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Startup Costs, Operating Costs, and Sales Projections (Business English) - YouTube
Channel: American English
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In this video we will explain
startup costs, operating costs and
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sales projections.
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We will talk about why they
are important parts of the financials of
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a business plan.
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Let's discuss startup costs first.
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The startup costs, part of the financials,
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shows the amount of money needed to
start an organization or a business.
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Even when a business has
a very simple design,
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there are some costs to getting started.
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For example, a start-up taxi service
would need at least one car,
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gasoline or petrol, and a driver.
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The car, the gasoline, and the driver's
time, while the business is looking for
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customers, are all start-up costs.
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Let's look at possible start-up costs to
consider for goods, such as a paper clip.
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One:
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Materials or supplies.
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This could be recycled metal for
a paper clip.
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Two:
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Manufacturing or production,
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a factory to make the paper clips.
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Three:
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Employees.
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How many are needed to
make the paper clips?
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Four:
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Office rent and office supplies,
computer, printer, paper.
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Let's look at possible
startup costs to consider for
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services, such as a taxi service.
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One:
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Supplies, gasoline.
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Two:
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Technology, machinery, vehicles,
a car for the taxi service.
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Three:
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Employees.
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Maybe the same number as the cars.
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Four:
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Office rent and office supplies.
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Computer, printer, paper.
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Now, let's look at operating costs.
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These are sometimes called
operating expenses.
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These are the costs to produce
a companies goods and services.
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This means the cost needed to run
the day to day operations of a business
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once it has started.
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Cash is important to a business because
it's used to pay for operating expenses.
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For example, what you pay your employees and
suppliers.
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Without cash, a business cannot operate.
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Normally, a business plan would include
a cash flow forecast in this section.
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To show that there'll be enough cash
to pay for day to day operations.
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A cash flow forecast is a plan of how much
money a business expects to spend and
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receive during a specific period.
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We do not have time to review how to
create a cash flow forecast in this
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course.
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However, because cash is so important,
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an entrepreneur needs to consider
this an important of a business plan.
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Now, let us look at sales projections.
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Sales projection show how many products
the business expects to sell this year and
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two to four years in the future.
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Sales projections are an important
part of a business plan
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because they show how quickly
the business is expected to grow.
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If sales grow, then the business
operation will need to grow, too.
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For example,
if a taxi service becomes more popular,
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the business will need to buy more cars
and gasoline and hire more drivers.
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These projections, therefore,
are also used in financial calculations
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to help forecast or predict how
costs will change in the future.
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Start up costs, operating costs, and
sales projections help the entrepreneur
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show the expected current and future
financial situation of a new business.
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