Start-up and operating expenses for the entrepreneurial project and sales forecasts of close to 100%

The interest of governments and economic entities in the role of the pioneering project in the economy and development is increasing with global technological development, and the implementation of these projects is a risk to success, so these risks must be estimated and preliminary studies must be conducted before starting the project by studying the feasibility and calculating the establishment and operating expenses of the pioneering project to know how much this project will cost you and how many sales must be achieved and other questions that we will answer. Don’t forget! Khutana Company helps you advance your project. Consult our experts in this field.

Pioneering project

Pioneering projects are the introduction of a new idea or a new product that the customer needs, which is competitive with what is available in the market. This introduction may be accompanied by a high risk of the idea not succeeding, in addition to the possibility of achieving a large financial return and changing the market economy system by creating job opportunities, the emergence of new products in the market, and increasing market efficiency, which increases competition between companies. For more, you can read the article What is the difference between an entrepreneurial project and a small business? 4 basic differences in the success and failure rate for both?

Establishment costs

It is the total cost that the owner of a new project needs to launch it – whether an individual or a company – from the emergence of the project idea until the start of operation, including resources and expenses from management fees such as licensing and registration costs and the cost of economic feasibility studies.

Operating costs

These are expenses associated with maintaining and managing the business on a daily, weekly, monthly, or annual basis, and include:

• Cost of production (raw materials).
• Marketing costs
• Operating expenses in addition to general expenses such as rent, salaries and bonuses, utility bills such as water, electricity, communications, and the Internet.
• Repair and maintenance costs.

Initial feasibility study for establishment and operating expenses report

The first step that must be taken before starting the project and calculating the establishment and operating expenses is the feasibility study that supports you in answering important questions such as: Is your project feasible? Is the product that you will offer needed by the customer? Is the project profitable? What are the market conditions? What are the expenses in accounting within the financial feasibility study? What is the difference between expenses to help advance feasibility studies? To ensure the success of the feasibility study, the study must be divided into several stages to cover all aspects of the study and obtain all the data and information that will tell us whether the project idea is feasible or not, which are:

First, market study:

The market study stage can be considered the most important stage among the stages, as it helps you to know and study the target customers for the project’s products and the extent to which they have the desire and ability to buy the product or service, in addition to studying the activity of competitors and their strengths and weaknesses and knowing the market prices and accurately estimating the extent to which the market can absorb new competitors and estimating the size of demand and supply for the goods or services that the project will provide by offering it on a trial basis to people interested in buying and thus evaluating the level of demand before implementation and studying the market conditions that may cause pressure factors on the project such as societal values, variables, environmental impacts, tax rates, fees, etc. We are pleased to read the main activities of the entrepreneurial project (3 stages with a detailed explanation of each stage).

Second, technical study:

The technical study is to study some of the essential things in the project that are not taken into account when planning to implement the idea, such as determining the location, whether it is close to raw material suppliers to ensure their continuous flow, and also choosing a suitable location to provide the service, the area and costs of the project headquarters, and determining the needs and costs of the project for equipment, tools and equipment (assets), and determining the project costs of raw materials, the number of employees, the level of skills required, the wage structure and the hierarchical organization of management. Learn about the opportunities of the pioneering project and the privileges it provides (the most prominent 5 opportunities)

Third: Economic or financial study:

It means developing a comprehensive and detailed project budget to estimate expected sales revenues, expenses, and necessary funding sources, and to determine the product price, break-even point, and return on investment.

Fourth: Risk study:

List the project’s potential threats and risks, assess their severity, and then develop an emergency plan that includes solutions to address these threats. Finally, collect data analyses obtained in the previous steps to ensure that the goals to be achieved are realistic and feasible.

Establishment and operating expenses:

First, the costs of the establishment phase

• Business registration fees are taxes for documenting ownership such as: purchasing a plot of land or renting a shop.
• Attorney, notary, or chartered accountant fees for establishing the company.
• Potential fees for accountants or auditors.

Second, the costs of starting the project

• Expenses for purchasing or renting a place to set up the project.
• The costs of purchasing equipment, tools, and materials needed for the project.
• Costs associated with hiring your first employees if you have to hire immediately, plus recruiter fees, job posting expenses, etc.
• Water and electricity expenses, plus transportation shipping, and taxes.
• Advertising and marketing costs.
• When determining the value of a project, calculate the cost of 6 months plus the cost of establishment to know the total amount required to open the project and continue it during this period.

Third: Operating phase costs

These are the expenses necessary to operate the project and maintain its existence. They are divided into two parts:

Fixed costs: These are costs that are not related to the volume of production, such as rent, communication, and external services, and administrative costs, such as salaries of departments shared between companies (administrative, marketing, finance, accounting, etc.).

Variable costs: These are related to the volume of production, such as raw materials, packaging costs, and other expenses that change with changes in production and sales.

Estimate the sales on which the establishment and operating expenses are based:

There are several methods for estimating and forecasting sales, including consulting marketers by asking them about their personal opinions about the product or service and their future sales estimates. This method is not 100% guaranteed and remains an opinion that we take into consideration. The second method is through comparison with similar projects by estimating the sales of those projects.

The third method is to bring samples of potential customers and interview them to understand their personalities and desires, provided that you ensure that the samples chosen represent your potential customers. This method is called a market survey and depends on sending a questionnaire list to a sample of potential customers or sales representatives in the market and analyzing it to determine the level of potential sales. The fourth method, called pre-orders, is to make customers pledge to buy the product before it hits the market by making a written pledge to purchase. Learn about the article Marketing Plan from Scratch 0 – How to Promote Your Entrepreneurial Project Step by Step.

Sales forecast:

Sales forecasting is a key step to starting a project to avoid and prepare for emergencies, which is the basis for production plans forecasting sales every month to be accurate or weekly for more accuracy, by writing down the number of units you plan to sell monthly or weekly, and you should specify as much as possible by studying the prices in the market and multiplying them by the number of units to be sold and subtracting them from the total sales and thus extracting your total revenues by using your previous experience in the field. It is necessary to create a forecast based on optimistic numbers and another based on pessimistic numbers, and accordingly update your forecasts with actual values over time. Do not forget to monitor sales forecasts based on the data of establishment and operating expenses. For more, you can read the article Economic feasibility, its importance, criteria, and characteristics – 5 steps to implement it.

Finally, after calculating the establishment and operating expenses and estimating your expected sales volume, you will have to start establishing it on the ground. Profit is not required in the first period, as it is the period of building your brand and name. It is one of the most difficult periods that require patience and experts specialized in this field to help you succeed. To get the satisfactory result that you have always dreamed of achieving, hurry up now to consult Khutana Company for Electronic Marketing.

Discover more articles:
Economic feasibility study, its importance, criteria, and characteristics – 5 steps to implement it
Successful entrepreneurial projects and 7 steps towards making glory and reaching the top

Questions about the article on the costs of establishing and operating a pioneering project and sales projections