Regardless of the industry you’re in, knowing your costs is essential for success.  It’s the age-old process of how to make a profit: money earned MINUS cost of goods equals your profit.  Thus, in order for you to be able to make a profit, you must know what your cost of doing business is, so that you can appropriately and accurately price your service or product.

So what are your costs?  It’s not just the amount you spend on product A, to be able to mark it up and sell it to a customer.  In today’s business world, it’s not enough to “eyeball” your pricepoint.  You need to think it through, and make sure your math adds up.

Some cost-related items to consider when creating financial models for your business:

– what is your overhead at your place of business?  (i.e. utilities, internet service, parking fees, etc.)

– what is your cost to acquire a customer?

– labor costs? (employee payroll costs, benefits, bonus payouts, etc.)

Just from this short list you can see there’s quite a bit to think about when analyzing your business’s financial forecasts and objectives.

 

 

 

 

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