Posted by Imagine that you want to open a bookstore near the university. You’ve already formulated the company’s mission, identified the characteristics of future customers, know the products and how to inform university students about your business. You’ve also discerned how many competing bookstores exist in the area and what assortment they have.
Your business plan is almost complete. Now all that’s left to do is to calculate all the expected costs and revenues, and so determine whether the business will actually be profitable. You are not an accountant by profession, you only know the basic principles of economic calculation. For 500 PLN per month, the financial details will be taken care of by a familiar accounting office.
Before opening a bookstore, you need to buy the necessary equipment. You have calculated that it will cost 12000 PLN. You have this amount saved, but you consider the possibility of leaving it on a bank deposit and taking a bank loan against a car. Starting a business is always associated with a high risk of failure. you will feel more secure still having savings. The interest rate on bank deposits is 6%, and the loan is 12% per year. Interest in both cases is calculated monthly. Inflation in the country is 8% and is forecast to fall further. Since you don’t know economics, you overlook such small price increases.
You would like to set up a student bookstore in such a way that the money invested will pay him back within a year. To work in the bookstore, you will hire Anna Kowalska on a contract and pay her 4,000 PLN gross. You will handle the ordering, marketing and selection of book titles yourself. Your bookstore is to be unique – all books, regardless of subject matter and thickness, are to cost an average of 50 PLN.
You should think about whether the price is set correctly and how many books he needs to sell in a month so that he can pay for Kowalska’s work every month – 4819 PLN, rent of the premises – 2000 PLN, bookkeeping service – 500 PLN, electricity, telephone and fuel – a total of 2000 PLN – and so that he can count on a return in the invested 12000 PLN in a year, as well as have something for himself.
You will find the calculations in the next blog post.