Hello everyone

Its pleasure for me while taking part in learning challenge that obviously increased my knowledge as the topic is good SLC | S21W1 | Costs for entrepreneurs - Introduction to cost.

What is cost and how important is it for entrepreneurs?

The cost analysis is one of most significant that one entrepreneur should be skilled. For running a successful business the core knowledge which is basically required is the cost.

Source

Cost is the process of financial evulation of the resources, the required material, possible risks, the estimation of time and utility needed to buy products or services.

It enabled entrepreneur to making decision which are definitely helpful for getting maximum profits and reduced the possibility of the risks.

How to apply Product development

With the cost analysis entrepreneur can make good evaluation for maximum ratio of profit either he is launching new products or services or may be wish to improve already existing ones.

Moreover with the cost analysis entrepreneur can estimate possible cost for research, development, marketing including the distribution and also the services for the customers. The other things which can be estimated are the potential revenues and profit ratio from the goods or services.

Let's suppose one entrepreneur wish to launching new mobile application, he will utilized the cost analysis in order to calculate the expenses and profit for application in house then its outsource for third party developing and its license from already existing application provisions.

Market launching

With the help of cost analysis the entrepreneur can check the competition and also attractiveness and this may enable him to decide better entry in the market.

It furthermore effective to asses the entry cost, how to operate in new market, for example the market research, regulations, promote activities, distribution services and the ratio of profit ratio in the market.

It can be better understand with an example as an entrepreneur I would like to expansion of my online clothing brand in a new city I would used the cost analysis in order to calculate the cost ratio profit of launching website partner with local platform and courier charges too.

The value of resource allocation

The cost analysis plays important role in order to used the resources effectively for example the money, time, HR etc. The cost analysis is useful for get rid of unnecessary cost.

Lets suppose if someone is running catering business with the help of cost analysis he can judge menu, price, equipment or staff, location of events and it will definitely helpful in order to avoid the risk of over or understock of labor, supply or ingredients being used.

Establish the difference between costs and expenses, giving examples of this through a real case.

In simple words cost is generally one time pay amount for any asset, while expense are paid regularly in any ongoing asset or business.

Cost	Expenses
The purchasing of any asset or investment	These are payments needed to run ongoing business or assets.
Financial statement is reflected on balance sheets	Expenses shown in the form of profit or loss statement
The purpose is the asset of business	business profits can be earn
The cost has indirectly effects on profit margins	expense has directly effect on profit ratio.
The cost has impact on current ratio or business	expenses has no impact on business current ratio.

Here is real world example:

Hamza restaurant, they purchased new cooking range of $ 20,000 for increasing the cooking dishes. Hence they paid 20,000 dollars it represent the cost of buying the asset.

Lets explain the expense with an example.

The cooking range reduction value is 3000 dollars we can say its the expense ratio on the statement of the income.

In order to maintain it the owner used 1000 dollars expenses, and for the energy used he Paid 1000 dollars. These are all expenses.

What are the benefits of performing a good cost determination?

There is a list of things which we need to understand, First of all our determination and strong decision is required to invest.

Secondly, we need to see where the cost using can help us to get maximum benefit. Good cost determination also plays important role in the term of performance and decision making ability. If we have better performance with good communication skills we can get more benefits.

For cost determination there should be proper budget plans and how much we can invest and along with we must keep an eye off our resources.

Accurate costs also help us to minimise the risk in future. As well as we can save more with proper management and cost less.

We must acknowledge the business where we would better understand we can reduce the cost and get more profit with the passage of time.

We must cost properly with full strategy for the competitive benefits.Along with proper management our performance can be enhanced.

To minimize errors there should be solid transparent system analysis which can enhance accountability as well as analysis.

How do you determine the costs of your business? If you are not an entrepreneur, how would you do it?

Well!!!! If i am not entrepreneur still I have to consider many things in order to run my business successfully. Knowledge about particular business is indeed important including my interest too. Because if I knew about the important things which should be knew about the business I may become successful soon.

The other things which I keep in mind the cost either it belong to buying assets, labour, taxes and marketing etc.

For example I would like to start Restaurant business, I must keep into consideration my budget to start business, how much I have to spent on rent of restaurant, buying goods, labor, traveling cost and marketing too.

Moreover I must keep the salary of working staff so that I can calculate my investment and profit ratio.

Its all about my today's post.

I would like to invite my friends @m-fdo, @jannat12 and @iqrarana786 to take part in the challenge