Amy sketched out a business plan: a local church would rent it's basement for $ 6 per hour. The size of the basement limited the number of students she could teach, but the rent was low. Insurance for a small studio was $ 50 per month. Initially she would teach classes only for young kids, since that was all she felt qualified to do. She thought she could charge $ 2.50 for a one hour class. There was room for 8 students per class. She wouldn't get rich - but at least it would be fun, and she didn't much at risk.

   Amy soon realized that the demand for dance classes far exceeded her capacity. She considered renting a bigger space that could serve 15 students per class. But her rent would also increase significantly. Also, rather than paying rent by the hour, she would have to pay $ 600 000 pe mont, even during the summer months when demand for dance classes was low. She also would have to pay utilities - roughly $ 70 pe month.

   However, with a bigge space Amy could offer classes for teens and adults. Teens and Adults would pay a higher fee - $ 5 pe hour, though the number of students per class would have to be smalle, probably only 8 per class. She could hire a part-time instructor at about $18 per hour to teach advance classes. Insurance cost could increase to $ 100 per month. In addition, she would need a part-time administrator at $ 100 per month to keep records. Amy also realize she could increase her income by selling dance supplies such as shoes, towels and leotards.

Amy laid out a new business plan based on these estimates. If she failed she stood to lose real money. Convinced she could make a go of it, she made the big plunge.

   Her planning paid off: Within ten years of starting her business in a church basement Amy have over 800 students, 7 instructors, 2 administrators, and a facility with 3 separate studios.

As the feature story indicates, to manage any size business you must understand how costs respond to changes in sales volume and the effect of costs and revenues on profits.