Managing finances

Costs and Expenditure in Blacksmithing

Understand the concept of fixed costs. These are costs that typically don’t change regardless of the amount of work taken, such as rent or machinery costs.
Comprehend variable costs – these are costs that vary depending on the level of business activity, such as material costs or utilities.
Realise the importance of managing indirect costs including administrative expenses, marketing and advertising.
Recall the term break-even point - the point at which total revenue from sales equals total costs.

Pricing Strategies

Understand the importance of cost-based pricing where prices are set based on production costs and desired profit margin.
Appreciate the method of competition-based pricing, where you price your blacksmithing services or products based on competitor prices.
Learn about value-based pricing, which is pricing based on how much customers are willing to pay for the product.

Crafting a Budget

Understand the role of a budget as a financial plan that estimates expected income and expenses over a specified future period.
Know the importance of cash flow forecasts to estimate incoming and outgoing cash in the business, helping to manage finances effectively.
Realise the importance of updating the budget regularly and making necessary adjustments based on actual income and spending.

Raising Capital and Investment

Comprehend the role of personal savings, bank loans, grants, and other forms of funding for the establishment and growth of your blacksmithing business.
Understand the concept of investment, which involves spending money with the expectation of achieving profit.
Be aware of the risks associated with different funding methods and how they can affect the financial stability of the business.

Bookkeeping and Accounting

Learn about the significance of accurate bookkeeping, which involves maintaining records of financial transactions including sales, purchases, income, and payments.
Recognise the importance of preparing financial statements such as balance sheets and income statements to give an overall picture of the business’ financial health.
Understand tax obligations as a part of your blacksmithing business. These can include tax on sales (VAT) and corporation tax (if your business is set up as a company).

Risk Management

Become familiar with the concept of financial risk management, which includes strategies to minimise potential financial losses.
Recognise the importance of insurance, such as public liability insurance, to give financial protection against potential risks.
Understand the role of contingency plans, which prepare your business for unexpected financial crises.

Remember, managing business finances is a critical element of running a successful blacksmithing business. From pricing your work accurately, budgeting for business costs, through to managing invoices and monitoring cash flow, good financial management can help ensure your business remains profitable.