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What are the costs of your business?


Tatawwar

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Unit Video

Unit Summary

The two essential cost structure elements include:
  1. Fixed Costs. These refer to things you need to spend money on whether you sell anything or not. These could include a factory or office, general administration staff, rent, management staff, etc
  2. Variable Costs. These refer to the money you spend on the sales of your products or services. The more you sell, the more these costs increase. Variable costs include things like the raw material for your products, consultants you hire or work with, etc.

Build Your Action Plan

In this video you will learn the 2 most important cost structures in your business.
Cost structures give a clear picture of how much everything will cost for you to deliver your business model. Keeping your costs under control is essential to maintain a healthy business.
The two essential cost structure elements include:
  1. Fixed Costs. These refer to things you need to spend money on whether you sell anything or not. These could include a factory or office, general administration staff, rent, management staff, etc
  2. Variable Costs. These refer to the money you spend on the sales of your products or services. The more you sell, the more these costs increase. Variable costs include things like the raw material for your products, consultants you hire or work with, etc.
When you first start up a business, you have to keep the fixed costs as low as possible so that you don’t run out of money too quickly. Especially before you start to sell enough to make a profit.
Calculate the cost that would be involved in the sale of each of your products or services to your ideal customer. Is it higher than the amount you think your customer is willing to pay?
If it is, then you need to think about either increasing the price of the product or adding more value so you can charge more.
You need to repeat this process to get to a point where the price you sell at is higher than the cost, in other words, your profit is positive.