Common Business Mistake #1 By Teenvestors

The picture shows Teenvestor and owner of a dog shampoo company, A Boy and His Dog. His business was inspired by his dog. 

Common Business Mistake of Teenvestors: Not Including All Expenses In Profit Calculation

I was once advising a 16–year–old Teenvestor on how to run his baseball card business. Every two months, he would make a one–hour bus trip to Chicago to buy more cards for his business. When I asked him to calculate how much money it cost him to make this trip into the city, he came up with a figure of $10. When I asked him to include the cost of his meals and miscellaneous expenses during his trip, he increased his expense figure to $24. When I told him that he should include these expenses in pricing his cards, he protested. "I enjoy going into the city to buy new cards. I don’t see why I should charge my customers for this trip."

When I asked him whether he would go into Chicago as frequently if he didn’t have a baseball card business, he said no. When I asked him whether he subtracted any of his travel expenses when calculating his net profit, he said no. I then said to him, "You are not making as much money in this business as you think you are."

This young entrepreneur’s problem was simply that he did not consider all of his true expenses when figuring out the cost of each of his cards. Many young entrepreneurs make the same mistake. They forget that small expenses add up to big numbers and therefore should be included in the cost of their products of services.

Some young entrepreneurs are also not aware that they should include the cost of their equipment in making their products or offering their services. Take a typical teenage business such as lawn mowing, for example. Many Teenvestors who start lawn mowing businesses use their family’s lawn mower. As with all other mechanical equipment, the more a lawn mower is used, the more likely it is to require servicing. If the youngsters mowing the lawns neglect to include the cost of periodic servicing of the mowers, then they are overestimating the profit figures in their businesses.