Unit 3: Chapter 7

Owning a business isn’t free, there are constant costs to keep your business running. The larger your business, the greater these costs. Owning a business is a constant struggle for your business to make more money than it costs to run. The most fundamental factor in ensuring that your business makes more money than it costs is to sell your product or service for a profit. This means, sell your product or service for more money than it costs for you to make. However, a lot of business costs aren’t related to the products or services, but instead to the management of the business. These costs include: paying employees, advertising, real estate, etc. There is also a startup cost for most businesses, which are the one-time costs you have to pay when starting a business. 

Startup costs can be tricky, as they are usually very expensive costs when you don’t have any business income to pay for them. There are a number of strategies for tackling startup costs, such as loans, or venture capital funding. Your business should eventually be able to pay back these startup costs. Examples of startup costs include, manufacturing equipment, real estate (if you’re purchasing property), business licenses, and inventory. 

Recurring costs can also be tricky, because you have to consistently and constantly pay them. Recurring costs are things like materials, employee paychecks, real estate (if you’re renting a space), and maintenance. Your profit as an entrepreneur is dependant on your business costs. You can’t simply take home all the money your business makes, because then none will be left over to pay your expenses. You’re going to have to find a good balance between putting money in the business, and giving some to yourself. You’re going to want to make sure you have an emergency fund for your business in case something happens. If your business is unable to pay it’s costs, you will likely have to shut it down.

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