Greetings teachers and students!
Am thrilled to participate in the season 21 w1 cost for entrepreneurs class with the topic " Introduction to cost".
What is cost?
In my own understanding i will define cost as a value of money that has been used to produce something or deliver service, let me use a company as an example, a value of money a company has to spend to produce its goods or services will be calculated as the amount that this company used to produce a certain unit of a product in other words it is the money that the company spends on things such as labor, raw materials, services and other things that brings profit to the company's account.
how important is it for entrepreneurs?
Business decisions that are made without understanding the cost mostly run on losses because cost is the core knowledge points for running a good business, entrepreneurs can make better and smarter decisions by applying cost analysis.
Establish the difference between costs and expenses, giving examples of this through a real case.
Cost and expenses are almost similar but they are not the same, as an entrepreneur they are some difference for business to consider, let say expenses is an ongoing expense this includes employees salary or a retail space used in running the business, now cost is the price paid to acquire an aset this aset will contribute to the growth of the bussiness and brings profits.
| Cost | Expenses |
|---|---|
| Example includes fixed asset, prepaid expenses, inventory. | Example includes depreciation, interests expenses, raw materials expense. |
| The purpose is to purchase an asset. | Purpose is to generate revenue |
|---|
| Does not impact the business profitability. | Impact business profitability |
|---|
What are the benefits of performing a good cost determination?
If i have poor cost-efficiency i will end up spending more than what my business generate, costing will help me sustain a profitable business it will reduce cost and also increase my profit margin.
Other benefit includes;
• greater customer satisfaction customers are always sensitive about price they compare price with what the get, costing will help to give value to the service i render.
• Increase customer retention when my bussiness can clearly demonstrate how my prices are determined based on accurate costing, customer feel more confident in their purchasing decision.
• Competitive advantage a lower price can attract price-sensitive customer and those looking for value boosting my market share.
How do you determine the costs of your business? If you are not an entrepreneur, how would you do it?
Estimating my cost, i will develop a list of my business needs note the average cost for each category, i will aso identify my expenses writing down the startup cost i have already incurred.
But if am not an entrepreneur this is my first line of action,
Firstly i will start by drafting how mush it will cost to start my own business,
Things i should consider if i want to be an entrepreneur, and lastly how the cost of a business is being calculated.
Am inviting @eliany @chant @goodybest to participate in this contest thank you.