Do you know the profitability of your business? - Small business ratios made easy

Profitability tells you whether a company is making a profit or a loss from its activities. Many small business owners only keep track of their bank account balance, but the real picture of the company's situation only emerges when you look at the key figures in the accounts.

In this article, we'll explain what ratios small business owners should monitor and how they can give you a quick idea of the profitability of your business.

Why are indicators important?

Key figures are not just tools for the accountant. They help the entrepreneur:

• understand where money comes from and where it goes
• assess whether the margin is sufficient to cover the costs
• make better decisions on pricing and costs
• anticipate future investment opportunities

Three key indicators for a small entrepreneur

1. Operating profit (EBIT)

Operating profit is the amount of profit a company makes after its actual operations, before tax and finance costs.

- If your operating profit is consistently negative, you need to change or streamline your business.

2. Coverage rate

The coverage rate is calculated as (sales revenue - variable costs) / sales revenue. It shows how much of each euro of sales is available for fixed costs and profit.

- The higher the margin, the more room for manoeuvre the company has.

3. Net result

The net result is the final result for the financial year, after all expenses, depreciation and taxes have been taken into account. It tells you directly whether the company has made a profit or a loss.

3. Why get your accounting right from the start?

Accounting is compulsory for all businesses, even small ones. A professional accountant will help ensure that things are done right, on time and without unnecessary stress.

At Konkretia Accounting, we offer accounting services at a fixed hourly rate - no hidden costs and no surprises.

How to track KPIs in practice?

• Monthly reporting: ask your accountant for clear reports on a regular basis, not just once a year.
• Compare to targets: set a budget or sales target and mirror the results against it.
• View trends: a single month does not tell the whole story - track the change over several months.

Avoid these common mistakes

• You only track turnover - high sales don't automatically mean good results.
• You forget your own wage costs - the entrepreneur's labour input is a real cost.
• You draw conclusions without up-to-date accounts - ratios are useless if the data is out of date.

Summary

Identifying profitability does not require complex calculations - a few basic figures are enough to give a clear picture of the company's situation. By regularly monitoring your operating profit, margin percentage and net profit, you know where you stand and can react in time.

At Konkretia Accountancy, we provide clear reports and concrete advice to help entrepreneurs understand their numbers easily - without the financial jargon.