Adriano now feels that he is almost ready to start setting up his dance teaching

Question

Adriano now feels that he is almost ready to start setting up his dance teaching business, however, there is only one more issue he is concerned about. Adriano will be investing a significant amount of his time, efforts and money into opening the business and he is worried whether his business will perform according to his expectations and be a viable venture or not.

Adriano is almost ready to start setting up his dance teaching business, however, there is still one more issue he is concerned about. Adriano will be investing a significant amount of time, effort and money into opening the business. He is worried that the business might not perform to his expectations and he knows that there are many risks involved with starting your own business. He is also uncertain if he has sufficient funds to start the business.

1) What do you think Adriano should do to monitor and evaluate the performance of his business when it begins operating?

Explanation / Answer

The following should be the major aspects that Adriano should monitor closely:

1. Cash flows: At the initial stage of the business, the amount of cash inflow would be fairly low. Therefore, it is essential that the cash outflows are meticulously monitored in order to avoid any unnecessary expenses.

2. Direct expenses: Adriano should closely evaluate the amount of direct expenses that are being incurred in order to run operations. This is done in order to match revenues with expenses. This does not include expenses such as interest on loans taken.

3. Reach of business: Since volume of business will be fairly low at the beginning of the business, Adriano should focus on improving the reach of his business by using advertsing techniques that are both inexpensive and effective at the same time. This will improve the volume of the business and thus enable him to cut costs due to scale of operations.

4. Peer Analysis: Adriano should conduct a proper analysis of the peers in his business in order to understand rates and demand. This will enable him to set a competitive price so that he can also compete in the industry. Also, such analysis will help determine what sort of value added services Adriano can provide his customers that his peers cannot.

These are some of the factors that Adriano should monitor and evaluate during the initial stages of his business. As regards profits, he should first aim at setting a break even target in order to meet the fixed costs and then scale up to achieve profits.

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