For the successful implementation of your own business, an important point is competent planning, which requires the obligatory calculation of the payback period of the project. This indicator is necessary when writing a business plan and searching for investors, because it is this point that interests them first of all. How to correctly calculate the payback period of the project?
It is necessary
calculator, investment amounts, variable and fixed costs, projected profit, notebook and pen
Instructions
Step 1
Calculate the required amount of investment. The payback period of the project is the period of time for which the net profit from the investment project will be able to fully cover the entire volume of investments in the project. This indicator is designated as "S inv".
Step 2
Calculate variable and fixed costs. Permanent costs include those costs that do not change their value, that is, the salary of employees (salary), rent of premises, etc. Variables include, on the contrary, such costs, the size of which depends on extraneous factors - employee bonuses, electricity costs, and the like. These indicators are designated as “S post. ed "and" S lane. ed ", respectively.
Step 3
Determine the amount of planned revenue. For this indicator, the field of activity, seasonality and other factors. This indicator is usually designated as "S exp".
Step 4
Calculate the net profit from the project. To do this, you need to use the following formula.
S pr = S ext- (S post. Ed. + S l. Ed.)
It should be remembered that the indicators for different years will not be the same. If the business develops successfully, then the costs grow (more premises are required, more staff, etc.), but revenue and, accordingly, profits also do not stand still.
Step 5
Find a break-even point. This point is called the moment when all the money invested in the project pays off. It is this time that will be the payback period of the project, that is, when all the investments made in the project have returned. To calculate this indicator, you need to use the following formula
S inv - S pr
When the answer is zero, the project will be considered fully paid off. If the project is large-scale, then it will not reach the break-even point in a year, so the indicators should be calculated for several years at once.
Step 6
When developing a business plan for a project, you should remember and understand that the payback period of a project is not calculated separately from other indicators. It is always associated with a fair value measure and with an internal rate of return (IRR).
