Cost And Effect

Budget Busters

What takes the biggest bite out of small-business budgets? According to the survey, compensation, taxes, sales and marketing, and employee benefits represented the highest costs for small-business owners. An average of 28 percent of total sales went to compensate employees, while taxes consumed another 15 percent. Sales and marketing expenses accounted for 9 percent, and more than 4 percent of revenues was devoted to employee benefits.

While these results were fairly predictable, other findings were more surprising. For instance, entrepreneurs expected to lose only 2.7 percent of their 1997 revenues to bad debt. Slow payers were likewise not a problem, with more than three-quarters of customers paying on time.

The survey broke down results by size of business and type of ownership, allowing for other surprises. For instance, women-owned businesses lagged behind others in providing employee benefits, including health insurance. And while firms with 21 to 100 employees led smaller firms in the use of technology, minority-owned firms were the most active of all in technology use.

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This article was originally published in the January 1998 print edition of Entrepreneur with the headline: Cost And Effect.

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