Betty is in the process of opening her own business – a coffee shop in downtown Fargo, North Dakota. With the Grand Opening a month away, she runs the numbers involved in her upfront expenses: $5,400 for local advertising, $2,700 for the security deposit and first month’s rent, $390 for a business license, and $17,200 for a down payment on equipment and furniture. As an incentive to create new businesses in its downtown area, the city of Fargo will waive half of the cost of Betty’s business license.
How much money does Betty need to cover these upfront items?
Just add them together. Remember, though that the business license only costs $195.
Betty is concerned about her monthly profit. She plans to hire two workers to help her run the coffee shop. Her total hourly cost per worker is $15.50 (including wages and taxes). One worker agreed to work full time (160 hours per month), the other half time (80 hours per month). Her rent is $1,200 a month. She expects the cost for utilities to be about $2,700 a month and her monthly payments for equipment and furniture are $3,100. She expects the coffee shop to generate about $14,000 in revenue a month.
What is Betty’s expected monthly profit?
To calculate how much money Betty needs to cover these upfront expenses, we need to add up the costs and then take into account the waiver on the business license.
The upfront expenses are as follows:
- Local advertising: $5,400
- Security deposit and first month’s rent: $2,700
- Business license: $390 (waived 50% by the city)
- Down payment on equipment and furniture: $17,200
To calculate the total upfront expenses, we need to add up all these costs:
Total upfront expenses = Local advertising + Security deposit and first month’s rent + Business license + Down payment on equipment and furniture
Total upfront expenses = $5,400 + $2,700 + $390 + $17,200
Total upfront expenses = $26,690
So, Betty needs $26,690 to cover these upfront expenses.