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Start-up costs are the expenses incurred
during the process of creating a new business. All businesses are different,
and can require different types of start-up costs. In order for a business to
survive, start-up costs need to be kept as low as possible. Business owner has
to make list of start-up costs. Using a list of start-up costs a business owner
would then create a personal survival budget.
For my business idea that is in school café I
should still keep start-up costs low, but as far as it is in school I don’t
have to worry about the equipment for my business, because they already have
kitchen to work in and café to sell my products. However I still have to pay
the rent and I need resources to start with – stock.
Personal survival budget
In order for your business to survive, you
need to have enough money to cover all your start-up costs, the costs of
running the business and also for you to live on. This section looks at how to
determine your personal survival budget.
I think my business would not affect my
personal survival budget too much, because I don’t have to buy all the
equipment like ovens, fridges, etc. As
far as I have to worry mostly about the stock for my business.
Cost of premises
Choosing appropriate premises is crucial to
the success of a business. Business owners then have to decide whether they
want to rent or buy premises. For place they have to pay rates as well as
insurance. When they are choosing the best place for business they have to make
sure that people are actually going to that place. For successful business they
need to locate it where it is easy to get to, where the public transport goes,
as well as there should be parking for customers with their own cars. However
they have to know their competitors.
I think in school the rent is not the
expensive one that is very good for me because I need to keep my start-up costs
very low so my business can survive. Café is only for students and staff in the
school. Staff has car park next to school. And in school I don’t have any
competitors, because in the school there will only be one café, so I don’t have
to worry about it.
Cost of equipment and supplies
The capital needs breakdown. Business owner
has to make list of what equipment and supplies needed they will need. Any
equipment or supplies that a business needs to purchase will typically end up
being a substantial financial cost and must be decided upon before putting
together a cash-flow forecast.
For equipment I don’t have to worry too much
because school already have kitchen, I might worry about supplies that I need.
And I need to include this in my cash-flow forecasting.
Employing staff is the biggest business
expense. If business owner decides that the business needs staff then they have
to follow all the laws of employing staff. The law requires that businesses
comply with the current minimum wage legislation and make National Insurance
contributions for each employee. However they have to follow other laws that
are common with employing staff.
My business in really small so I think I don’t
need any staff to employ. Just in case if I can’t open for a couple of days I
can talk to caterers in school if they can be open for me and pay them for the
work, or just close down for couple days.
Products or services need to be priced
correctly or the business may not succeed. There are a number of ways to
determine a satisfactory price. The pricing that businesses could use are –
cost-plus pricing; penetration pricing; premium pricing; price skimming;
economy pricing ; psychological pricing; promotional pricing or value pricing.
For pricing I will use – cost-plus pricing and
psychological pricing together. I will use cost-plus pricing because I need to
make profit from my products so I can get money. Psychological pricing I will
use on top of cost-plus pricing to make people think that it is cheaper.
This will involve trying to plan when costs
will occur as well as estimated revenue over the next 12 months. A new business
will have to base its forecast on market research undertaken prior to starting
up whilst an established business will base it on what has happened to the firm
in previous years.
I will have to make a prediction on my money
inflow and outflow, so I know how much money I get or lose. I need to know how
much money I get from sales and how much money I spend of paying for rent and
buying stock every month. As well as I could find out the net cash flow – how
much I get or lose. However I need to calculate opening and closing bank
balances, so I know with what I am starting with each month.