Thursday, July 12, 2001

Jim Hollyer was one of three University of Hawaii
researchers to come up with a wall poster to
aid businesses.

UH researchers size up
finances for businesses

A poster provides a way to
track costs and organize data

By Lyn Danninger

Anyone who owns a business or is considering starting one needs to know how much it costs to provide a product or service.

But not all entrepreneurs have a clear idea what their product actually costs to produce.

Too often, they end up selling a product at less than the cost of production, a factor that contributes to the high rate of small business failures.

Three researchers at the University of Hawaii School of Tropical Agriculture and Human Resources have come up with a method to help both would-be entrepreneurs and established businesses quickly track costs, estimate revenues and organize business financial information.

Their effort is summarized in a quick reference wall poster which is available through the school. The poster format was chosen because the project was originally conceived as an aid to help farmers track their costs.

"Typically we'd say get a computer and set up a spreadsheet, but with farmers that's not always possible," said Jim Hollyer, who along with the school's PingSun Leung and Linda Cox, created the poster.

Many small farmers do not have access to a computer nor are they familiar with typical spreadsheet programs such as Excel, Hollyer said.

To create something that would be accessible and easy to use, the idea for the poster seemed the best solution, Hollyer said. Moreover, the same method can be applied in just about any other type of business, he said.

"All you need is two fingers and 42 inches of wall space," he said.

Understanding the cost of production gives the entrepreneur the ability to not only control future production costs, but also make informed decisions about potential profitability, said Hollyer.

"If you know your cost of production, you will know what your minimum selling price must be," he said.

Knowing actual costs also gives the entrepreneur the ability to make adjustments where necessary. The poster gives step by step instructions not only on how to calculate cost of production of each item, but also provides a cost table template where the information would then be transferred.

Once all the numbers are factored in, the actual cost of production can then be accurately calculated. Then a business owner can decide whether it's profitable enough to continue with a product, Hollyer said.

"After all, you're in business to make a profit," he said.

Easy Profit Estimator

Cost: $3 plus shipping and handling
Contact: University of Hawaii-Manoa CTAHR Publications and Information Office.
Telephone: 956-7036

E-mail to Business Editor

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