Photo: Geoff Crawford/Tearfund

From: Footsteps 80

How to start and run a successful small business

For a business to succeed, ‘income’ (money coming in) must be more than ‘expenditure’ (money going out). It is a simple principle that is easily overlooked. In this article we will briefly consider the key points to remember when running a business. 

There are four main types of money which relate to your business. These are often recorded on a monthly basis.  

Photo: Richard Hanson/Tearfund

Photo: Richard Hanson/Tearfund

START-UP COSTS

These are the costs of setting up the business before any product can be made and before any service can be delivered. They include costs, such as purchasing equipment and raw materials, and any additional money you need until you start getting money in from customers. This can be covered by your savings or a loan from your family, a friend, a micro-enterprise organisation or a bank. This will need repaying, including any interest due.

OPERATING COSTS

These are the monthly costs of running your business. It can also be called expenditure. Costs must be measured accurately and should include costs such as hiring a vehicle, wastage, replacing equipment and power charges.

INCOME

This is the money your business receives from its customers. 

PROFIT

This is the money you have left when you have received all of your income and have paid all your operating costs and loan repayments. If it is a minus number (i.e. your costs are greater than your income) it is called a loss and is bad news for a business if it continues on a regular basis.

Profit can be increased in three ways.

Basic cash flow analysis

A simple way of monitoring your finances is to set up a basic cash flow analysis table (see below).   

Discussion questions

Similarly Tagged Content

Share this resource

If you found this resource useful, please share it with others so they can benefit too.

Sign up now to get Footsteps magazine

Footsteps Cover Issue 112

A free digital and print magazine for community development workers. Covering a diverse range of topics, it is published three times a year.

Sign up now