September 5, 2009
Why is it vital for a a soletrader to control costs?
Jennifer asked:
Aside from the following;
unable to operate the business due to bad debts and so on
owner may face law suits and may have to sell off assets
unable to pay overheads
business and owner reputation hindered
problems with suppliers and employees
unable to develop business
Aside from the following;
unable to operate the business due to bad debts and so on
owner may face law suits and may have to sell off assets
unable to pay overheads
business and owner reputation hindered
problems with suppliers and employees
unable to develop business
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Comments on Why is it vital for a a soletrader to control costs?
None of the reasons you mentioned is the correct answer or even part of it.
All businesses have to control costs because turnover says nothing about the profitability of a business. It is the net profit which finances everything a business requires, including capital purchases, purchases for resale, wages and bank interest.
Costs being controlled are what allows the business to spend less than it earns and thus finance it's costs and leave a profit.
A sole trader has to be particularly careful because there is no limited liability protection which exists for a limited company so the proprietor is personally liable for business debts and losses.