Thursday, March 3, 2011

The cost of running a business


The blog Well Seasoned Fool published a very interesting article last year on the true cost of running a business. Here's an excerpt.

Small business operators have a tool, mostly ignored, that can help focus on what matters. This is "Cost per Minute".

How many minutes, per month, is your business open? What is your monthly operating cost? Don’t know? Shame on you. Divide the monthly operating cost by the minutes you are open. If you have never done this, you will probably be shocked.

In the mid 1990’s, my employer had me organize and manage off premise car sales. We held sixty over a thirty month span. The cost? $32 per minute. Our dealerships were run in a most frugal, if not downright cheap, manner. No frills. Our operating costs were around $122 per minute.

Generating income per minute became a focus. Every problem can be overcome but time gone cannot be recovered.

Employees respond well, if grudgingly, to clear goals and practices. The ten minute gab fest around the coffee pot isn’t very enjoyable when you are focused on the cost per minute and revenue per minute.


There's more at the link. Very interesting reading, and highly recommended for all those who are self-employed or working in or for a small business.

Peter

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