Scenario 7-1.
Kelli is starting her new business in the mall in the coming weeks. She has finished her business plan and is now looking at planning her startup. Her business consists of a clothing store for young women who purchase medium-quality fashionable school and work clothes. She sees customer service as her strong point because she is currently in the same age group and is very clothes conscious herself. Her competitors, also located in the mall, are all older women who cater to older women who purchase fashion-conscious clothes. Kelli has no business experience, yet is willing to invest her entire inheritance in her new business venture. She is single, 21, and has no current debts. She has an opportunity to rent a space in the local mall if she signs the agreement next week. Kelli is excited about being able to pick the clothes on her racks herself and then sell those clothes to young women who would look fashionable in them.
-In Scenario 7-1 above, Kelli is estimating her startup costs. She has figured all of her expenses, her capital equipment purchases, deposits, insurance, etc. What amount should she now add to this total to cover expenses she did not plan on?

Question

Scenario 7-1. 
Kelli is starting her new business in the mall in the coming weeks. She has finished her business plan and is now looking at planning her startup. Her business consists of a clothing store for young women who purchase medium-quality fashionable school and work clothes. She sees customer service as her strong point because she is currently in the same age group and is very clothes conscious herself. Her competitors, also located in the mall, are all older women who cater to older women who purchase fashion-conscious clothes. Kelli has no business experience, yet is willing to invest her entire inheritance in her new business venture. She is single, 21, and has no current debts. She has an opportunity to rent a space in the local mall if she signs the agreement next week. Kelli is excited about being able to pick the clothes on her racks herself and then sell those clothes to young women who would look fashionable in them.
-In Scenario 7-1 above, Kelli is estimating her startup costs. She has figured all of her expenses, her capital equipment purchases, deposits, insurance, etc. What amount should she now add to this total to cover expenses she did not plan on?

Quizplus · Accepted Answer

Kelli should add 10 percent to her total startup costs to cover unexpected expenses. This is a common practice in business planning to ensure that there is enough cushion to cover any unforeseen expenditures. Adding a percentage to her initial costs will help Kelli avoid running out of funds before the business becomes profitable.

Scenario 7-1. Kelli Is Starting Her New Business in the Mall in the Mall