To establish a business with the greatest chances of success, a person needs to have a clear idea of the costs likely to be involved. Business costs vary depending on whether one is starting new, taking over an already existing company or on the specific industry requirements.
A businessperson, wants to start something that will grow and give back good returns, so it is important to not only look at the initial cost to set up a business, but also at the running cost of the particular type of business. He or she wants to minimize on costs and maximize on profits. So just how is this achieved?
Do some research
A business person does not get into a venture blindly; instead he or she gathers as much information as possible about it. If for instance he or she intends to start a jewelry business, he or she will look at the already existing market, spot a gap and work to fill it in a way that sets it apart from the others. From this point, he oe she takes the following steps:
- Puts together a business plan – A business plan helps him approximate the total costs he will incur in order to reach his business goals. Through it, he will be able to point out what is necessary, what can be minimized and what needs greater attention.
If after studying the industry market and an entrepreneur decided to venture into the jewelry business, he will go ahead and layout his business plan. Basically, the plan will be a brief description of what exactly he is getting into and the money he will be required to put in to it.
- Understands the nature and value of each cost – He breaks down the costs depending on the nature of business. For instance, if it is a jewelry business, he identifies the one off establishment costs such as licensing and insurance, cost of equipments such as display stands, polishing materials, stationery, microscopes and furniture, working capital which capital which covers staff, marketing, compliance fees and premises. For the management costs, he would create a forecast that gives him a sense of how money moves in and out of his business for like the next 12 months.
Jewelry inventory usually has a high cost due to the nature of the goods and the efforts needed to maintain it until it reaches the consumer. Getting into this kind of business means that one has to spend a lot of money in acquiring the stock and also protecting it due to its high value and delicate nature that makes it susceptible to theft or damage. Having this in mind then helps one prioritize the cost of setting up such a business in the right order.
- Determines his break-even point – He analyses the relationship between his costs and sales and considers the fixed and variable costs. As well as the the cost to set up a business, he also gets to the sales he needs to make in order to make a profit. In the jewelry industry, he is bound to spend more on acquiring stock, building his brand and marketing. Knowing this, he will then set a considerable price for his inventories just make sure he is profitable.
As an informed entrepreneur who understands the nature of his line of business, he will minimize other costs that have no negative effect on the quality of sales so that in the end he still gets his gains.
Consult experts or attend workshops on the cost to set up a business
If after research, a business person is not content and confident enough to start up a business, he then needs to seek help from experts in the area or those already in the market. This helps him learn from their mistakes and improve on what they have done or are doing. Workshops, seminars and other similar forums will get him in touch with other entrepreneurs where they can exchange information on the various costs of setting up a business.
A financial expert sees beyond his dream of setting up a business and comes up with facts of what can work and what won’t. A businessman getting into the jewelry industry should consult a financial expert to help identify his competitors, supporting industries and any other related businesses that may affect his. Such a person can also consult on setting up the records needed for correctly accounting for the financial transactions of the business.
Businesses will require different set-ups and approaches. Without realizing it, people face great challenges in their business due to poor understanding of the concept of costs. They overlook some factors or focus on those with little or no value. The success of a business depends on how well it starts off. An entrepreneur that fully grasps the importance of carefully planning his cost to set up a business is more likely to excel than one who does not.