Implicit cost in a Family business

Let’s take an example of a regular family. A mother, father, a son and a daughter. The family earns their bread by running a general store. Father is the person who has the full time responsibility of the shop. Other people just act as a helping hand. Whenever there is any delivery to be done or any special goods are to be brought the son is given the job to do it. Whereas, whenever a product selection is to be done, the daughter is sent to analyse and select.

To run the store efficiently, the father needs helping hands. He could have kept helpers to help him. The helpers would have done the work the daughter and the son is doing. But that requires capital. Thus, to reduce the cost, the family members help in running the store.

The cost that do not take the form of cash outlays and do not appear in the books of accounts are implicit costs. These are owner-employed resources and can be spent or saved as per the requirement and will of the owner.