Fixed and Variable Costs For a Small Business

Before you can use cost/volume/profit analysis to help you evaluate your business's operations, you need to get a handle on the fixed costs of your business, as compared to your variable costs.

Virtually all of your business's costs will fall, more or less neatly, into one of two categories:

• "Variable costs," which increase directly in proportion to the level of sales in dollars or units sold. Depending on your type of business, some examples would be cost of goods sold, sales commissions, shipping charges, delivery charges, costs of direct materials or supplies, wages of part-time or temporary employees, and sales or production bonuses.
• "Fixed costs," which remain the same regardless of your level of sales. Depending on your type of business, some typical examples would be rent, interest on debt, insurance, plant and equipment expenses, business licenses, and salary of permanent full-time workers.

Your accountant can help you determine which of your costs are fixed and which are variable, but here the key word is "help." In order to be accurate, the ultimate classification has to be done by someone who's intimately familiar with your business operations — which probably means you.

Combination costs. Some costs are a combination of fixed and variable: a certain minimum level will be incurred regardless of your sales levels, but the costs rise as your volume increases. As an analogy, think about your phone bill: you probably pay an access or line charge that is the same each month, and you probably also pay a charge based on the volume of calls you make. Strictly speaking, these costs should be separated into their fixed and variable components, but that may be more trouble than it's worth for a small business. To simplify things, just decide which type of cost (fixed or variable) is the most important for the particular item, and then classify the whole item according to the more important characteristic. For example, in a telemarketing business, if your phone call volume charges are normally greater than your line access charges, you'd classify the entire bill as variable.

Relevant range of activity. It's important to realize that fixed costs are "fixed" only within a certain range of activity or over a certain period of time. For example, your rent is a constant amount per month — until your landlord raises it at the end of the year — unless you go out of business completely, in which case it would drop to zero, or unless your sales increase to the point where you need to rent an additional workplace, in which case it might double. So CVP analysis is only valid within a certain range of sales (generally, this coincides with the range that could reasonably be expected for your business) — at the extreme high and extreme low ends of the range, or if enough time passes, all costs become variable.

Cost per unit or job. If you add up all your variable costs for the accounting period, and divide by the number of units sold, you will arrive at the cost per unit. This cost should remain constant, regardless of how few or how many units you sell. If yours is a service business, you may be able to divide your variable costs by the number of jobs performed (if the jobs are essentially similar) or by the hours spent on all jobs (if the jobs vary greatly in size).

Once you're comfortable with classifying costs as fixed or variable, you can apply this knowledge with two techniques: contribution margin analysis and breakeven analysis.

Articel Source:

http://www.toolkit.com/small_business_guide/sbg.aspx?nid=P06_7510

8 Simple Ways to Control Small Business Costs

For a small business, cost control is not a luxury. Expenses can spiral out of control quickly and many a vibrant and promising company finds itself on the slippery slope to bankruptcy because it didn’t attend to the simplest of routine expenses. Careful cost consideration will help ensure your new business lives up to its full potential rather than falling victim to an operations oversight. Here are some ideas for ensuring your small business keeps costs under control. 1. Know your products and services - When you find that a particular product line or service is not cost-effective, consider redeploying your resources. Ask whether the expense you’re incurring is adding value to the firm. Does it bolster the bottom line? If not, consider cutting back in that area. 2. Borrow prudently - It’s a good idea to take on debt only as part of a well-thought-out strategy. In other words, consider all available financing options before signing up for a bank loan or borrowing from other sources. 3. Investigate tax savings strategies - Which business entity, you choose can have a significant affect on how much tax you’re paying. We’re talking about Sole Proprietorships and Partnerships versus Corporations and Limited Liability Companies (LLC). Incorporating your business or forming a Nevada LLC can have tremendous tax benefits for small business owners. 4. Control overhead - How much office space do you need to run your business? How many vehicles are necessary? Are you paying for a Ferrari computer system when a Ford will get you to the destination? Again, the goal is to make your firm efficient while it continues to grow. 5. Let your employees help - Often the best ideas for making your company more efficient come from the folks working in the back office or on the factory floor. Let staff know your objectives and provide an environment that rewards innovation and encourages efficiency. 6. Limit your risk - Law suits against small businesses are not uncommon and are often financially devastating. You can immediately limit your risk by incorporating your business or forming a LLC. These two business structures will ensure that your personal and business assets are separated from business operations and protected from legal liability. 7. Don’t slash costs indiscriminately - Making across-the-board cuts is seldom the best way to attack bloated expenses. You may be cutting muscle — costs that contribute to revenue — instead of fat. Be selective. 8. Monitor costs constantly - Even if you’ve just pulled your business from the doldrums, continue to track costs and look for new ways to make your processes more efficient. It’s important to maintain an attitude of thrift in yourself and your employees. Some owners employ internal auditors; others walk the factory floor or visit branch offices. The goal is to control costs while your business is growing — not an easy task to perform. If you’d like additional suggestions for controlling expenses in your business, small business and Nevada corporations or how to form a LLC, visit our web site at www.laughlinusa.com or contact us at 1-888-273-8152. By Dave Pye Published: 3/17/2008

