Dear M & M:
What can an income statement show me about my business and what won’t it show?
In the day to day operations of your business money is taken in and bills are paid, sometimes it is hard to know how much money you are making or loosing. The income statement can answer how much you are making or losing. Remember an income statement will show how you are doing for the period of time you are measuring. Since an income statement reflects your business activity over time (not like a balance sheet which is a snapshot of your business for one particular moment), it usually is developed monthly, quarterly and annually. Creating projected income statements for a period of the next 12 months, based on projected outcomes would be a beneficial exercise for most companies. Here are some things an income statement can show; comparing monthly, quarterly, or annual income statements are sales figures are sales going up or down, what is your gross profit – how much money is left over for the rest of your business after deducting what it costs to produce or purchase your product, increases or decreases in net profit comparing one period of time to another, is your company profitable, how much money is left over to grow the business, pay down debt, or left as a profit for the owner? An income statement won’t show you what’s tied up in account receivables, what you own in assets, what you owe in liabilities, nor will it give you an overall financial condition of your entire company (see the balance sheet for that one).
Dear M & M:
Should I buy or lease a location to open my business?
Someone once said, “Never put a business in a building you don’t own.” Sounds like sound advice. There are many exceptions to every, “Never”. Many high traffic locations or great locations are unaffordable or just not for sale. If you are considering buying the building, lot, or location there are many things to consider. What type of financing is available and do you have a lender willing to make a loan to you on a project that involves the purchase of a building or construction of a new facility for you to conduct business in? Do I have the money or the down payment necessary for a lender to make a loan on the purchase of an existing building or a new construction project? Can your business support the debt to pay back the money used to finance the project? Bottom line is can I afford the monthly payments? Can I wait 6 or 12 months while the land is being developed or the building is built? If one is leasing you should ask yourself the following questions? What is the cost per square foot? What are the other costs associated with the lease, (property taxes, common area maintenance, insurance, advertising fees, percent of sales)? Can the lease be transferred? Are there any use clauses on what you can and can’t sell? Can you lease with an option to buy? Selecting a location is an important part of any business. Leasing or owning is an important decision to make.
To ask your questions: Call the Small Business Development Center(SBDC) at Cochise College (520)-515-5478 or email firstname.lastname@example.org or contact the Sierra Vista Economic Development Foundation(EDF) at 520-458-6948 or email email@example.com