- You are here:
- Home »
- Blog »
- Manage Your Computer Business »
- How To Predict Your Profits
How To Predict Your Profits
In this article I would like to share with you something that helps me immensely in all of my business ventures. It allows me to predict roughly how much money I will make in the future months allows me to make good business decisions based off that. It allows me to see why my profits are up on one month, yet down on another month. It is something that is incredibly simple, yet it gives you so much power over your business.
What am I talking about? I am talking about creating a line graph of your businesses profits, comparing it to last years profits and then matching it up to school holidays and other events.
If you use an accounting package, half of this work is already done for you since you already have the month by month data and possibly a line graph already made. However, just having this years data and line graph is not enough, you need to compare it to last years profits. Once you have done this, you will begin to see patterns emerging.
I have created a sample graph to show you what I am talking about. The figures in this graph are fictional and are only for demonstration purposes, but the “wave shape” is based off real Australian events and holidays.
The graphs of our American readers will look somewhat different to this graph since their summer holidays are in the middle of the year, whereas the Australian summer holidays are at the end of the year. Also, this example graph is based off someone who does a lot of residential work which is why it is so effected by school holidays. If you only work with business clients, the school holidays wouldn’t cause too much of a variation.
Take a look at this graph:
As you can see, even though 2010’s profits are higher than 2009’s, there is a definite trend appearing. You can use this same data to predict next years peaks and dips. You can also see that the business is growing compared to 2009, even on the down months.
After some research on when the school holidays are, I can see that they definitely effect the profits.
Here is an explanation of each month:
January – Often slow since a lot of people dont have much money to spend after Christmas.
February – Kids start going back to school and they need their computers fixed that they broke over the holidays.
March – Business as usual, no peaks or dips.
April – Easter Holidays and the kids are home again to break the computers.
May – Business as usual.
June – The Australian tax year ends on June 30th so technicians will end up selling more computer systems at this time. Many clients will buy computers before June 30th so they can claim as a tax write off straight away.
July – Business as usual.
August – Business as usual.
September – A smaller school holiday starts in September.
October – Business as usual.
November – Business as usual, with a little bit of people getting things done before the Christmas madness starts.
December – Christmas. School holidays are on so kids are home breaking computers. Systems are often bought during this time as Christmas presents as well.
The ability to spot such pattern can prevent you from making costly mistakes such as taking on a full time employee to deal with what you think is business growth, even though its only the usual June rush. It also prevents you from feeling bad on the down months wondering what the hell you did wrong. When you know it is just a seasonal dip, it is much more comforting and you can plan accordingly.
So, get this years and last years data together and you will be able to have a rough idea on the health of your business and work out roughly of how much money you will make next month. If you don’t know how to make a graph like this in Microsoft Excel, I have included my sample graph for download here.
Session expired
Please log in again. The login page will open in a new tab. After logging in you can close it and return to this page.
I should start tracking profits, and I now know how to do it effectively, also good sense of humor: “School holidays are on so kids are home breaking computers.” lol
This is a great tip and one that works well. I would caution against using profits as a measure though. There are many things that can cause profits to change. I recomend using gross revenue. Unless you drasticly change your pricing structure revenue is a fairly good measure.
It’s interesting to see the trends that other computer repair companies are experiencing, and comforting to know that I’m not so different. Thanks!
Like usual, great topic thank you Bryce.
We do this everyday where I work, the only difference would be, we do it on a daily basis, actual sales for the day, or the number of clients that entered your store. Check the margin, and see, the type of stock that sold for that day,time of month small amounts, like a pack of blank 10 dvd’s, generic ink cartridges, the consumables, or the usual, the daily shopping, keep the margin high on small items like these. Another theory I have, and some don’t agree with me,check the local take-away stores near you,or “fast food” weird I know, but some of you will see, if you live in a small town like me, if these places are packed, it means people has extra money to spend.
Back to the topic of How To Predict Your Profits, in this month that I have noticed, more consumables, are sold this time of month, so we stock up on these, and make profit.
I started a post in the forum on a similar topic. I wanted to know, from statistical data, the component percentage of revenue based on specific service offerings (i.e.: tune-ups, virus removal, pc builds, etc).
My goal is very similar in this case: I need to find a way to project revenues based on my offerings to build a business plan and forecast.
Forbegos
The PC Help Shop
Tracking trends is important, but there are many other factors that can be different year to year… hypothetically I made 2 grand over my monthly average last April, but I need to remember that there was a HORRIBLE storm involving blackouts/brownouts thus there were more computers that were damaged and needed repair… Or had a lot more virus removals last november because of the huge issue (or was it hype) of Conficker.
Trends are good, because yea I would schedule my vacation in July-August vs Nov-Dec (from your graph above), but previous gains or losses are not the only thing that will affect future results. Being mindful that there are many factors that you need to keep track of is very important.
Sad but true… A lot of business comes from people causing harm to their own machines, and those are the peak periods. My boss and I try to minimize that by showing clients how to keep their machines safe, thus making the repair call more of an investment. Our city isn’t huge, but we’re keeping busy with satisfied clients returning only with new referrals or machines we never saw before, or after years of running reliably after our repair. “If we remember you, we didn’t do a good job.”
Great topic and information! I had a question that would probably be best served on the forums. It would seem during down months, that would be the time to take a personal vacation. Have you ever gotten with a “competitor” as a emergency contact for your regulars? Is that asking to lose customers? Or, in the end, do you just warn your regulars that you will be out of town for a week? Thanks.
cobrapup:
Yes, this would be better posted within the forum, however I have a deal with a competitor in that we look after each other’s customers when we are on holiday. We have never lost custom to one another (we have the utmost respect for each other so we would not attempt to steal clients). I feel that I am in a very fortunate situation.
Thanks for the kick in the pants Bryce. I have been thinking about this for a bit.
After performing this little exercise, it had turned out that January was a better month than expected. I thought that this must be because of the large number of customers who had scheduled services for “after the holidays wind down”. Other than that, no huge divergence for my biz!
Bryce, what this type of planning is also good for is planning an advertising or special promotions. You can plan them around events and you can also track the results (use some sort of special code to help track where people are coming from-ie mention Summerdeal and get 10 per cent off!!!).
this is a great tip. Maybe in the future when my business gets big enough the profits will need to e tracked, but right for now I won’t worry about it.
We do this everyday where I work, the only difference would be, we do it on a daily basis, actual sales for the day, or the number of clients that entered your store.
Wow, I did this using Gross profit (before expenses), and I have 3 trend lines acting the same way. December and February are wow months and I am holding on tight cause from here to december the trend line goes down.
If you know that a trend line is going to go down, make sure you invest in advertising before this starts so that you can try and flatten the trend line out.
My profit lines also reflect a consistency in increased income over the months.