4.00 Explain the fundamentals of financing a small business. C. Financing a Small Business 4.00 Explain the fundamentals of financing a small business. 4.01 Identify the start-up costs associated with owning and operating a small business.

Start-up costs associated with opening a small business Start-up costs: Expenses that are initially paid to establish a business.

Types of start-up costs Rent or lease space Equipment, furniture, and fixtures Decorating and remodeling Beginning inventory Deposits for utilities Accountant and lawyer fees Licenses and permits Advertising and promotion for grand opening Contingency funds

Factors that affect start-up costs Nature of the business Manufacturing Retail Wholesale Service

Factors that affect start-up costs Size of the business

Factors that affect start-up costs Inventory required Customer credit policies Other unique factors

Factors that affect start-up costs The estimated time between starting the business and earning income from sales. The operating expenses that must be paid before cash is received from sales.

Expenses that remain the same for a period of time. Fixed costs Expenses that remain the same for a period of time. Office salaries Insurance Rent or lease

Expenses that may change from month to month; these expenses are often based on quantity of good or service sold. VARIABLE COSTS

VARIABLE COSTS Salaries and wages for employees Advertising and promotion Supplies and materials Utilities VARIABLE COSTS