I.3. Selling and distribution costs

Income-generation occurs only when there is sales revenue, a consideration obvious enough, but nevertheless often overlooked by agencies which fund production units without undertaking a market feasibility study. In order to achieve sales, costs will be incurred. These will depend on what the selling method is. There may be promotional leaflets or catalogues, travel expenses to visit customers or sell in the marketplace, a commission payable to a sales agent etc. When selling overseas, there will certainly be further costs: cartage to port, additional packaging, documentation, customs clearance perhaps levies, certainly extra running around.

Selling and distribution costs are part of the overheads of a production unit. They may be variable, for example, a sales commission, or fixed, such as the bus fare to the weekly bazaar. The important thing to remember is to calculate them and include them in the coatings analysis in the same way as other overheads. Very often small businesses overlook them, because they have not evolved a selling strategy, and then find they cannot afford to incur the expenditure necessary for marketing. The onus to sell products is on the production unit; it should not wait for people to visit, but rather go out and find the customers, confident that there is some margin in the costing for doing so.

At this stage the costing sheet might be looking like this (Figure 3):

Figure 3. Fibre Mat Costing Sheet (Direct & Indirect Costs)