This document provides information on costing and modeling for an entrepreneurial venture. It defines fixed and variable costs, and provides an example of costing out a business idea of painting games on school playgrounds. The document estimates fixed costs such as website and supplies, variable costs like paint and transportation per game. It models the potential market size and revenue based on number of schools and percentage that may purchase. By estimating costs and potential earnings, it demonstrates how to calculate total costs and potential profit for a venture to evaluate viability.

2. Slide to remind
students of
deliverable
• Maybe the schedule of the remaining
work days

3. Costing & Modeling

5. 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.

6. 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.

7. Costing:
• Research costs of inputs, labor,
products, transportation, etc. to
determine
Modeling:
• Creating a guesstimate of how much
money you might earn and spend

8. Costing Basics
There are two basic types of cost that
you need to keep in mind:
• Fixed
• Variable costs

9. 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)

10. An Example

12. Example
Fixed costs: website, office, stencils, some
labor, brooms, cleaning supplies
Variable costs: paint, paint brushes,
transportation costs

13. 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)

14. 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!

16. 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)

17. Example
Fixed costs:
R2400 to start
Variable costs: (520 games)
R165/game (total cost)
X 520 games
I
R85,800

18. 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

19. 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.

20. From Before:
Market Research for your solution(s)
Focus on:
• Competitors
• Complementary Partners/Products
• Costs
• Size of need/market

21. DO YOUR BEST to Cost and
Model your BUILD Lab solution.

22. Copyright © African Leadership Academy, 2011