This block includes all the company's expenses for the year. It is advisable to divide them into fixed and variable, you can also separately calculate indirect and direct costs, taxes and deductions. This will allow you to see business processes more deeply and influence their efficiency.
Variable costs
These are expense items determined directly by the volumes of manufactured products. This includes investments in the purchase and delivery of materials, sales bonuses, etc. They are calculated in rubles or as a percentage of revenue - a specific approach depends on your business scheme.
At this stage of creating a exploring amazon: the essentials financial model of the enterprise, you can understand what will happen if you refuse the previous supplier in favor of another one, who is ready to offer materials cheaper. Or what results will be achieved by introducing motivation for sales managers, what will be the result of revising logistics while maintaining sales at the current level, etc.
Calculate the marginal profit by subtracting variable costs from revenue. This will give you an intermediate income that does not include office rent, salaries, taxes, etc. It can be used to assess how effective the business is and what results you get from selling your products.
Fixed costs
Expenses of this type can be direct and indirect. The former are related to renting a workshop, paying wages, etc. Even if production is worthwhile, such items result in losses.
For this section of the financial model, you need to calculate the gross profit: subtract fixed direct costs from the marginal profit. This indicator indicates the level of production efficiency. If there is a negative trend, you need to abandon the direction that is not able to provide the necessary profit.
Calculating expenses
Indirect direct costs include administrative staff salaries, rent, utility bills, etc. Sometimes a company has no direct fixed costs, only indirect ones. For example, this is the case in consulting.
Calculate EBITDA (earnings before interest, taxes, depreciation, and amortization). The figure obtained from revenue minus all variable and fixed costs is not net profit, but operating profit.
These figures allow you to choose the most profitable way to produce goods: to do it yourself or to delegate it to outsourcers. They also make it possible to choose the most suitable tax system and perform a number of other actions.