How to calculate the profitability of the project

Calculate the planned volume of production and sales of products manufactured at the project facility. Conduct market research. This is a very important and responsible step that will help you to define the parameters of supply and demand for this product and its analogues, as well as a competitive price on the market. In a competitive market, the beginning of production without carrying out accurate and qualitative marketing research, may lead to unexpected financial problems, or even to complete bankruptcy. Determine the number of sales and also with competitive price, it is possible to calculate the design size of the gross income from the sale of this product.

Calculate the total cost of production. To gross expenditure are: cost of goods and costs of its implementation. The cost of production is the total amount of all costs associated with the release of this product. These costs include: the salaries of the main production workers, the cost of overhaul and current repairs of equipment, transportation costs, expenses for labor protection and fire safety, other administrative expenses, etc.

Determine the amount of gross profit. Gross profit is the difference between gross income from sales and the gross expenditures associated with production of these products. If you know the sum of figures in gross profit and gross expenses, you can calculate the profitability of the future enterprise. The project's profitability is calculated as the quotient of gross profit on gross expenditure. Usually mid permissible indicator of profitability of production is in the range of 5-15 %.