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ProjectionHub

Archives for September 2013

How High Should Your Gross Profit Be?

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Are you selling a lot of product, but can’t seem to make a consistent profit?  Are you having a hard time covering your overhead costs each month?  The problem may very well be that your gross margin’s are simply too low.

What is Gross Profit?

The first question is what exactly is gross profit.  It is pretty simple, Gross Profit = Sales – Cost of Goods Sold.

Gross Profit Margin = Gross Profit/Sales

So what is a reasonable gross profit margin?

At ProjectionHub we help business owners create financial projections without the need to have a PhD in Excel.   We have had thousands of business owners use our web application to create financial projections, so based on their projection data, we can share what the average business reports for their gross profit margin.

Average Gross Profit for a Product Business – 65%

Average Gross Profit for a Service Business – 72%

Our hope is that this gives you a frame of reference.  If you are trying to run a business with 25% gross profit margin, and you are struggling, now you know why.  It is just difficult to make the math work to run a profitable business when your gross margin is significantly lower than the average.

How to improve gross profit?

If you want to improve your gross profit margin, you really only have 2 choices.

  1. Raise your prices
  2. Lower your cost of goods sold

If you can’t raise prices, and you can’t lower costs, you need to consider whether this business can really work, or not.  Create a set of financial projections with our tool, and determine what volume of sales you would need in order to break even.

66% of Entrepreneurs Make a Personal Investment into Their Startup – Average $70k

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ProjectionHub is a web application that helps entrepreneurs create financial projections without Excel.  We looked at just over 200 startups who have used ProjectionHub to create their financial projections over the last couple months and discovered some interesting data.

A full two thirds of entrepreneurs intend to make a personal investment into their startup.  The average projected personal investment is just over $70,000.

This is an important stat for entrepreneurs to hear.  Many want to be entrepreneurs think they can start a business without putting any of their own capital at risk.  Often times you hear entrepreneurs say something like this, “I will just come up with a business plan, and then bring that to the bank and get a loan, or find an investor to fund our plans.”  This is unrealistic.  There are very, very few banks or investors that will give you a dime without some of your own skin in the game.

So, based on this data, if you want to start a business, the first thing you should probably do is start saving some money that you can use to make an investment into your startup.

You can start creating your financial projections with ProjectionHub today.  Make sure to use coupon code “ba25off” to get 25% off, or just use our free version of the tool.

Average Startup Expenses – Are you Spending Too Much?

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At ProjectionHub we help entrepreneurs create financial projections without using Excel.  Over the last 6 months we have had thousands of business owners use our tool to create their financial projections.   Out of the thousands of users, we chose 800 accounts that we believe have realistic data.  We took this aggregate data and found some interesting trends and numbers that we wanted to share related to expenses.  Approximately 80% of our users are startup companies, so here are some average expenses numbers that you can compare to your startup to help you determine if you are spending too much.

Also, just keep in mind that not every business actually had each of these expense categories, we calculated the average only based on the companies who actually projected spending something in that category.  For example, not everyone had legal expenses, but those who did, spent $1,006 per month on average over the first 3 years.  Here are several other average expense categories over the first 3 years of business.

Accounting – $482

Advertising – $2,767

Insurance – $298

Licenses – $262

Maintenance – $504

Office Supplies – $142

Rent – $1,800

Salaries – $16,700

Telephone – $356

Utilities – $190

Website – $689

Keep an eye out for additional blog posts as we continue to release interesting data related to startup finances.  Also, make sure to test out our financial projection tool at ProjectionHub. 

10 Key Startup Statistics | Read About Top First Year Business Goals for Your Startup – ProjectionHub

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See How You Compare with These 10 Key Startup Statistics

At ProjectionHub we help entrepreneurs create financial projections and goals for business without using Excel. Over the last six months, we have had thousands of business owners use our tool to create their financial projections. Out of the thousands of users, we chose 800 accounts to generate real startup statistics. We took this aggregate data and found some interesting trends and numbers that we wanted to share. Approximately 80% of our users are startup companies, so here are 10 key startup numbers for you to compare to your startup as well as a business startup
timeline for them. Check out some of our first year business goals and see your business or startup stacks up!

Startup Capital

1.  Average Investment – $448,000

2.  Average Business Loan – $304,000

3.  Average Loan Term – 50 months

4.  Average Interest Rate – 8%

Days to Get Paid

5.  Average Number of Days to Get Paid for Products – 16 days

6.  Average Number of Days to Get Paid for Services – 22 days

Margins for Startups

7.  Average Gross Margins for Products – 65%

8.  Average Gross Margins for Services – 71%

Startup Sales Growth

Over 36 months of projections the average monthly growth rate for sales was as follows:

9.  Average Monthly Sales Growth Rate Products – 17%

10. Average Monthly Sales Growth Rate Services – 5%