Work Out Costs

Identifying and working out all the costs associated with the start up are essential to assessing its viability. First you need to look at the capital expenditure that you need to incur in your start up. For capital expenditure, you have to understand how capital costs are depreciated or in some cases amortized over a period of time.

Next, you have to know the differences between fixed and variable costs. Variable costs refer to those costs which are incurred in direct proportion to the income generated form the sale of goods or services. For variable costs, the most obvious is the cost of goods sold. Fixed costs are costs which are incurred rrespective of whether there is any income generated from the sale of goods or services. Fixed costs are also referred to as overheads.

Therefore you need to start with understanding the concept of amortization and depreciation and cost of goods sold, and work out the costs associated with these items as follows:

Amortization and Depreciation

Cost of Goods Sold

Machinery/Equipment and Furniture

Premises

Renovation

Licenses/Patents

Employees

Expenses

 

 

Home

The 8-Step Approach

Pick Relevant Attributes

Generate New Ideas

Select Best Ideas

Identify Income Sources

Work Out Costs

Forecast the Revenue

Assess and Iterate

Invest and Launch