Statistics show that 96% of new projects do not achieve good results. These are the 5 strategies to measure the potential gains

How to measure the true potential of a new business idea

 For a good start in the business, you need to have clear that all new business starts with an idea and that is, beyond the enthusiasm, should put on alert to not stop doing many questions that make you think about how powerful this idea may be, or simply realize that everything was no more than an illusion without much consistency.

Business ideas are all different and not all applies the same rigor and depth of the questions at this stage of exploration.

Some statistics say that 96% of the new projects of innovation does not reach the results expected by executives and 76% of executives believe that its products and Service behaves more and more like a commodity.

Here are 5 strategies to measure the true potential of profits of a business idea:

1. Measure the sales potential that has the business.
2. Determine the product contribution margin.
3 Determines the required equilibrium point.
4 Sets total investment capital.
5 Determine the cash flow potential that will take your business.

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The potential sales potential is the maximum payout can be reached or the maximum that should be achieved. The prognosis is likely achieved, is an estimate. The fee is what is expected from an employee about the potential and the prognosis.

Both what happens with the potential as well as the prognosis depends on a number of factors that can be summed up in these four: what do consumers, the signature, the competitors and what happens in the environment.

Time is a determining factor in the establishment and fulfilment of potential and prognosis, since short deadlines can be differentiated are far from reality and it cannot be a decision optimum use them and a long term may seem large and growing.

Potential of the market determine the maximum limit of sales is very difficult, there is the concept that is still fixed number, but not so, the potential is dynamic since this can vary substantially by the time.

The potential changes by market factors such as the price or a situation in the economic environment. Estimates of the market potential has five main applications.

• Choices of input/output • decide the level of resources • make decisions relating to the location or resource allocation • establish objectives to evaluate performance • the potential integrates the forecasts in range of contribution the contribution margin is the difference between selling price minus variable costs. It is also considered as the excess of income over variable costs, excess that should cover the fixed costs and the utility or profit.

In the process of production incurred in fixed costs, variable costs and is expected in addition to a profit margin. The sale price, is composed of three elements: so fixed, variable costs and utility.

The contribution margin allows you to determine what is contributing a certain product to the business. Allows you to identify to what extent is profitable produce that item.
Formula for the calculation of the contribution margin formula is very simple, since everything is done is subtracted from the unit sale price the unit variable cost, so left MC = PVU-CUV.

Price 6,000 fixed cost 2,000 3,000 variable cost MC = 6,000 - 3,000 = 3,000 balance the determination of the point of balance allows to check the viability of the business. If there is reflected in the rate of revenue it there will be in the range or time in which the point of equilibrium will be reached. If economic activity was destabilizing and becomes more volatile, the point of balance will also volatility, moving out of the usual range and causing liquidity problems that require you to postpone or refinance credits or payments for raw materials. All these signs of behavior are possible to determine with the analysis of the break-even point.

Find the balance point is finding that point of activity where sales are equal to costs.

Find and analyze the point of balance allows us, for example: get a first simulation that allows us to know from how much sales will begin to generate profits. Learn about the viability of a project (when our demand outstrips our break-even point).

know from what level of sales can be recommended to change a Variable cost for a fixed cost or vice versa, for example, change sales commissions to a salary fixed at a dealer.

calculate the initial investment must be added all the expenses that you have to do to start your business. This list can include:-equipment - rental (if required or a local store) - tax - the cost of production of the product - the cost for employees -Insurance (health, business, vehicles) - training and training materials must also estimate the increase and decrease of the initial funds that were used to start the business. This may include:-purchase and production versus selling items (much to produce items versus how many items were sold)-inventory of changes - replacement of equipment cash flow if everything seems to indicate that processing plans will produce a good utility, is almost ready to proceed with the project. However, also needs to be an analysis of the cash flow in order to be sure that the resources in cash which is proposed to be in the business, or which is planned to apply for on loan to the Bank, will be sufficient to meet the needs on a sustained basis. 

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Will be spent all the cash before you earn any income? Is it possible to pay the Bills? Is it possible to acquire the inputs to farmers and other vendors? If not so, although initial estimates have been thinking that the business would be profitable, it is likely that there will be problems. A little cash flow is one of the main reasons why companies around the world are problems.

Although it is important to be sure to avoid problems of flow of box and that there will be shortage of funds, are at the same time, be careful to borrow money in quantities greater than that are actually needed.

Other formulas site Surepayroll, which delivers consultancy to small business owners, says that there are other techniques for measuring the success of a business. These are: profit profitability is what you first think when you measure success. And it is something natural because businesses are precisely created to make money. The equation is simple: If there is money in box after paying monthly operating expenses and debts, then things are going well. However, if the final balance is continuously in red colors, the chances of success are lower.

Base of clients the second indicator of success, as well as profitability, is the database. If you have a list of regular customers that grows on a regular basis, you'll be on track. On the contrary, without a wide base or at least be in constant motion, your success will be limited.

Satisfaction in this item is important to both the satisfaction of customers and employees. The first indicate that the business is aware of the needs of the market and that serves them correctly. Meanwhile, the seconds indicate that the work environment and the remuneration of cash for their work is correct.
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