Stage 2: What are the operating costs of the business?
The operating costs are divided into fixed and variable costs incurred in running the business, selling and fulfilling bookings. All fixed and variable costs are considered after start up costs. If you need to borrow money to cover start up costs, then the interest and repayment of that borrowing is a fixed cost.
Fixed costs are, as the name suggests, those costs that you will incur regardless of how much business you do. A typical example would be office space or salary costs of permanent members of staff. While all costs are actually variable over time, the essence is to include those costs which it is very difficult to remove and that don’t vary widely according to how much business you do.
Fixed Cost Item
Estimated Cost
Salaries (including yours)
Office Lease
Utility bills, like the phone and broadband internet connection
Interest and repayment on start up cost borrowing
Trade Association Membership fees
Banking services
Professional Indemnity Insurance
Web hosting

Fixed costs can explain what seem like crazy pricing for goods. 

Variable costs, you might have guessed by now, are costs which change according to how much business you do. If you make ten times as many bookings you would expect the variable costs to go up by ten. Typical examples include marketing costs and the supplier costs involved in fulfilling a booking.

Variable Cost Item
Estimated Cost
Sales and marketing literature production and postage
Marketing campaign spend
Cost of Sales – ie supplier costs for each booking
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