4. costing & modeling

Slide to remind

students of

deliverable • Maybe the schedule of the remaining

work days

Costing & Modeling

Deliver:

Solutions are evaluated for viability and

long-term sustainability to discover

which are true opportunities.

Entrepreneurs deliver these solutions by

mobilizing resources, venture planning

and leveraging networks.

Deliver: Solutions are evaluated for viability and long-term sustainability to

discover which are true opportunities.




Costing:

• Research costs of inputs, labor,

products, transportation, etc. to

determine

Modeling:

• Creating a guesstimate of how much

money you might earn and spend

Costing Basics

There are two basic types of cost that

you need to keep in mind:

• Fixed

• Variable costs

Fixed costs: Fixed costs don’t vary with

the level of production. A good example

is a lease on a building.

Variable costs: Unlike fixed costs, variable

costs change with

the level of production. For example,

material used in production is a variable

cost. (from Dummies.com)

Costing Basics

An Example

Fixed costs: website, office, stencils, some

labor, brooms, cleaning supplies

Variable costs: paint, paint brushes,

transportation costs

Example

Fixed costs:

R1000 (Website)

R1000 (Stencils)

R400 (Cleaning supplies)

R2400 to start

Variable costs:

R100/game (paint)

R15/game (paint brushes)

R50/game (transportation costs)

R165/game (total cost)

Example

Look for:

•Size of “market” (potential purchasers)

•Guess number of which could be purchases

• Google is maybe the popular product in

the world and only 65% of people use it

• Only 42% of people drink Coke

• Be conservative

•Guess how much they will pay

•Multiply!

Modeling Basics

Best guess:

~26,000 schools in SA (“How many

children in SA?”)

x 2% (520) will pay (Guess)

x R200 (Guess—could ask creche)

R104,000 (money we earn)

Example

Fixed costs:

R2400 to start

Variable costs: (520 games)

R165/game (total cost)

X 520 games I

R85,800

Example

Total costs:

R2400 (website, stencils, cleaning supplies)

R85,000 (cost of paint/brushes/transport)

R87,400

Total money earned:

R104,000

Profit: R104,000 - R87,400 = R16,600

Example

Deliver:

Solutions are evaluated for viability and

long-term sustainability to discover

which are true opportunities.




From Before:

Market Research for your solution(s)

Focus on:

• Competitors

• Complementary Partners/Products

• Costs

• Size of need/market

DO YOUR BEST to Cost and

Model your BUILD Lab solution.

4. costing & modeling

Business