Entrepreneurship
What this domain tests
Business opportunity, costing, pricing, break-even, cash flow, legal basics and customer retention for an automobile workshop or spare-parts business.
Core rules and concepts
- Start with a market survey: demand, competitors, location, skills and startup capital.
- Separate fixed costs (rent, salaries, insurance) from variable costs (parts, consumables, job-linked labour).
- Contribution per job = selling price - variable cost. Break-even quantity = fixed cost / contribution.
- Profit is not cash: credit sales and stock can tie up working capital.
- Legal basics include shop licence, Udyam registration where applicable, GST registration if turnover crosses the threshold, and insurance.
- A quotation should state scope, parts, labour, taxes and warranty clearly to avoid disputes.
- Customer retention comes from honest diagnosis, realistic delivery promises and follow-up.
Worked example
Fixed cost is ₹80,000 per month, variable cost ₹300 per job, price ₹800 per job. Contribution = ₹500. Break-even = 80,000 / 500 = 160 jobs per month. At 200 jobs, profit = (200 × 500) - 80,000 = ₹20,000. If price falls to ₹700, contribution is ₹400 and break-even rises to 200 jobs, leaving no profit at that volume. Reason: lower contribution needs more volume to cover the same fixed cost.
Traps that cost marks
Treating owner's drawings as profit; ignoring tax and warranty reserves; underpricing to win work; spending all cash on equipment; promising delivery dates without checking parts availability.