Profitability and the death of the garment industry of Ukraine.
The profitability of the losers of the joke is when we buy for $ 2 sell for 4 live by 2 %. The fact that production in Ukraine is only on this principle. Why — you will understand further, but back to the anecdote. Successful losers tells each student how he conducts his business. He doesn't know how much interest it earns, and the more scary words such as: ROA, ROA, ROI and ROE. It is enough that there is a good profit. In our case things are more complicated. So I decided to roughly calculate the average profitability of garment production.
About the mill and the overall situation
For thirty years we were fed with slogans about access to international markets, attracting investors, the growth of imports, GDP, and the legalization of labor relations, etc., etc. All this against the backdrop of high production costs, low quality and lack of reputation in the world market. While the fight against smuggling, counterfeiting and the "deviators" from taxes. Interestingly, first create for these problems, the conditions, and then fight.
Most aspiring entrepreneurs sewing business do not have the ability to escalate the level of the shop in the backyard. Industry "stifled until it is small".
If not for the draconian taxes, it would be possible to create and develop production in the country, reduce the cost of production, to create new businesses and jobs, not to mention attracting investors.
War with windmills is when someone is spending power and the resource to a non-existent enemy. Now, in Ukraine there is no state apparatus against an illusory enemy, there is a very specific task to squeeze out small and medium businesses all the tools, and put people in such conditions that the work "white" is simply impossible.
Why? The answer is obvious.
About the problems
First, what we are up against — the raw material, fabric, thread and accessories. Almost everything is imported, so the cost of the finished product is markedly increased.
The second is the problem of staff shortage. People are not going to learn in order to, for example, to become seamstresses. Most need to sit out the last two classes of the school, and in any case, to get a crust. Vocational education was not needed and not effective.
Large enterprises, if you want to run without shortage should create their training courses in the workplace. Thus most of the students are motivated and the company can select the best for yourself.
But don't forget that funneling qualified personnel to work abroad in the near future we will not have employees, customers, and the state taxpayers.
The lion's share of selected taxes.
Approximately 41.5% of the tax goes to the maintenance of one person. Naturally, employees are not interested in how and where you will deduct taxes from wages. The specialist is required to obtain a specified amount on clean hands!
To date, that the seamstress was motivated and worked, requires a minimum of$ 750, and is slightly more than 1000$ with taxes!
If this money is not forthcoming, the seamstress will just go to work.
Of course, there's always a way — we train young cadres for yourself! But realizing that they pay more, they will also leave. The result — turnover and a shortage of workers in case of unemployment in the country.
It is a paradox.
Operational work — one of the methods of avoiding dependence on qualified personnel. This method improves the quality by 15-30% and production by 10-30%. This is especially true for Kharkov. And yet we Balk at the qualifications of the technologists.
— Where to take them?
Automation is expensive but more effective solution. The Chinese say: if the worker gets 600+$, we put 1 machine to replace 10 employees, will pay the operator$ 1,000 and we will not skimp on employees. Automation can improve the quality of 10-60% and production by 20-40% compared with the operating work.
The company Legprom has created a new service — selection and delivery of sewing equipment without intermediaries from China with a guarantee. This approach reduces the costs of enterprises in the purchase of equipment.
Now for practice, that is, the calculations of the "white" production
The profitability of the practice
Example: manufacture of women's jackets
· Wholesale price on average 30-45$ per piece.
· All naborkoy on the product imported (fabric and fittings, insulation, filament), 20+8% losses at customs.
· Raw material costs is 10$ (for the product), including taxes of the$ 2.3 and this is not counting the cost of intermediaries, delivery, brokers, certification.
· Tax on imported raw materials per month of the$ 2.3 per product.
· Payment for cut, sewing with naborkoy and accessories will take an average of$ 10 EA. But this salary is on hand, still have to pay taxes.
