The document discusses activities and costs for businesses. It describes direct costs as those that can be directly attributed to a specific activity, such as materials and wages. Indirect costs include overhead like administrative salaries and office supplies. Startup costs are also outlined, including market research, legal/accounting advice, licenses, and equipment. The document provides a cost of business calculator to estimate annual expenses across various categories. It also explains how companies can perceive value differently from intrinsic value and looks at examples like Gillette razors and 3M Command Strips that leverage a high-margin business model through proprietary accessories.

1. Activities and Costs
Frieda Brioschi / Emma Tracanella
frieda.brioschi@gmail.com / emma.tracanella@gmail.com
IED, 28 Mar 2017
Lesson 5/2017

2. 5. Actiivities & Costs
Course program
1. Start-ups
2. Business Model & Canvas
3. Value Proposition Design
4. Customers & Market
5. Activities & Costs
2

3. 5. Actiivities & Costs
The Business Model Canvas
During last lesson we discussed what is a business model and how fulfill a
business model canvas, looking into each part:
• Value proposition
• Customer segments
• Channels
• Customer relationship
• Revenue streams
• Key resources
• Key partner
• Key activities
• Cost structure
3
1 2
3
4
5
6
7
8 9

4. 5. Actiivities & Costs
List the costs you foresee if your
core business is making bicycle
4

5. 5. Actiivities & Costs
…according to you/1 -
Money
5
• 5,000
• 20,000
• 100,000

6. 5. Actiivities & Costs
…according to you/2
6
• material, distribution
• Money spent for the materials, for the items used to build it,
for the time I spend building it, for the clothes I will ruin while
making the bike, for the place where I will make it, for the
person I will ask help to
• Cost of materials, stocking costs, producing costs, employees
• materials to create the bike. ex. tire, steel, etc.
• Producing, stocking, distribution,
• Production, sell and distribution

7. 5. Actiivities & Costs
…according to you/3 - ?
7
•I don't know
•I have no idea.Engineer cost and saler
•???

8. 5. Actiivities & Costs
All you need to know
about costs
8

9. 5. Actiivities & Costs
Costs
In production, research, retail, and accounting, a cost is
the value of money that has been used up to produce
something, and hence is not available for use anymore.
Two kind of costs:
• Direct costs
• Indirect costs
9

10. 5. Actiivities & Costs
Direct costs
Costs that can be identified specifically with a particular
project or activity, or that can be directly assigned to them
with a high degree of accuracy.
Direct costs generally includes:
• Salary and wages
• Material, supplies and equipment purchased directly
for the specific project
• Communication and travels costs
10

11. 5. Actiivities & Costs
Indirect costs
Costs that are not classified as direct
Indirect costs generally includes:
• Salary of administrative staff providing normal support
activities
• Office supplies, computers
• Local telephone calls
• Memberships
=> Overhead
11

12. 5. Actiivities & Costs12

13. 5. Actiivities & Costs
Bykes
Direct costs:
• Metals
• Wages for assembly
Indirect costs:
• Abrasive, glue, pink
• Rent
• Insurance
13

14. 5. Actiivities & Costs
Actual cost of doing
business
Before you can price a product or a service, you need
to know your cost to produce it.
A start-up usually should divide costs in one-time and
recurring.
14

15. 5. Actiivities & Costs
Common start-up costs
• market research
• preliminary accounting and legal advice
• tenancy/lease bond, stamp duty and lease agreement
advice
• telephone/internet installation
• statutory requirements such as licences and insurance
• power connection and bond
• signage and initial marketing
• equipment, fixture and fittings purchases
• staffing and wages
• initial raw materials and/or stock purchases.
15 https://www.business.qld.gov.au/business/starting/starting-a-business/calculating-your-costs-when-starting-a-business

16. 5. Actiivities & Costs
Photographer
• How much charge a photo?
• Minimum fee?
• No costs?
A useful tool: the Cost of Business calculator. It list annual
expenses, but it depends on your inputs which can be hard to
estimate.
16

17. 5. Actiivities & Costs
Cost of doing business
calculator/1
Expenses
• Office and/or studio (rent, mortgage payments, taxes,
insurances, home maintenance, …)
• Phone (cell and/or landline and faxes) – remember to
include also the cost of the phone itself
• Photo/Video/Audio Equipment and Accessories
• Equipment services and Repairs
17
https://nppa.org/calculator

18. 5. Actiivities & Costs
Cost of doing business
calculator/2
• Computer(s) (harware and software)
• Broadband internet
• Web hosting/Portal services
• Vehicle Expenses (Lease, Insurance, Maintenance)
• Office supplies and Furnitures
• Postage and Shipping
18
https://nppa.org/calculator

