There are many things to consider when starting up a new business venture but one of the most important is what it will cost. Cost is not just simply the price of stock, rent and fixtures but also things like rates per day, personal cost and time cost.
When writing costs for a new business plan I believe it is best to always provide three estimates: Below Average, Average and Above Average. For example, a restaurant may want to buy fancy plates but you could just as well get by with standard ones. These two options would be covered in below and above average costs.
If compiling three different cost plans seems like too much work (though many people would say all business is hard work) perhaps an easier way is to make your ‘main’ costing plan and make that your Average costs then take 25% off (or 10% or 15%) and make that Below Average and the same amount added makes your Above Average costs.
If you do similar bracketing for your turnover projections you can get a good idea of how the business will cope in various situations. It can also serve as an early warning if it seems that the only way you can turn a profit is with Below Average costs and Above Average turnover!
This type of bracketing is also useful when predicting growth too.
