Introduction
My business idea is geared at beginning a dress shop to provide trendy, affordable, and quality formal dresses to women aged between 20 and 39 years. This will ensure that individuals look attractive in public by wearing glamorous outfits to boost their confidence levels. After choosing the desired pricing strategy to adopt for the new business, it is crucial to determine the potential expenses to maximize profitability (Crash Course, 2016). The paper focuses on identifying the possible start-up expenses related to the sale of formal dresses.
Main Expenses for the Business
As a first-time entrepreneur, I need to comprehend the various expenses associated with the new business to make the proper investment worth generating significant returns. One of the main expenses for the business is labor costs, where I will be required to acquire and pay some employees to help deliver exceptional customer service and guarantee timely deliveries. This will help in encouraging clients to make return purchases and recommend the business to their colleagues and family members. The second main expense is rent, where I will be needed to find a space in the most suitable location to open my shop. However, I will pay rent costs to enable a smooth operation of the business to attain the anticipated objectives. The third primary expense is equipment to ensure that the business has the essentials and materials needed to accomplish office tasks and reach out to the customers (Marburger & Peterson, 2013). Some of the equipment needed include cellphones, computers, cash registers, and furniture.
The fourth expense is licensing charges to acquire the required permits and licenses from the local, state, and federal governments. The fifth start-up cost entails information technology to achieve website development and specialized POS systems. The sixth cost linked with the new business is marketing to enhance product awareness and introduce the shop to the public. This will include printing business cards and brochures, developing a business logo and advertisement (Marburger & Peterson, 2013). The seventh main expense is the initial inventory and consultation to acquire the right stock and consult the correct people to achieve success. Lastly, the costs extend to include utilities and miscellaneous to help the business remain operative and increase sales volume. The utility expenses cover electricity, sewage, and waste disposal, while the miscellaneous costs entail the acquisition of hangers and mannequins, among others.
Estimated Expenses in My Hometown
My great network of friends and the use of the internet helps me make an estimate of the expenses for my business idea within the hometown to acquire the right amount of funding. A novice business requires enough funding to meet all payments and focus on surpassing the potential competitors in the market. Estimating expenses allows an individual to understand the areas that can help attain cost minimization to increase the profit levels. The start-up expenses in my hometown are shown in the table below based on internet research and consultations.
Breaking down My Expenses
The expenses for the business idea can be classified into fixed and variable costs. Fixed costs entail those expenditures that remain the same for a particular time. These types of charges do not vary even when the business output and performance levels alter. In most cases, they are considered the payments that a business would continue making if it decides to close its premises for a short time. However, the fixed costs may upsurge after a while to match the conditions in the economy (Taylor, 2014). From the list of start-up expenses, the fixed charges include rent, licensing, equipment, website development, and consultation. These expenses do not change even when the business records high losses or profit levels.
On the other hand, variable expenses related to the business idea entail all costs that fluctuate over time. The expenditures are usually linked directly to the daily operations of the business to support its survival. As a result, fluctuations in the business output and performance yield changes in the variable expenses. The costs are mainly incurred to improve the performance of the business and attain a higher market share. Additionally, the charges are not experienced if the business chooses to close for some time (Marburger & Peterson, 2013). From the list of the start-up costs, variable expenses extend to entail labor, marketing, inventory, utilities, and miscellaneous expenses. An increase in these costs, particularly in the sale of formal dresses, results in higher levels of profits.
Conclusion
A determination of the possible expenses that a new business may undergo helps individuals make reliable financial decisions and identify the desired starting capital. The expenses reveal the fundamental requirements needed for the business to remain operative and accomplish the projected objectives. The classification of expenses into fixed and variable expenses allows individuals to comprehend the areas that need increased funding to maximize the profitability levels. This creates an opportunity to augment the competitive advantage and outshine the potential competitors in the market.
References
Crash Course. (2016). Revenue, profits, and price: Crash Course economics #24. YouTube.
Marburger, D. R., & Peterson, R. (2013). Chapter 4: What your cost accountant can’t measure: The economic theory of production and cost. In P. J. Romero & J. A. Edwards (Eds.), Economic decision making using cost data: A guide for managers (pp. 47-74). Business Expert Press.
Taylor, T. (2014). Principles of microeconomics. OpenStax College.