There are three basic areas of business which you should be well-informed about in case your subordinates ask you… According to the management.about.com website, this knowledge is also important for your decision-making.
1) How does your company make money?
First, you must know what makes money for your company. Examine your products and services to discover which ones are actually bringing in money. In a bakery 80% of sales might be croissants, 15% cakes and 5% cookies. That enables you to see what is actually important for you at the given time. Your decisions will be better informed once you have this insight. What were the sales? Knowing both last year’s and current sales enables you to understand the current status of your company clearly.
2) What about profit?
The higher the profit margin is, the more efficiently the company is run. Net profit is calculated from gross profit. The difference between them is formed by tax and operating costs.
3) What are the costs?
Costs are another crucial factor. Costs can be cut, but in some industries costs directly affect quality and the satisfaction of your employees and customers. Direct costs include costs associated with production such as materials, labor and distribution. Operating expenses are any expenses necessary for the running of the company which are not in direct costs. These can be salaries for employees in support functions, rents, marketing expenses and research and development.
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