Starting A Catering Business

Your Gross profit and turnover are one and the same thing. It is all the income your business takes in.

Net profit is the amount you have left over when you take away all your business expenses from your Gross profit.

I always think of a fisherman's net to remind me of the difference. Imagine a net and into that net you put all your business income. Things like staff wages, materials and all other expenses fall through the holes in the net, leaving your Net profit.

In your business plan both Gross and Net profits need to be included in detail.

Net profit is one of the main things investors are interested in. It is the main indicator as to how well your business is currently doing and how good an investment your business currently is.

Investors are less interested in gross profit. Imagine a business with gross profit of 5 Million and net profit of 1 million and another business with gross profit of 100 Million but net profit of 10 thousand. Forgetting about the unknown future plans and growth potential for either of the two businesses in our example, currently the business with the much smaller gross profit has a far larger net profit and is therefore more appealing for the investor.

The larger the Gross profit the more cash flow through the business. Larger cash flows can cause problems if income from work done is slow to come in compared with the outgoings required to fullfill new orders.

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