STUDENTS' CORNER - 240

            Total cost of a business

Without the information of the total cost of a business, it will be unwise and incompetent to arrive at the Return On Investment. You must know how much you have invested in the business of manufacturing a product or evolving a system of service. This is important because it effectively guides you in pricing a product. Of course arriving at a pricing decision is very critical since the very marketing exercises and the consequent expenditure, the essentials of a business concern, are involved in it.  In fact, it is the most important final decision in any business process. In a way, every commercial decision is critical; right decision at lease guarantees that there will be no loss if not expected profit. Business like jealous lady-love demands complete attention to itself.

Now, how to arrive at the total cost of the business: of course,  business is in a way a very sound common sense, not spoilt by greed for more or by fear of facing challenges; the greatest challenge is neither market fluctuations nor customer or employee betrayal but the uncertainty that surrounds every little fact of life that includes business. Another name that comes very close to common sense is what is called insights; in the popular terminology, sometimes it is called by some successful entrepreneurs as ‘guts feeling’.  That is where experience matters; it is also a big complex thing; let us leave it now and go to cost of business.

Even the platform shopwala knows there is fixed cost and the other thing non-fixed cost; this is called in business terminology variable costs. The total sum of both the costs is total cost of the business; in other words, this total cost earns the investing man the name, the Owner of the business concern.

 You might have heard the most popular quote from Shakespeare: “Uneasy lies the head that wears the crown.” Imitating him, we can say uneasy lies the head that is in a business. Simply, it says crown and business take away peace of mind from him;  and we know business people strive to retain the peace of mind through sustainable business; that is, all the time thinking about business; it means the threats of the merciless and unpredictable market ; the known and the unknown formidable rivals to the business.

We will spend some more time on both the fixed and variable costs in our next session.