The Articel Source: http://www.buzzle.com/articles/8-simple-ways-to-control-small-business-costs.html

Forex Trading: Investment Secrets Of The Rich And Powerful

If you search on the internet you’ll find millions of investment programs such as real estate, stock trading, bond trading, mutual funds, CDs, auction programs and various internet programs. I have not done many internet income opportunities or programs or affiliate programs because I had been lucky to discover a very easy way to make money through forex trading, (Foreign currency trading) safely on the internet. Perhaps you know about only stock trading or bond trading which are common, but not forex trading. Forex trading is the most profitable and attractive internet income opportunity because you can do it from home or office and from any country in the world. In forex trading, you don’t need to do any marketing or selling or internet promotion to succeed. In forex trading, you don’t need to spend thousands of dollars to do any internet promotion. In forex trading, you don’t need any stocks or warehousing. In forex trading , all that you’ve to do is open an account with one of the brokers with as little as $300 or $2000. Then follow simple instructions to buy and sell the currencies. When the price of the currency is low, you buy. In a few seconds or minutes, the price will go up, and you sell it and make a profit. By so doing , in a day, you can easily make $500-$1000 by just buying, selling and trading these foreign currencies for about 3 or 4 hrs! And get this: You don’t even have to be stuck sitting behind your computer buying and selling these foreign currencies. You can enter all your buy trades and specify the sell prices you desire and then log off. Whenever the values of these foreign currencies rise and your selling prices reach, the currencies will be automatically sold for you and you make money! You can do forex trading and at the same time keep your day job, because in forex trading, there is no work to do. In the future when you have made hundreds of thousands of dollars, you may then quit your job and just keep doing currency forex trading forever and go on permanent vacation! To understand the beauty of forex trading Picture this: In the morning, you get up from sleep at 6 am. You go to your bathroom and have your shower. At 7am, you hurry and eat your breakfast. At 7.20 am, you login into your forex trading account on the internet and spend 10 minutes to buy about 3 or 4 different currencies, [for example British Pound, Euro, CHF (Swiss Currency) and Yen (Japanese currency).] You can specify the price at which you wish to sell each currency. Then you can log off. By 9 am, you’re at work in your office or business place. You do your job as usual and by 5 pm, you’re finished and heading home. When you get back home around 6.30 pm, you login into your forex trading account to see how much money you’ve made. Holy Molly, there in your account it says you have made $750! "Is this for real?", you wonder… Yes, it is. (Your eyes are not deceiving you…) $750 in a day for just clicking your mouse twice and doing no work? (Whereas at your job, you work 8 hrs, but make only probably $150..) This is how easy it is to make money from forex trading. But before you use real money to open a live forex trading account, you have to open a free trial (demo) forex trading account and practice first, to understand how it works and to acquire the right skills. This free demo (trial) forex trading account (forex simulation trading) will help you to reduce a lot of risks that can lead to loss. In forex trading, you can choose how much money to invest, how much money to make and when to make it. You can make money daily, 365 days all year from forex trading. Your computer can be transformed into an "ATM" machine that cranks out cash for you daily (without large investment or hassles) from forex trading. In forex trading, you can choose what type of risk you can manage, when to invest and when not to invest. In forex trading, you’re the boss. You may do as you please. When forex trading is compared to other investment programs such as stock trading, bond trading, mutual funds, real estate and regular business, it is evident that forex trading is the fastest and greatest way to make money in the world. Forex trading is a 2.5 trillion dollars daily business and it is larger than all the stock trading in the world combined. These are some of the reasons why I believe that forex trading is the fastest and best way to create fantastic wealth. Perhaps from reading this article you’ll now come to know why forex trading is the secret behind the greatest wealth on earth and why it has been kept hidden from the average people of the world and therefore little known to the masses. May these forex trading insights open your eyes to the possibility of infinite wealth and success that can be yours from forex trading. Please feel free to print or publish this article anywhere and read and also send to your friends and well wishers and please preserve the author’s resource box below. Warmly, Ikey Benney

By I-key Benney, CEO Published: 9/10/2005 Article Sourse: http://www.buzzle.com/editorials/9-9-2005-76426.asp

Bad credit small business loan - Does a Bad Credit Small Business Loan Make Sense?

