The Costs of an Entrepreneurship

Embarking or not is a decision that can change several lives, so you should be able to visualize a minimum floor, both economic and temporary, so that you can make a more realistic decision about a future business or enterprise.Rise school is Best School of Accountancy in Lahore.CA admissions in Lahore now open. The best School of Accountancy in Pakistan offers CA in Lahore and Best CA in Pakistan.

Therefore, we will speak today of the foundational stone of any business: The break-even point.

This is obtained from costs, on the one hand and sales on the other, subtracting from the second, the first, that is, total sales for a given period less costs. When the point is zero (0), it is called a point of equilibrium.

Now, the costs of sorting in many ways, according to their purpose, use, nature, ability to control, etc. However, for purely pedagogical purposes, we are going to create a single structure called costs, in which, all the resources needed to run a company must be included.

These amounts, which we have called costs, may have a direct condition with respect to production, that is, with higher production costs, if this is so they will be called variable costs and if the costs are permanent, at least for a given period , Such as wages and rent, will be called fixed costs.

Well, in the category of costs to be taken into account, which are fixed and weigh heavily in the beginning of a venture, because it is not possible to reduce them, nor to cover them with an incipient production, are: The national to the municipal, which requires compliance and has a cost, for example, sanitary permits, creation of the company, permission to operate the mayor, etc); The rent (a space is required to be able to carry out the entrepreneurial activity, normally different from the house); The initial salaries (usually the payment of oneself, when it is a small undertaking, or the number of employees with which to start), initial furniture (including pc, desk, air conditioning, refrigerator, kitchen, etc. ), The initial industrial machinery, among others.

Among the variables, we have the raw material needed to produce a good or a certain number of goods, which is increasing directly proportional to production, associated services (electricity, water, gas, etc.), services Technicians on the equipment, etc.

The difference between these costs is the time of their amortization or payment, while the variables must be paid by means of direct production, some of the fixed costs, such as the acquisition of machinery and furniture, should not be reflected in their Total in the sale price of the product, but a quota to be determined, to reduce it gradually.

Now, let's go to a practical example, Jorge, wants to sell empanadas on the corner of the school, and estimates that he should sell it at 1 dollar each. Their costs are: their salary (minimum), a fryer, a cart to move the products, bags, napkins, meat, rice, potatoes, corn dough, condiments, kitchen tools, glass heater and saucepans. Presumably, all this makes about 1500 dollars to start (which does not mean that it should be obtained at one time, but amortizing these costs in an average period of 18 months), so Jorge determines that his goal is to sell 300 empanadas Per day, working 5 days a week, that means that on average, you must sell about 6600 pies per month (calculating that you work 22 days per month). Your approximate costs are $ 290 per day, including your salary. That means that your costs (fixed and variable) are $ 6380, leaving as a profit (not salary) $ 220, so the break-even point for this example would be if the costs are $ 6380, Less 6380 empanadas (remember that they are in 1 dollar) to arrive at the point of balance, a pie less, and the company begins to arrogate losses.