19. 5. Actiivities & Costs
Cost of doing business
calculator/3
• Professional Development
• Advertising and Promotion
• Subscription and Dues
• Equipment and Business Insurance
• Health Insurance/Deductibles/Copays
• Legal and Accounting Services
19 https://www.calcxml.com/calculators/bus02

20. 5. Actiivities & Costs
Cost of doing business
calculator/4
• Taxes and Licenses (Business and Self-Employment)
• Office Assistance (Payroll, Answering Service, Intern,
etc.)
• Utilities
• Travel and Entertainment
20 http://www.wsj.com/public/page/news-small-business-startupCalculator.html

21. 5. Actiivities & Costs
Cost of doing business
calculator/5
• Income factors
• Desired Annual Salary
• Non-assigment Income
• Number of Days You Can Bill Per Year
21 https://www.business.qld.gov.au/business/starting/starting-a-business/calculating-your-costs-when-starting-a-business

22. 5. Actiivities & Costs
Cost of doing business
calculator /6
https://nppa.org/calculator
22

23. 5. Actiivities & Costs
Perceived Value
23

24. 5. Actiivities & Costs24

25. 5. Actiivities & Costs
Value
The extent to which a good or service is perceived by its
customer to meet his or her needs or wants, measured by
the customer’s willingness to pay for it.
It depends more on the customer’s perception of the
worth of the product than on its intrinsict value.
How do we create the perception of value when we talk to
our customers?
25

26. 5. Actiivities & Costs26 https://beyondphilosophy.com/comparing-perceived-value-drivers-employees-customers/

27. 4. Market and Value5. Actiivities & Costs
Gillette Fusion
• Amazon price: 19.25$
• 8 cartridges
• Cost/cartridge: 2.41$
• You need the razor (11.49$)
27

28. 4. Market and Value5. Actiivities & Costs
Gillette Custom Plus
Disposable
• Amazon’s price: 20.97$
• 30 razors
• Cost/razor: 0.70$
28

29. 4. Market, Value and Business Model5. Actiivities & Costs
Gillette Fusion vs. Custom
Plus
• Prices
• 19.25$ vs. 20.97$
• 8 cartridge vs. 30 razors
• Cost in use
• 2.41$ vs. 0.70$
• Additional perceived value justify the additional cost in use
• Durability of blade
• Comfort
• Less irritation
29

30. 4. Market, Value and Business Model5. Actiivities & Costs
Gillette idea
By providing something at below the market price
(the razor), you can create a market for a secondary
product (the blade) upon which you make ongoing
profits.
The mark-up on the secondary products is
disproportionate relative to their cost so were highly
profitable for the manufacturer.
30

31. 4. Market, Value and Business Model5. Actiivities & Costs
3M Scotch® Tape
• Amazon’s price: $1.70
• Lenght: 650 inch
• Cost/inch: $0.003
• Cost to hang a poster: $0.01
31

32. 4. Market, Value and Business Model5. Actiivities & Costs
3M Scotch® Command
Strips
• Amazon’s price: $2.70
• 12 strips
• Cost/strips: $0.08$
• Cost to hang a poster: $0.32
32

33. 4. Market, Value and Business Model5. Actiivities & Costs
Tape vs. 3M Scotch® Strips
• Price
• $1.70 vs. $2.70
• Using Scotch Tape, the user can hang 75 posters vs. 3 for the
command strips
• Cost in use
• $0.01 vs. $0.32 to hang 1 poster
• Additional perceived value justify the additional cost in use
• Less damage to wall
• Simplicity to remove
• Durability
33

34. 4. Market, Value and Business Model5. Actiivities & Costs
CocaCola
34

35. 5. Actiivities & Costs5. Actiivities & Costs
Nespresso
35
What else?

36. 4. Market, Value and Business Model5. Actiivities & Costs
A-Style
• Logo
• 1989 stikers on the walls of
Milano and Roma
• Patented by Italian designer
Marco Bruns
• Clothing Brand
• Italian brand founded in 1999
• A-style has used street-level buzz
marketing to grow to international
prominence
36

37. 4. Market, Value and Business Model5. Actiivities & Costs
Lacoste
• Founded in 1933 by the
tennis man Rene Lacoste
• At the end of 1990 the
company change its strategy:
marketing, retails outlets,
product range, ...
• Sale of t-shirts in limited
series
• Re-establishing Lacoste as “a
distinctive premium brand”
37

38. 5. Actiivities & Costs
Making an app
38

39. 4. Market, Value and Business Model5. Actiivities & Costs39 https://www.comscore.com/Products/Audience-Analytics/Mobile