Your enterprise has been your dream, your livelihood and even your obsession for years but due to recent events, the accounts receivable have taken a downturn and you are beginning to accrue a hefty debt. Due to new competition or just a slowdown in consumer spending, or for any reason, the monthly bills dwarf the cash flow each month, and payments are falling behind schedule. The delinquent payments are resulting in substantial late charges being levied and the interest continues to accrue and adds to a growing, rather than decreasing, principal. It seems to you that the financial obligations you are facing are spiralling out of control. The farther behind you get, the more damage is being done to the venture's credit rating. You think it may be possible to save the venture by taking out another business loan to bring the payments current, but then you get quite a shock. The lender you have always used will no longer grant a loan due to your bad credit rating. You still entertain the idea of taking out another loan to make accounts current. Is it time to consider a bad credit small business loan? What kind of terms can you expect with a bad credit small business loan? A bad credit small business loan is one of several types of alternative style loans that lenders offer to enterprises that no longer qualify for conventional loans due to a poor credit rating. These alternative loans may include a hard money loan that will hold collateral like real estate or other tangible goods to guarantee repayment. A hard money loan is a secured loan, whereas a bad credit small business loan is unsecured, but often has very stringent terms that make it a doubtful advantage. For example, the interest rates are generally quite high and may have balloon payment, or very large payments that come due within a few years. There are usually very stiff penalties for missing a payment and an infraction such as this often can negate the contract and the creditor may be able to demand payment in full immediately. But when an owner is struggling to keep his or her enterprise, a bad credit small business loan may look like the only alternative. The are other alternatives and a professional debt counsellor should be consulted before taking out a bad credit small business loan and sounding the death knell to an already struggling venture. A good consultant will explain the debt management options to a bad credit small business loan such as debt consolidation or even debt settlement. Both of these options depend upon the skilled negotiation that the consultant will undergo with the creditors on the behalf of your enterprise. A settlement or consolidation will result in being able to make reduced payments, by consolidating the debt and by reducing the interest, therefore allowing more of the payment to address the principal. Often a settlement will result in the financial obligation being paid off much more quickly. Another advantage of debt reorganization to a bad credit small business loan is that it actually improves your credit score. Just by entering into a reorganization plan, an owner sends a signal to creditors that he or she is serious about curing the financial situation and the credit rating begins to improve, rather than continuing to sink. Speak to a debt relief consultant to find the solutions that are preferable to a bad credit small business loan, which is, after all, yet another financial obligation to add to the problems that are already in place. Check these links to learn more: http://www.commercialdebtcounseling.com/ http://www.commercialdebtcounseling.com/business/business-y/business-index.shtml James Banks is a contributing writer to http://www.commercialdebtcounseling.com/and is currently writing some special articles to guide business owners on how to manage debt and avoid bankruptcy. For Free Information on KEYWORD and Debt Help Consultation, call toll-free 1-877-324-1218. By Debbie White Published: 5/3/2007 The Artile Source is: http://www.buzzle.com/articles/136236.html

Top 7 Mistakes That Small Business Owners Make and How to Overcome Them!

