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Tettra Academy

Building a Cost Model for Your Business Template

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1. Cost Category

Identify the main cost categories relevant to your business. This can include but is not limited to:

  • Direct Costs
    • Cost of Goods Sold (COGS)
    • Raw Materials
    • Direct Labor
    • Production Costs
  • Indirect Costs
    • Overhead Expenses
    • Rent and Utilities
    • Marketing and Advertising
    • Research and Development
    • General Administrative Expenses

2. Cost Elements

Break down each cost category into specific cost elements. For example:

  • Direct Costs:
    • Cost of Goods Sold (COGS)
      • Material Cost
      • Packaging Cost
      • Freight and Shipping Cost
      • Manufacturing Cost
    • Raw Materials:
      • Material A
      • Material B
      • Material C
    • Direct Labor:
      • Labor A
      • Labor B
      • Labor C
  • Indirect Costs:
    • Overhead Expenses:
      • Rent
      • Utilities
      • Maintenance and Repairs
    • Marketing and Advertising:
      • Advertising Campaigns
      • Digital Marketing
      • Trade Shows and Events
    • Research and Development:
      • Research Costs
      • Prototyping Costs
    • General Administrative Expenses:
      • Office Supplies
      • Employee Benefits
      • Legal and Accounting Services

3. Cost Drivers

Identify the factors that drive or influence the costs within each cost element. This can include:

  • Material Cost:
    • Quantity of materials used
    • Market price fluctuations
    • Supplier relationships
  • Direct Labor:
    • Number of labor hours
    • Labor rates
    • Efficiency and productivity
  • Rent and Utilities:
    • Square footage of leased space
    • Utility rates
    • Energy-saving initiatives
  • Marketing and Advertising:
    • Advertising channels used
    • Campaign duration
    • Target audience reach
  • Research and Development:
    • Number of projects
    • R&D team size
    • Technology and equipment investments
  • General Administrative Expenses:
    • Employee headcount
    • Regulatory compliance requirements
    • Professional service fees

4. Cost Measurement and Tracking

Specify the methods and tools used for measuring and tracking costs. This can include:

  • Accounting Software
  • Cost Management Systems
  • Time-tracking Software
  • Project Management Tools
  • Purchase Order Systems

5. Cost Analysis and Optimization

Outline the process for analyzing costs and identifying opportunities for optimization. This can include:

  • Regular cost reviews and analysis
  • Comparison of actual costs to budgeted costs
  • Identification of cost-saving measures
  • Collaboration with relevant stakeholders to optimize costs

6. Cost Reporting

Specify the frequency and format of cost reporting. This can include:

  • Monthly Cost Reports
  • Quarterly Cost Reviews
  • Cost Dashboards or Visualizations
  • Cost Variance Analysis

Create a Tettra Page for Each Project to Scale the Business 

  1. Document your initial estimates and analysis in Tettra for each product or service. As you're working on each, document where you were accurate and where you weren't.
  2. Start looking for pieces of your business you can outsource to someone less experienced or less expensive than you.
  3. Share your documentation as you grow your business, so this person gets up to speed quickly. 


Note: This template can be customized based on the specific needs and structure of your business. Adapt and expand the sections to align with your cost model requirements. Regularly review and update the cost model to ensure accuracy and relevance.