Definition: The selling and general and administrative expenses incurred by a
business
Although different businesses have different costs associated
with them, the main operating expenses of most businesses
include:
Rent. Under many lease agreements, you'll be expected to
provide the first month's rent plus a security deposit. Many
leasors also require the last month's rent.
Phone and utilities.
Equipment. Equipment costs vary from one business to
another. At a minimum, most businesses need office equipment,
signage, and security systems. To determine your costs, list all
the equipment you must have to efficiently operate your
business.
Fixtures. This broad category includes partitions,
paneling, signage, storage cabinets, lighting, checkout counters,
and all shelves, table stands, wall systems, showcases, and related
hardware for product display. The cost of fixtures depends on your
business location, the size and condition of your facility, the
type of business you're in, what kind of image you want it to
project, and whether you're purchasing new or used fixtures.
Inventory. Like equipment, inventory requirements vary
from business to business. Some businesses, such as retail stores,
are inventory-intensive, whereas others, such as personal shopping
services, don't require any inventory at all except office
supplies.
Leasehold improvements. These nonremovable installations,
either original or the result of remodeling, include carpeting and
other floorings, insulation, electrical wiring and plumbing,
bathrooms, lighting, wall partitions, windows, ceiling tiles,
sprinkler systems, security systems, some elements of interior
design, and sometimes heating and/or air-conditioning systems.
Because the cost of improvements can vary tremendously, get several
estimates from reputable contractors.
Licenses and tax deposits. Most cities and counties
require business operators to obtain various licenses or permits to
show compliance with local regulations. Licensing costs vary from
business to business, depending on the requirements of your
particular location.
Marketing budgets. Most companies determine their first
year's advertising budget as a percentage of projected gross sales,
typically two to five percent.
Professional services. Generally, this refers to your
lawyer and accountant. Their fees will range according to their
expertise, and the location and size of their practices.
Payroll.
Insurance.
A word of caution when estimating these costs: If there's ever a
time to be conservative, it's now. Err on the high side when you
project expenses, and on the low side when you project revenue. And
don't forget to add a "rainy day" or contingency fund to cover the
costs of unforeseen expenses-somewhere around five percent of your
budget is a typical amount to set aside. This financial cushion
will help you-and your investors-avoid panic in case you're faced
with an expense you hadn't budgeted for.