Yes, small businesses can succeed! The success of your business depends not on its size but in the quality of its execution and implementation. Here are some common mistakes business owners make and how you can avoid them. a. Focusing on tertiary work: Many small business owners are so overwhelmed with non-critical work that they have very little time left for strategic, more important business decisions. It is far more important not to get bogged down by the little, trivial details of everyday business. Instead, you need to stay focused on your core competencies and drive the business forward. If you are understaffed consider outsourcing all non-core work. b. Not making an honest assessment: Most small business owners don’t know what’s happening in their own business. They mostly presume they know it, but fact is they are never really on top of things. It is essential to honestly evaluate the current state of your business. Take an employee-wide survey or ask your subordinates and colleagues for honest feedback. This will provide a much needed honest assessment of the current situation in the company. c. Not setting timelines: Most meetings go by without end objectives being met. The reason for laying down a plan and conducting meetings is to ensure each responsibility is implemented within the timeframe. Therefore set realistic goals and set timelines to each plan. Delegate work according to skill sets. This will also ensure all employees are happy in their responsibilities and job skills. d. Not performing follow-ups: A crucial determinant of success is how much you follow-up and ensure implementation. It is necessary to follow-up and to ensure all tasks assigned are completed within time. Else the plan just remains open ended with no near end to completion. So ensure to keep reminding and asking your subordinates on the plan at hand. If you can’t, delegate the responsibility to someone else. e. Investing more on technology vs. people: One big mistake small business owners make is to invest heavily on new technology as opposed to their own employees. It is a company’s employees who drive the business forward and get new customers and contacts. Therefore it makes perfect business sense to invest more in people. f. Not remunerating yourself well: Most small business owners multitask a lot. It could be because of a shortage of capital, lack of resources etc. However, whatever the reason, when it’s pay time, ensure you remunerate yourself according to whatever effort you have put in. Most business owners undervalue themselves and end up getting paid less. Don’t make this mistake. Pay yourself well, that way you will stay motivated too. g. Work life balance in jeopardy: Most CEOs of successful Fortune 500 companies have a happy, family support system behind them. If you want your business to flourish, make sure not to compromise on your personal life. Take care to balance out work and family time. By seeing to a holistic balance, you can enhance your business growth in a short time. Now that you know the mistakes, take active steps to avoid making these mistakes. These are common pitfalls that business owners fall into. So take note and stay away from these! (c) 2007, Doug and Claudia Brown of www.whatisyourplan.com All rights reserved. Reprint rights granted so long as article and by-line are published intact and with all links made live. Doug and Claudia Brown use their 40 plus years of business building experiences to educate people and businesses on how to dramatically increase their revenues. Free Report "17 Strategic Steps to Steps to Achieving a Six Figure Income or More" at http://www.whatisyourplan.com/ By Doug and Claudia Brown Published: 12/13/2007

Article resource: http://www.buzzle.com/articles/top-7-mistakes-that-small-business-owners-make-and-how-to-overcome-them.html

FOREX as A Small Business on Internet

Small business and individuals are now very popular and easy to start on web in this age, however, often times they are looking to make big money, and to be the victims of scams when it comes to learning about FOREX and the foreign trade markets day after day. At least by more than half of the beginners, FOREX is seen as how to make a quick buck or two, people don't question their participation in such an event, but if you are not investing money through a broker in the FOREX market, you could easily end up losing everything that you have invested in the transaction. Be careful, research and prepare for trading in FOREX market before you spend 100 dollars on the web.

Foreign Currency Exchange - Is It A Good Investment? By Omar Guaba

Foreign currency exchange is really hot investment today. Every currency of the world is exchanged in the Forex market. Forex involves selling and buying currencies. The foreign currency exchange market does not use a central exchange site like the stock market. Forex is the largest market in the world, beating the NYSE (New York Stock Exchange) in daily trading volume. This can be a really good investment if you know hot to do it.

Individuals and private entities conduct the market. Buyers and sellers conduct the trading directly, there is no central exchange. They use the Internet, phone and other networks of communications to trade and make money with this investment. Foreign currency exchange is risky. The market conditions and expectations are the heart of Forex trading. The return of this investment is worth the risk.

As we said above foreign currency exchange is the selling and buying of two currencies. For example, the combination might be US pound/ US dollar. The majors or highest traded currencies in the Forex market are: the Euro, the US dollar, the US dollar, the UK pound and the Japanese yen. The spot market is where the trade occurs, because of its volume. Currency trades are made directly on the spot. In Forex you have 24-hours to trade five days a week. When the market goes up or down you can retract your moves and react to make money with this investment.

A currency is cheaper to trade when it has a high liquidity level. Most foreign currency exchange patrons like to use majors to trade, because the high liquidity they have to make money. The absence of commissions is an attractive for money movers. Misleading incentive is not a reason to trade currencies. The reason is real merit of this investment. We need to learn more about a Forex investment and currencies trading than we said above.

It is good to talk to a foreign currency exchange expert if you want to know more about trading. Also, you can ask somebody about his Forex experience. Just ask whatever you want. Forex is the largest market of the world. The foreign currency exchange risky and you need to get expert advice if you want to be making money with Forex trading. This market is very liquid and is open five days a week, 24/7.

If you need more information about how to get the best Forex software, feel free to go to my blog. http://exit1.info/wordpress

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