P4 Describe financial aspects that affect the start-up of your business.


Start-up costs

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

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.

Pricing policy

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.

Cash-flow forecasting

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.

 

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