BOSS: Mo's Bakes Year One
Lesson 13 of 13 in our free Business Money Basics guide: a 5-minute money game with the key points below.
This lesson is in the full version.
Free with a code from your uni, college, council, landlord or employer (worth £600/year). Lesson 1 of Business Money Basics is free for everyone.
Got a code? Unlock this lesson
Questions you'll answer
Mo's Bakes P&L (illustration): 15,500 cakes at £4, variable cost £1.40 a cake, overheads £18,000. What's the net profit before tax?
What's Mo's break-even point in cakes for the year?
Year two: a supermarket-style chain offers to take 20,000 cakes at £3, paying 90 days after delivery. What's the biggest risk to check first?
Final move: what's the most sensible way for Mo to pay himself in year two?
Quick facts
- Fact: “Mo's sales of £62,000 mean he's under the £90,000 VAT registration threshold for now.” — But he must keep checking the rolling 12-month total. The chain deal could push him over.
- Myth: “Mo can pay himself the full £22,300 profit with no thought for tax.” — As a sole trader he's taxed on that profit, so part of it belongs in the tax pot.
- Myth: “Mo's tax as a sole trader depends on his drawings, not his profit.” — Profit is what's taxed. Drawings are just him moving money he's already earned.