Your cost-benefit analysis shows that you should add outdoor seating, because the new benefits ($5,000 in new sales) outweigh the new costs ($3,000 in permitting and equipment expenses). But, the outdoor seating permit costs $1,000 each year, and you’d also have to spend $2,000 to buy outdoor tables and chairs. You estimate outdoor seating would add $5,000 in extra profit from sales each year. This can come in handy with hiring another employee or an independent contractor.įor example, let’s say you’re deciding whether to add outdoor seating for your sausage themed restaurant, Haute Dog. It simply involves adding money in benefits and money in costs over a specified time period, before subtracting costs from benefits to determine success in terms of dollars. Then, you can use a cost-benefit analysis, or a process that helps weigh the strengths and weaknesses of a business decision, and put potential recurring benefits and cost reductions in context.Ī CBA is a technique for making non-critical choices in a relatively quick and easy way. From development and operations to recurring and nonrecurring costs, it’s important to categorize expenses in your balance sheet. Looking closely at money-in and money-out helps maintain a sustainable balance between profit and loss. The Governors Office of Small Business Assistance works closely with a variety of partners to facilitate small. ![]()
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