Making Money Fundamental Concept And element of making money (profit)
- Cash flow
- Return on assets
Customer (customer journey)
The customer are people, companies or other entities, which purchase goods and services produce by another person, company or other entity
Business people have to make close connection with their customers and strongly believe that their business cannot thrive without satisfying them. In addition business people understand that by building relationship with customer, satisfaction will accelerate sale and growth.
Cash flow is the difference between all the cash that flows in to the business and all the cash that flows out of the business in a given time period
A business person Have to Ask:
Does the business generate enough cash?
What are the sources of cash generation?
How is cash being used?
Product sold (cash in) RS 100
Cost of product, supplies and taxes Rs20
Total cash flow Rs 80
Margin is the net profit the company earns after paying expenses, interest payment and taxes.
Revenue (sale) Rs 100
Expenses (cost of goods sold) Rs 20
Labor(salary) Rs 30
Other expenses Rs 10
Occupancy & fees (taxes, insurance) Rs 30
Total Expenses Rs 90
Margin 100 – 90 =10
Velocity is the speed at which product move through the business to the customer Demand And supply velocity is increase return is higher
Return on assets
Return on assets describe how much money is coming into a business from the use of assets. Efficient companies use fewer assets to generate higher margins.
For example if you are doing a business of small tea stall and if you want to expand your business while investing in big tea stall then you need to determine if the large tea stall would generate enough revenue to justify the cost
Growth occurs when both the sale top line and profit bottom line increase each year. In other words, business should be both profitable and sustainable
Growth should be accompanied by improved:
fundamentals of business growth is important to show a right path to your business