Costs eat a little more than$ 40 to the cost of the product, when the market price 30-45$
Recalculate based on the number of products
· Take the average of the production for 40 pers. with a capacity of 1 seamstress -3 products per shift.
· In the state Treasury will send 5,17$ taxes per employee for each released unit.
· 40*3*24=2880 units per month or 14889$ tax feature working in a month.
· Expenditure on salaries process engineer, mechanic, accountant, a couple of sales managers, marketing professionals, about 3500$ + 1811$ taxes.
· Average monthly rent, utility expenses for the rented room of 130sq order.m. about 1000$, also laid taxes!
· Officially on preferential taxes on group 3 with 5% tax to work will not work, because 5 million UAH. in circulation, this production will exceed 3 months of work.
· Taxes 20% VAT, 45$ wholesale price = 9$*2880 products = 25920$ VAT per month
· Customs clearance of raw materials 2880 units*2,3$=6624$.
Together 32544$ taxes + taxes per employee 16700$
Costs 28800$ raw +49000 pay$ tax+$ 1000 rent+ 25920$ VAT+$ 2,000 in advertising and marketing=106720$
The maximum profit will make 22880$
But that's not all!
18% income tax and 1.5% military tax
22% of ERUs
Income tax 9495$
Approximately 58 739$ without risks goes to the state with an honest, small company, despite the fact that every time puts a spoke in the wheel.
Good profit and without investment is it not?
About 13 385$ belongs to the entrepreneur, but it's not pure profit! I missed the cost of sourcing, logistics, Internet resources for depreciation and equipment modernization, the development of the business. Also, we forgot about the risks and penalties....
Automation will solve some of the problems, but automation and modernization will have to take out loans with huge %!!!
In fact, if you stay 3-5000$ is perfect!!!
For reference: the number of registered and terminated their activities in the garment factories according to the tax service, of October 27, 2019.
"Evolve" next
And if the company will think to enter the market of Europe? Just read the price of 100$ cum. shipping + 23% VAT and is opt!
Yes, now you say that the export is 0 VAT, but with one "BUT" — you must take the goods outside the country and to make a Declaration, after which the VAT returns to the tax loan and to reimburse it on a current account is practically impossible.
Refund of VAT in our country was always the object of attention from the GFS to Me personally, this system is somewhat similar to the optimization of income and expenses, OOO through the FOP, only to have the state diagram!
Of low sales
And now, for comparison, shows why we have poor sales and why we can't compete with the world's light industry.
— Our prices are inappropriately high for everyone!
The Internet has opened the world and now, you can buy anything in America, England, China is quite easy. Will work out cheaper and better than us, and even world famous brand.
For example:
This is an American site, the price discount, but where most just take all the discounts. And Yes, this is the retail price. At the same time, shipping is inexpensive. For yourself for one or two units do not pay taxes. It is a famous brand, the quality of the material is much higher than us, the quality of tailoring at least — not worse.
And here's a site from China, free shipping, quality level:
And this model is more difficult to dispel hopes for a happy future:
Do you know how they do it? Own production of raw materials, their production equipment and sewing.
About tax do not know, but I will say that China did not touch small businesses up to a turnover. It is important that the government at some point helps with subsidies to business.
This is something that for us is impossible!
#Decemmaculatus
What to do right now?
Hope for tax cuts — not worth it. Of course, officials will play in windmills, to combat smuggling, illegal labour and to squeeze out entrepreneurs to the maximum. It is profitable business in the shadows, "always to blame" it is easier to manipulate. Won't help common sense, articles and even mass protests. They will never refuse from the trough.
Every year the chance to stay afloat is reduced, but something that we can do. At least this:
· automation of production;
· transition to operational work;
· motivation of personnel;
· reducing the number of intermediaries.
Each item in this short list is tested and working. To better understand what your situation will be better — it requires analysis.
My proposal — audit your production, search losses, proposals for business development through automation or by another equally effective but less costly program.
Interested — call right now!