Center for Educational Leadership Entrepreneurship and Financial Literacy Training.

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    12-Jan-2016

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  • Center for Educational Leadership Entrepreneurship and Financial Literacy Training

  • Costs of Running a BusinessPre-tax Profit: Monies left over after you pay all your bills and before you pay Uncle Sam.Return on Sales (ROS)Example: Sales $1000 Pre-tax Profit $100ROS 10%ROSRangeTypical ProductVery low2-5 %Very High Vol. /PriceLow6-10 %High Vol./PriceModerate11-20%Moderate Vol. /PriceHigh20-30 %Low Vol. /PriceVery high30% - upVery low Vol. /Price

    Text Page 185

  • Costs of Running a BusinessProduct/ServiceUnit of SaleBy the pieceCombo of piecesBy the job/projectTime

    Text Page 116Revenue Model

    Product one PieceProduct two ComboProduct three job

  • Costs of Running a BusinessCosts of GoodsMaterial CostsRaw materialSupplies Third partsPackaging

    Variable Sales CostsCommissionsAdvertisingLaborShipping

    Revenue UnitsMinus Costs of GoodsMaterial CostsVariable CostsEqualGross Profit

  • Costs of Running a BusinessOperating Expenses(Overhead)

    Fixed ExpensesUtilitiesFixed SalariesAdvertisingInsuranceDebt ServiceOffice/WarehouseStoragePO Box Franchise FeeDepreciation

    Text page 123Revenue UnitsMinus Costs of GoodsMaterial CostsVariable CostsEqualGross ProfitMinusOperating Expenses

  • Costs of Running a BusinessOperating ExpensesVariable ExpensesUtilitiesPhone billSales TaxesTravel and MileageMaintenanceProfessional ServicesOffice SuppliesBank feesConsulting Services

    Revenue UnitsMinus Costs of GoodsMaterial CostsVariable CostsEqualGross ProfitMinusOperating ExpensesFixed ExpensesVariable ExpensesEqualPre-tax Profit

  • Costs of Running a BusinessAllocating your Fixed CostsMaking sure your unit costs covers all costsMake Fixed Costs Variable when PossibleNegotiate fixed expenses as a percent of SalesThree Month Reserve for Fixed CostsPlan for slow sales or changes in marketKeep expenses low as a percentage of Sales

  • Income StatementsIncome statements give you a snapshot of whether you are meeting your customer needs, creating value in the company and keeping good records.

    Text page 175

  • Income StatementsEight Parts of the Income StatementRevenueCosts of Goods SoldSales expenses (other variable costs)Gross ProfitOperating Expenses (Fix Costs)Pre-tax profitTaxesAfter Tax-profit (Loss)

  • Income StatementsSame Size AnalysisUsing ratios to analyze your business performance and measure your success against industry and competition.Startup Costs

    Text Page 183

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