SLC | S21W1: Costs For Entrepreneurs| Introduction to Cost
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Hello friends, I welcome you all to my article in the SLC: S21/W2 in this special challenge, I would be putting in more efforts to bring forth creative feedback in all possible way to these questions.
Cost is the entirety of the gross expenses, funds and financial equity requires to start a business. It cuts across human resources, manual labor as the case may be, loans and in other cases every necessary prerequisite required to start a business. It is really vital to know the business cost in order to ascertain if the designed business is profitable or not. Importantly cost cuts across all businesses, it has to do with the expenses in running the business which means payment of workers, expenses in buying raw materials for running the business in other cases, it is a broad term and i hope we all understand my thoughts.
Importance of Cost for Entrepreneur
The deep study into the cost is really crucial because it enables the entrepreneur ascertain whether he makes profit or loss in his business. It is a yardstick to check loss and balance profit margin in business.
Analysis into your cost and cost management, eventually enables the entrepreneur know the appropriate area to invest which yields him profit. From costs uncured during the running of the business. There is decisive intuition to choose a more basic investment plan for proposed business.
The cost is a vital instrument required in any business, this a good cost analysis must be a great leverage over most failing business, if we can spot the appropriate cost at the right time, we make profits in business this a basic economic instrument crucial for business growth.
There is great similarity between costs as expenses and also a thin line between cost and expense. Cost indeed is the money spent on the overall running of the business, basically the specail needs required to run the business, while expenses are utility and miscellaneous money spent in the day to day running of the business asides money spent in opening the business.
 sourcebusiness cost varies from expenses |
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Analogy:
A Saviette brand owns great workers, a big company and the cost of bringing the machines, printing the label on the packaging, branding, purchasing raw materials for production are all incorporated into the cost of running of the business.
Moreso, the expenses could be the tax levied on the company, cost of utility bill, cost of payment of workers, cost of diesel plant in case of power outage, installation of solar panel for night shifts and a whole lot of other expenses. The cost of refuse disposal just to mention a few would be incorporated as expenses, these are made after the product has been produced. This is indeed my indeed of cost and expenses.
There are some benefits of performing good cost determination, these great beneficial factors would indeed grow your business in one way or the other.
Profit Maximization: Cost determination is indeed a great beneficial instrument in business as it keeps you on a great profit margin, this could definitely help you know the right selling price in cases of products to bs slightly to your benefit and not so outrageous profits to scare customers away. It is a beam balance, so to say, to keep your relevance in business.
Competitive Forces: The cost determination ensures you get right prices for your product, keeping you really relevant in the market, of your products are not so expensive yet profitable, it would bring about reoccurring customers visiting and an ideal competition in the market, a great threat to your competitors and an edge too in business.
Positive Giant Business Strides: When you have precise cost information you make smart decisions and definitely progress in business by making giant business strategies, which would sky rocket your business thus, attaining profitability and success in business.
 sourceprofits function for cost determination |
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Foremost, I would lay emphasis basically on profit generation, calculations would be made to know the percentage profit in relation to my capital for the startup. That being done I would check the cost of the startup which includes insurance, utility bill, cost of production, cost of transportation during supply of products to customers and a total rundown of percentage cost against profits.
Moreso, this approach would aid me to know my profit margin against cost margin. If need be to adjust it would be done, if it requires cheaper cost of production, by cutting unnecessary expenses and curtailing expenditure in one way or the other the business cost can be tracked and compared against profits before finding or ascertaining whether there is profits or loss.
Greetings @daprado1999
1.- You have defined the cost and shared its importance. It is true, financing can be considered a cost, since it generates financial expenses when having it. It is very important to determine the cost to know how profitable the business can be.
2.- You have shared the difference between costs and expenses. We can say that the cost is related to the essential operational aspects of a business, where the purpose is to produce a good; and expenses are disbursements that are made to cover collateral activities, as well as basic services related to the project.
3.- You have highlighted the benefits of costing. This provides security and confidence when generating appropriate pricing policies and strategies; both to be competitive in the market and for business growth.
4.- You have shared your way of determining the costs if you have a business. Going after profits is good, however, we must keep in mind at what cost, or what risks we must take to achieve them.
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