Video Worksheet 12:  What Are the Operating Costs?                 Name:____________________________

Objective: What are operating costs and why do you need to create a budget and timeline for these costs?

A carefully prepared business plan will try to project every possible expense while anticipating revenue and sales.  All businesses must weigh current profits and losses with an investment in future productivity.   Businesses strive for revenues to exceed expenses. When this happens, the owners of the business earn a profit.  Non-profits with extra revenue can offer more or add services. 

Vocabulary: 

Operating Costs–The ongoing expenses incurred from the normal day-to-day running of a business. 

Fixed Expenses–Expenses that are the same amount each month. 

Variable Expenses–Expenses that change each month.

Business Plan–A written document describing the nature of the business, the sales and marketing strategy, the start up and operating costs, and contains a projected profit and loss statement. 

After-watching debrief:

1.  What is the difference between start up and operating expenses?

2. Most companies or businesses lose money their first and second years because expenses are greater than revenue. In the table below, provide examples of fixed expenses and variable expenses that a business might encounter.

Fixed Expenses	Variable Expenses

3. When businesses have more revenue coming in than expenses going out, the owners of the business earn a profit. What happens when a non-profit has fewer expenses than revenue coming in?

4.  How does tracking and managing expenses contribute to the success of a business?