Should you continue operating your business?

Question

Suppose you decide to open a copy store. You rent store space (signing a one year lease), and you take out a loan at a local bank and use the money to purchase 10 copiers. Six months later a large chain opens a copy store two blocks away from yours. As a result, the revenue you receive from your copy store, while sufficient to cover the wages of your employees, and the costs of paper and utilities, doesn't cover all of your rent and the interest and repayment cots on the loan you took out to purchase the copiers. Should you continue operating your business?

sorry, I should have put, this is a homework question, not real life

Answer 1

shut down, you can't cover your fixed costs. You can lay people off, but not taking care if fixed costs on scale is where you shut down.

Answer 2

You would need to figure out all your sunk costs and fixed costs. Economist argue that sunk costs are not relevant here, but I always say remind yourself of what you have buried in something before you bury your business.With contracts with the landlord and the banks, even covering some of these costs is better than bowing out and losing the whole deal. When you can't make a profit, you should at least attempt to minimize your loss. So, if running at a loss is less of a loss then closing and dealing with those losses, then keep going and re-evaluate your position. Or you could open a for cash only poker game in the back and keep those proceeds, etc. Just joking!! I know somebody that did this and it worked great until the cops found out.

Answer 3

I'd say that's up to the business owner.

Some things to consider, they already have a copy shop, so why not use that to make advertising to send out. Especially to nearby offices.

Another option is to relocate to where there is business, they have the equipment and staff, so they just need to move that.

Whether they do that or they can close, both of which depend more on how much it costs to break the lease. If it's a lot it might be cheaper to stay in the sinking ship so to speak.

Answer 4

Certainly you should continue. A little competition is good for the business. You just have to alter your prices to be a good competition for the other people. Do things cheaper. It doesn't have to be a lot cheaper, just cheaper. Do other things that the other store doesn't do.

I own a tattoo and body piercing studio. In the beginning I was the only one now there are about 5 or 6 in the same city I'm in. they are no competition because everyone is unique with their art and when it comes to body piercing, we are the highest priced but we do one thing that no other place does. We make our basic jewelry instead of buying it. I've been in business for 10 years now and things just keep getting better. People know where to go for quality.

Answer 5

countless people might attempt to advance a suffering employer fairly than positioned people out of jobs. i comprehend somebody like that that have! My aunt! i might additionally If i presumed i ought to and had the money then I chanced on some thing i presumed might paintings. it is chilly to throw away so,eon's existence's paintings for a pair of dollars