First of all, estimate what kind of sales you think you might achieve - just to give you an idea of what size of business you might be thinking about. So, if you were running a cafe with ten tables, you might estimate that you'll turn over £250 a day Monday to Friday, and £500 on a Saturday, so your yearly income will be in the region of £90,000.
Then, think about your direct costs - the costs that can be directly attributed to producing your product or service. They are sometimes called cost of sales. It's not always so clear-cut, but in the cafe example it's pretty easy to say what your direct costs are - the ingredients for your food. You could potentially include some staff costs, eg your extra person for the busy Saturdays - but it's unlikely that you'd include more regular staff.
How will you get a figure for direct costs? It depends on your business, but you could talk to someone else who's run a similar business, you could chat to suppliers, look at trade magazines, or read a relevant "How to..." book.
You can now work out what your gross profit will be - more details on the next blog.
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Posted by: Hassim423 | December 07, 2011 at 08:56 AM