Budgeting gross profit for products, services, retail or projects each have different requirements. Let’s start with services this week.
- In the service industry your time and your employees’ time is what’s for sale. Once you know what the market will bear for your services you can attach a billable rate to yourself and each employee.
- Next you will need to know how many hours are available to bill out. When calculating this number consider things like travel time, company meeting time and any other functions that might need to be performed by yourself or employees that cannot be charged to your customers.
- Now that you have total billable hours and rates for yourself and employees put the two together for each month. This will be your total gross revenue on a monthly basis.
- Cost of Sales is the next component of gross profit. How much will you pay each person? You can incorporate payroll taxes and benefits in this number or these costs can be included with overhead. I would suggest that you follow what is typical in your industry. You can find industry information at Free Industry Reports, or for more in depth information Prime Industry Reports.
- To finish calculating your gross profit, subtract the monthly cost of sales from the monthly total revenue.
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