cost
Cost is everything you give up, in money or effort, to get or make something, and knowing yours is how you avoid selling at a loss without realising it.
In plain English
Think of cost as the true price tag behind the price tag, the one only you can see. When a woman in Onitsha buys a bag of rice for ₦45,000 to resell, that ₦45,000 is a cost, but so is the ₦2,000 she pays the boy who carries it to her shop, and the fuel she used getting to the market, and even the hours she spent haggling instead of doing something else.
Cost is not always cash leaving your hand at once. There are costs you pay upfront, like buying stock, and costs that creep in calmly over time, like electricity, rent, or the data you use posting on Instagram to sell your goods. Many small businesses in Lagos struggle and not since sales are low, but because the owner never added up all these smaller costs, so the profit they thought they were making was actually an illusion.
In the United Kingdom, a Nigerian running a small catering business out of her kitchen has to count her cost carefully too. Ingredients, gas, packaging, delivery, even her own time, all of it is cost. If she only counts the ingredients and forgets her time, she might charge ₦8,000 worth of effort for a dish and think she is winning, when really she is just working for free with extra steps.
Cost matters most when you compare it to what you charge. That is how you know if a business is truly profitable or just busy. A shop that sells a lot but spends almost as much to keep the lights on and the goods coming is not necessarily rich, it is just active.
Understanding your cost is like knowing your own body before you run a race. You cannot know if you are winning if you do not know what the race is costing you.
A tailor buys fabric for ₦12,000, pays ₦3,000 for thread and buttons, and spends ₦1,000 on transport to deliver the finished dress. Her total cost is ₦16,000. If she sells the dress for ₦18,000, her real profit is only ₦2,000, not the ₦18,000 that first excited her.
Questions people ask
Is cost the same as price?
No. Cost is what it takes for you, the seller, to produce or acquire something. Price is what the customer pays you for it. The gap between the two, if there is a healthy one, is your profit.
Should I count my own time as a cost?
Yes, always. If you spend three hours making something and do not value that time in naira, you might price your work too low and calmly work for free while feeling busy and productive.
What is the difference between fixed cost and variable cost?
Fixed costs stay the same whether you sell one item or a hundred, like shop rent. Variable costs rise and fall with how much you produce or sell, like packaging or raw materials.
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