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Starting and Running a Business: Introduction to the Financials Part I

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Starting and Running a Business: Introduction to the Financials Part I

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    14. If we were to start this business, what would we need to have?

    15. Start-up Investment The initial amount needed to starting your business Office Supplies Your Product Materials Equipment Legal, Incorporation, etc. 3 months cash (operating) reserve Costs of Starting and Running a Business

    16. Start-up Investment The initial amount needed to starting your business Office Supplies Your Product Materials Equipment Legal, Incorporation, etc. 3 months cash (operating) reserve Costs of Starting and Running a Business

    17. Ex: John’s Gift Basket Shop Business Certificate $100.00 Basket Ingredients $275.00 250 Business Cards $20.00 100 flyers $50.00 Office Supplies $45.00

    18. Ex: John’s Gift Basket Shop Business Certificate $100.00 Basket Ingredients $275.00 250 Business Cards $20.00 100 flyers $50.00 Office Supplies $45.00 3 months fixed costs $120.00

    19. Ex: John’s Gift Basket Shop Business Certificate $100.00 Basket Ingredients $275.00 250 Business Cards $20.00 100 flyers $50.00 Office Supplies $45.00 3 months fixed costs $120.00 Total Start-Up Investment $610.00

    20. In NFTE’s 10th Edition: Fixed and Variable costs are defined by how they relate to sales: Fixed costs: do not fluctuate with sales Variable Costs: do fluctuate with sales or production The 2 Costs of Running a Business Fixed and Variable

    21. Variable Costs: costs that fluctuate with sales Divided into 2 categories:

    22. Variable Costs: costs that fluctuate with sales Divided into 2 categories: a) Cost of Goods Sold (COGS) or b) Other variable costs

    23. Variable Costs: costs that fluctuate with sales Cost of Goods Sold The cost of producing one additional unit of the product you sell Ex: If I’m in the watch business and it costs me $5 to purchase 1 watch that I sell, my cost of goods sold (or COGS) for 1 watch is $5.

    26. Variable Costs: costs that fluctuate with sales b) Other Variable costs Commission Packaging Shipping

    28. Keystoning is doubling your cost of goods sold (COGS) to set your selling price.

    29. The Production/Distribution Chain or The Supply Chain

    30. Formula: Gross Profit = Selling Price – Var. Cost per unit per unit per unit

    31. In order to calculate, we must define our Unit of Sale

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