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4. costing & modeling

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4. costing & modeling

  1. 1. Slide to remind students of deliverable • Maybe the schedule of the remaining work days
  2. 2. Costing & Modeling
  3. 3. 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.
  4. 4. 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.
  5. 5. Costing: • Research costs of inputs, labor, products, transportation, etc. to determine Modeling: • Creating a guesstimate of how much money you might earn and spend
  6. 6. Costing Basics There are two basic types of cost that you need to keep in mind: • Fixed • Variable costs
  7. 7. Costing Basics 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)
  8. 8. An Example
  9. 9. Example Fixed costs: website, office, stencils, some labor, brooms, cleaning supplies Variable costs: paint, paint brushes, transportation costs
  10. 10. 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)
  11. 11. Modeling Basics 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!
  12. 12. Example 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)
  13. 13. Example Fixed costs: R2400 to start Variable costs: (520 games) R165/game (total cost) X 520 games I R85,800
  14. 14. 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
  15. 15. 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.
  16. 16. From Before: Market Research for your solution(s) Focus on: • Competitors • Complementary Partners/Products • Costs • Size of need/market
  17. 17. DO YOUR BEST to Cost and Model your BUILD Lab solution.
  18. 18. Copyright © African Leadership Academy, 2011

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