For many small business owners, making sales can feel like proof that a business is doing well, but revenue alone does not show how much money a business has actually made.Sarah Khaemba, founder of Rechos Fashion Sense, says entrepreneurs need to account for every cost before determining their real profit or risk making financial mistakes.Khaemba, who has run her fashion business in Nairobi's Central Business District for 12 years, shared the advice during this week's episode of Co-op Bank Youth Forums.The session, themed "Buy Smart, Sell Smart: Getting Better Deals and Maximize Profit," focused on helping young entrepreneurs make better purchasing and pricing decisions.Khaemba said business owners should begin by calculating the full cost of getting a product ready for sale.This includes the cost of stock, receiving goods from suppliers, transportation, rent, deliveries and electricity, as well as less obvious expenses."Everyday stock recording and total accounting at the end of the month can help entrepreneurs track where their money is going,” Khaemba said.She warned that transaction charges can easily be overlooked when calculating profits."You can find you have spent like Ksh36,000 in transaction fees for deliveries and the rest. Those Ksh7 or Ksh15 add up quickly," Khaemba said.For example, selling 10 products for Ksh20,000 does not mean the business has made Ksh20,000 in profit."The Ksh20,000 is not a profit. Your profit is somewhere in there," she said, noting that the cost of the products and moving them from the supplier must first be deducted.Khaemba also advised young business owners to compare suppliers based on quality, delivery costs, payment terms, minimum order quantities and return policies rather than simply choosing the lowest price.
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