Small Business Mathematics: Where Does it Come In?

We have all seen how vital it is to use maths in production and finance; but is maths also vital to small businesses? Remember that owning a business is more about creating a product that can solve the issues of the customer. Overseeing various aspects of the company is crucial to the success of your business.

One way to make sure you succeed in business is to understand basic mathematical concepts. These concepts are the ones that form the basis for advanced mathematical applications in other sectors, and form part of the useful content in various posts. If maths is not one of your strengths, then you need to partner with someone who understands these concepts.

So, how can you use maths in your small business?

Calculate the Costs of Production

Before you start a business, you need to estimate how much you require manufacturing a product. You need to be able to add all the expenses that are involved in the process to see whether you are competitive with other businesses.

You have to compute all the costs that relate to the business and how much you are getting out of them.

Determine the Correct Pricing

To make sure you operate the business and produce cash flow to keep it afloat, you need to charge enough money on the product to be profitable. You need to know how much the merchandise costs and determine the selling price. The difference represents the profit.

If the production process requires a huge makeup, then you are not as competitive as you thought, especially if there are other companies selling the same kind of product.

Calculate Profits

If you need to know how much net profit you have made over a certain period, you need to calculate the returns, cost of production of each item and the operating expenses from the selling price and multiply by the total number of items that have been sold.

You need to consider the discounts on the items, the depreciation of the equipment, and any associated taxes during that period.

To get to the net profit, calculate the interest earned from customer credit. The net profit tells you whether you are charging enough per item to stay afloat.

Analyze the Performance

To analyze the performance of the business, you need to project the income and expenses for the future. You need to understand the impact of the records that you generate so that you understand the changes in future sales.