production and sale of this product (service).

At the slightest fluctuation in the values ​​of these economic factors the value of the indicator also changes up or down. Of particular importance is the analysis of all costs, which economists divide into fixed and variable. The first include:

• Depreciation for major facilities and equipment;
• Rent;
• All utility costs and payments;
• Salaries to employees of the enterprise management;
• Administrative expenses for their maintenance.

They are easier to analyze and control, and can be tracked in dynamics. Variable costs become more “unpredictable”:

• Wages of the entire working staff of the enterprise;
• Commissions for servicing accounts, loans or transfers;
• Expenses for the purchase of raw materials and components (especially when currency fluctuations);
• Payment of energy resources spent on production;
• Fare.

If the firm wants to remain consistently profitable, its management must control the rate of return, analyze costs in all respects.

Any enterprise strives to develop and build up capacities, to open up new areas of activity. Investment projects also need detailed analysis, which helps to determine their effectiveness and adjust investments. In domestic practice, several basic calculation methods are often used, giving an idea of ​​what the profitability of a project is:

1. Methodology for calculating the net present value: it helps to determine the net profit from a new project;
2. Methodology for calculating the profitability index: it is necessary to generate income per unit of costs;
3. Method of calculating the marginal efficiency of capital (internal rate of return). It is used to determine the maximum possible level of capital expenditures in new project... The internal rate of return is most often calculated using the formula:

IRR = (current net worth / current initial investment) * 100%

Most often, such calculations are used by economists for specific purposes:

• If necessary, determine the level of expenses in the case of project development at the expense of borrowed funds, loans or credits;
• To confirm the profitability and documentary evidence of the benefits of the project.

If there are bank loans, the calculation of the internal rate of return will give the maximum allowable interest rate. Exceeding it in real work will mean that a new venture or direction will be unprofitable.

1. Methodology for calculating the return on investment;
2. A more accurate modified method for calculating the internal rate of return, for the calculation of which the weighted average cost of the advanced capital or investment is taken;
3. Accounting rate of return methodology that is applied to short-term projects. In this case, the profitability will be calculated using the formula:

RP = (PP + amortization / amount of investment in the project) * 100%

PE is a net profit from a new business project.

Complete calculation different ways is done not only before the development of a business plan, but also during the operation of the facility. This is a necessary set of formulas that owners and potential investors use when trying to assess the possible benefits.

Ways to Increase Enterprise Profitability

Sometimes the analysis produces results that require serious management decisions... To determine the way to increase profitability, it is necessary to understand the reasons for its fluctuations. For this, the indicator for the reporting and the previous period is studied. Usually, the last year or quarter in which there was high and stable revenue is taken as the base one. This is followed by a comparison of the two coefficients in dynamics.

The profitability indicator can be affected by changes in the selling price or production cost, an increase in costs or the cost of raw materials from suppliers. Therefore, it is necessary to pay attention to factors such as seasonal fluctuations in customer demand for goods, activity, breakdowns or downtime. Solving the problem of how to increase profitability and, it is necessary to use different ways increase in profits:

1. Improve the quality of products or services and their packaging. This can be achieved by modernizing and re-equipping its production facilities. Perhaps for the first time this will require serious investments, but in the future it will more than pay off by saving resources, reducing the amount of raw materials or a more affordable price for the consumer. You can consider an option;
2. Improve the properties of their products, which will help attract new consumers and become a more competitive company in the market;
3. Develop a new active marketing policy for your business project, attract good management personnel. Large enterprises often contain an entire marketing department that deals with market analysis, new promotions and finding a profitable niche;
4. To reduce the cost in various ways in order to compete with a similar range. This should not compromise the quality of the product!

The manager needs to find a certain balance among all the methods in order to achieve a lasting positive result and keep the company's profitability indicators at the proper level.

Assortment work immediately comes to mind when we think about what could be the way to increase the profitability of sales. What positions are used most in demand? Which positions provide a more interesting margin for us? We monitor, control and work on it to increase profitability.

What about alternative ways to improve your ROI?

Key points:

1. To increase our ROI, we need to be able to sell high.
2. You need to strive to sell more expensive, with a higher rate of return.

   For example, in the same mall there may be different shops and boutiques selling clothes. Where they sell Chinese products "no name" - the most low prices... Nearby, in another store, licensed clothing can be sold. Each item uses the symbols of Winnie the Pooh, Spiderman or Winx. For each copy, the manufacturer pays royalties to the copyright holder. But the prices for these things are sharply higher, and they are sold better.

   The profitability is many times higher, as you might guess. And these clothes can be produced at the same factories in China, with the same quality and cost.
   Finally, the most high profitability ensures the sale of branded clothing in branded boutiques. Such as Armani, Brioni, Hugo Boss. Moreover, expensive Hugo Boss suits do not last long in operation. As one of the participants of the “Big Contracts” training said: “The Hugo Boss suit cannot withstand even one KAMAZ unloading!” Go to the boutique again, pay a lot of money again! Here's a hint: Ermenegildo Zegna suits are more durable. With many years of intensive use, it will rather lose its shape than tear.

3. Sell ​​more comprehensively! Sell ​​not only a suit, but also two shirts, a tie, shoes, and a belt. Each such sale will dramatically increase profitability.
4. A special case is the sale of services. Where the volume of services provided is directly related to the volume of work performed by specialists. An increase in the volume of sales and the volume of services rendered does not increase the profitability of such a business at all. Moreover, it may not even increase the income of the business owner and his key employees. In one of his books, David Meister proved that an increase in the income of the service business and the income of the key employees of this business can only be achieved by increasing the price of the services provided.
5. There is an alternative route for a trading or manufacturing company. This path consists in reducing costs, increasing sales and production by reducing prices, and debugging business processes. A positive example of this approach is Walmart, where the retail price of consumer electronics may be lower than the wholesale purchase price of smaller chains. At the same time, Walmart maintains a good rate of return on its entire sales volume.
6. However, in Russia this path can lead you nowhere. How can this be, you ask? What's wrong with cutting costs, lowering prices, and fine-tuning business processes? The trouble is that as a result of all this, your price will still not be the lowest on the market. Because those who don't care about the quality of their products or services will always offer lower prices. They sneeze on their reputation. They are hungry, greedy and want to snatch money at any cost. To compete with them on price, you have to go down to their level. And offer customers the same rubbish.

   This is hardly a good way to successfully run a business for many years, keep customers happy and sleep well. In addition, clients always believe that the price you have asked them for your product or your services is sufficient. And if the client is unhappy, he will tear the skin off you. It doesn't matter how cheap he paid. So it’s better to sell to your customers something that you don’t have to blush for later. And you need to be able to convince the client to pay you more for quality products, instead of saving money by paying for low-grade rubbish that competitors offer. Read about how to do this in the book by Konstantin Baksht "Big contracts".

7. Another critical way to increase your ROI is to increase the intensity of your sales force. In most companies, sales managers work lazily, weakly, making only 20-30% of the possible number of calls and meetings with clients? If your employees work 3-5 times less than they could, what kind of profitability can we talk about?

Problems with low work intensity of sales managers, few calls and few meetings with clients - the most common problem in sales departments Russian companies... "Low activity of businessmen", "managers are too hungry", "swamp in the sales department" are different manifestations of this problem.

To cope with it, you must:

1. Rigid regular management of the sales department (13 management activities).
2. Regularly hold competitions for the recruitment of personnel in the sales department based on the personnel assessment.
3. Build a professional sales department in your business.

The best way to quickly master and implement the technology of building a sales department is to attend K. Baksht's training on sales management "Sales System".