In this world of business, you cannot just rely on one metric to measure the overall performance of your tobacco business. Whether you are manufacturing cigarettes or cigarette boxes, you need to keep track of a lot of things at the same time. After all, it is your business. If you are here to learn about all of the essential metrics to measure your cigarette boxes' worth, then you have come to the right place. In this article, we’ll take you through seven metrics your business requires to measure the financial performance of your overall business. To learn about them, be sure to read this article till the end!
Revenue is referred to as the number of sales you generate by selling your Cigarette boxes minus the cost of refunded or undeliverable stuff. It is that one main metric that every business, including the tobacco business, uses to track their financial performance. Every business and brand out there desires to generate as much revenue as they can. However, the metric that is more symptomatic of your tobacco business’ financial performance is year-over-year (YOY) revenue growth. This method is more effective in evaluating and measuring the financial performance of your business. Even though you and your competitors are targeting the same customers, you should keep in mind that your business situation is completely different from them. Therefore, it is better to compete with yourself and compare current financial performances and revenue with your past ones.
Average variable cost (AVC) is your company’s variable costs that include labor, electricity, material, etc. to produce a unit of your product. A few examples of your variable cost will be production equipment, materials, sales commissions, staff wages, online payment partners, credit card fees, cigarette boxes, and shipping costs. The variable costs of your business directly depend on the amount of product you sell. It means the more units you sell of your product leads to the higher variable cost and the less you sell the unit, the less will be your variable cost.
As the name suggests, the average fixed cost (AFC) is the fixed cost that does not change regardless if you sell more products or less. For example, web hosting costs, utility bills, rent on office space, small business loans, property tax, manufacturing equipment, health insurance, management salaries, etc. all are referred to as fixed price no matter how much your product, sell, or ship your cigarette packages. All of these costs stay constant each month. To figure out how much your tobacco business will have to pay for each unit of your product before you measure the variable costs needed to produce cigarette packaging. For this, you need to determine your average fixed cost, which is your total fixed cost divided by your total number of packaging units you have produced. This will help you determine the level of influence your fixed costs have on your product’s potential for profit. Plus, how much should be spent on variable costs to turn a profit.
The contribution margin ratio is known as the difference between your business sales and variable expenses that are expressed as a percentage. As your variable cost is directly associated to producing your product and fixed cost is related to business operations, contribution margin allows you to understand and how lucrative your product is. However, if you want to understand how variable and fixed costs affect your bottom line, you need to calculate each of your product’s contribution margin ratios.
The break-even point is the revenues required to cover a business’s total amount of variable and fixed expenses during a definite period. In other words, it is the quantity of product you have to sell to equal your total costs with your total revenue. You should know that your break-even point is very significant because it is the minimum objective or aim your business should try to achieve not to lose money during a specific period. What is even better is to surpass your break-even point your business will turn a profit during that time.
The cost of goods sold (COGS) is known as the direct costs of producing the goods sold by your brand. This amount comprises the cost of the labor and materials used in the manufacturing of the good. However, it doesn’t include indirect expenses, such as sales force costs and distribution costs. In other words, it is your cost of sales or cost of doing business. Tracking your COGS is crucial because it directly impacts your bottom line. For instance, when your COCG will decrease, your profit will increase, and vice versa.
It is a metric that is used to access your business financial health and business model by showing the amount of money left from product sales after subtracting the cost of goods sold. Your gross profit can be calculated by deducting your COGS from your total revenue and reveals your business’ production efficiency. It is often expressed as a percentage of sales and called the gross margin ratio. It is the best way to determine a business’s financial performance.
We understand that keeping track of all these metrics can be a little daunting and time-consuming, but it's worth all your effort. Because you don’t want your business to face loss and not to generate your cigarette boxes. However, with all these metrics, you need to get your hands on custom printed cigarette boxes, so all these calculations and tracks are worth it.