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Economic and management sciences

Grade 8

Entrepreneurship

Module 16

How feasible is my business?

ACTIVITY 1:

To determine the financial viability of the business idea.

[LO 4.4]

Up to now we have looked at the business idea in terms of the product, its manufacture and assessment, the market (the buyers) and the way in which we are going to get the buyers to buy the product (marketing strategy). However, now we must make sure that the idea is actually financially viable. A business is only viable if it shows a profit. That means that we should not sell our product or service at a loss and that the breakeven point (the number of items or service contracts that we have to sell in order to break even) is realistically attainable.

To be capable of doing that, we need to look at the following:

  • the selling price;
  • the direct cost of creating the product or service;
  • the costs involved in running the business (e.g. transport and marketing).

The selling price

The selling price is determined provisionally beforehand on the basis of market research. The research is used to determine which similar products or services exist and what they cost.

The cost of the product

A product cannot easily be created without any costs. For example, even if spring water is drawn and sold, the containers (bottles) still cost money.

Operating costs

Operating costs include anything that is needed to keep the business going, such as transport, salaries, marketing, postage, telephone costs, and so on.

Let us do a calculation to determine the viability of a specific business idea. Let us assume that we are going to sell hot dogs at an athletics meeting. It will be only a small meeting and we think we’ll be able to sell 100 hot dogs. After doing some research we decide that R6,00 is an acceptable price. The frankfurters cost R3,00 each and the rolls are R0,60 each. The various sauces that we’ll need cost R25,00. We find out that we’ll have to rent a stall at R50,00 and that we’ll need 20 posters at R8,00 each to market the stall.

This is what our calculation will look like:

Sales: 100 hot dogs @ R6,00 each = R600,00

Cost of products: 100 hot dogs @ R2,75 each, and sauce @ R25,00 = R300,00

Gross profit as first indicator (sales less cost of product) = R300,00

Operating costs: Stall @ R50,00 and 20 posters @ R8,00 each = R210,00

Operational profit = R 90,00

It seems, therefore, that the enterprise will be profitable. The selling price, as provisionally determined taking into account the market indicators, can thus remain unchanged. If the calculation did not show a profit, we could have considered adjusting the selling price upwards.

There are important tests that have to be done to ensure that the project is truly viable: we have to determine where the breakeven point is in case we are not able to reach the goal of selling 100 hot dogs.

ASSIGNMENT:

Determine the financial viability of your business idea by carrying out the above steps, using your data.

Activity 2: to discuss the different kinds of ownership of a business.

[lo 4.3]

When you plan to start a business you must decide to whom the business will belong.

Questions & Answers

what is variations in raman spectra for nanomaterials
Jyoti Reply
I only see partial conversation and what's the question here!
Crow Reply
what about nanotechnology for water purification
RAW Reply
please someone correct me if I'm wrong but I think one can use nanoparticles, specially silver nanoparticles for water treatment.
Damian
yes that's correct
Professor
I think
Professor
what is the stm
Brian Reply
is there industrial application of fullrenes. What is the method to prepare fullrene on large scale.?
Rafiq
industrial application...? mmm I think on the medical side as drug carrier, but you should go deeper on your research, I may be wrong
Damian
How we are making nano material?
LITNING Reply
what is a peer
LITNING Reply
What is meant by 'nano scale'?
LITNING Reply
What is STMs full form?
LITNING
scanning tunneling microscope
Sahil
how nano science is used for hydrophobicity
Santosh
Do u think that Graphene and Fullrene fiber can be used to make Air Plane body structure the lightest and strongest. Rafiq
Rafiq
what is differents between GO and RGO?
Mahi
what is simplest way to understand the applications of nano robots used to detect the cancer affected cell of human body.? How this robot is carried to required site of body cell.? what will be the carrier material and how can be detected that correct delivery of drug is done Rafiq
Rafiq
what is Nano technology ?
Bob Reply
write examples of Nano molecule?
Bob
The nanotechnology is as new science, to scale nanometric
brayan
nanotechnology is the study, desing, synthesis, manipulation and application of materials and functional systems through control of matter at nanoscale
Damian
Is there any normative that regulates the use of silver nanoparticles?
Damian Reply
what king of growth are you checking .?
Renato
What fields keep nano created devices from performing or assimulating ? Magnetic fields ? Are do they assimilate ?
Stoney Reply
why we need to study biomolecules, molecular biology in nanotechnology?
Adin Reply
?
Kyle
yes I'm doing my masters in nanotechnology, we are being studying all these domains as well..
Adin
why?
Adin
what school?
Kyle
biomolecules are e building blocks of every organics and inorganic materials.
Joe
anyone know any internet site where one can find nanotechnology papers?
Damian Reply
research.net
kanaga
sciencedirect big data base
Ernesto
Introduction about quantum dots in nanotechnology
Praveena Reply
what does nano mean?
Anassong Reply
nano basically means 10^(-9). nanometer is a unit to measure length.
Bharti
do you think it's worthwhile in the long term to study the effects and possibilities of nanotechnology on viral treatment?
Damian Reply
absolutely yes
Daniel
how did you get the value of 2000N.What calculations are needed to arrive at it
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Source:  OpenStax, Economic and management sciences grade 8. OpenStax CNX. Sep 11, 2009 Download for free at http://cnx.org/content/col11040/1.1
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