Start-Up Costs
Name one example of a start-up cost.
Any of: buying equipment, initial inventory, business license, website design, etc.
What information do you need to know in order to figure out a business’s break-even point?
Fixed costs, variable cost per unit, selling price per unit
Name one source of funding for a small business.
Any of: bank loan, personal savings, equity investment, crowdfunding, venture capital
Define a fixed cost and give an example.
Fixed cost: A cost that stays the same regardless of production/sales; example: rent, insurance
What do we call the money a business brings in from selling goods or services?
Revenue or Sales
True/False: Start-up costs are only paid once, before a business opens.
True
If fixed costs are $200 and contribution margin per unit is $5, what is the break-even point?
Break-even = $200 ÷ $5 = 40 units
What is debt financing?
Borrowing money that must be repaid, usually with interest
Define a variable cost and give an example.
Variable cost: A cost that changes with production/sales; example: materials, packaging
What word describes the money left after all costs and expenses are paid?
Profit or Net income
List two start-up costs for a new coffee shop.
Examples: buying espresso machine, initial coffee beans, shop renovation, business license, marketing materials, etc.
True/False: The break-even point is when a business starts making a profit.
False (it’s when revenue equals total costs; profit starts after break-even)
What is one advantage and one disadvantage of equity financing?
Advantage: Don’t have to repay if business fails; investors may offer advice
Disadvantage: Must share profits/ownership; lose some control
Is employee hourly wage usually a fixed or variable cost? Why?
Variable; because it increases as more hours/products are produced
What is the term for the goods a business has on hand to sell?
Inventory
List the four main categories of start-up costs we discussed in class.
Legal, Physical, Marketing, Operations
A lemonade stand has $50 in fixed costs, $0.50 variable cost per cup, and sells for $2 per cup. Calculate the break-even point.
Contribution margin: $2 - $0.50 = $1.50
Break-even: $50 ÷ $1.50 ≈ 34 cups
Describe how crowdfunding works.
Collecting small amounts of money from many people (usually online), often by offering rewards or early products
Read this list: rent, flour, logo design, packaging, insurance. Categorize each as fixed, variable, or start-up.
What do we call the amount of money a business spends to get started before opening?
Start-up costs
Imagine you are opening a food truck. For each of the four start-up cost categories (Legal, Physical, Marketing, Operations), give one specific example of a cost you would need to pay and explain why it is necessary.
Sample answers:
A student starts a T-shirt business with these monthly expenses:
Fixed: Booth rental ($80/month), social media ads ($25/month)
Variable: Employee wages ($2/shirt), fabric/supplies ($4/shirt), packaging ($0.50/shirt)
Total fixed = $105/month
Total variable = $2 + $4 + $0.50 = $6.50/shirt
Contribution margin: $18 - $6.50 = $11.50
Break-even: $105 ÷ $11.50 ≈ 10 shirts
Match each business scenario to the most appropriate source of funding: debt financing, equity financing, venture capital, or crowdfunding.
List two costs that could be either fixed or variable, depending on the situation.
What is the term for money invested in a high-growth start-up by a professional firm, usually in exchange for partial ownership?
Venture capital